Risk management is an integral part of project management. But how do you know if your risk management strategies are actually working?
The fact is, most projects run for months, if not years. This can make risk measurement quite challenging, which is why you’ll need metrics in place to help you track and evaluate your project risks. These include:
1. Identified risks
The identified risks are those you are aware of and which you know will occur during the project. If your risk reduction strategies are en-point, you will notice that the number of these identified risks reduces over time, or they don’t turn up during subsequent projects.
2. Actual risks
Not all of your identified risks become a reality. But some do. If you notice that the number of actual risks is as high as the identified ones, your risk measurement process is probably not right. An effective risk manager will know how to reduce the extent of actual risks too.
3. Unidentified & unanticipated risks
While it’s challenging to anticipate certain risks, effective risk management requires project managers to place measures to solve any problem. You must use your experience to identify perilous situations and establish solutions that can be used to tackle them, should they arise.
4. Frequency of risks
A risk management practice is appropriate only when it prevents the onset of the risk at later stages of the project. However, if you notice the same uncertainty plaguing you at various stages of the project, it means that you don’t have the right risk management techniques in place.
5. Severity of risks
When we talk about the severity of risks, we refer to how close the seriousness of the predicted threat is to that of the actual risk. If your risk manager evaluated the project risks correctly, he would have set up adequate measures to safeguard your project. However, poor risk management occurs when the project is too little-equipped or over-equipped to deal with the hazard. Both circumstances can result in a loss of time and resources.
6. Costs incurred due to risks
Ideally, your risk management strategies should not only help you mitigate the risk, but they should also assist with finding cost-effective solutions. When you compare your current risk status to a past project/timeline, you might notice a drop in the expenses you incurred due to the risk. This would indicate effective risk management.
7. Speed & effectiveness of solutions
Finally, the speed with which you implemented risk mitigation solutions, and how effective they were in actually reducing the risk, indicate how well-prepared your organization is. A strong and successful risk management plan is one that actively updates as the project proceeds and which, when implemented, helps the company get back on track without much hassle.