Well-designed project portfolio management (PPM) tools and methodologies go a long way in helping an organization cope with multiple projects, deadlines and gauging of performance levels. Risk management is an invariable aspect of PPM, and without the former, PPM will fall flat.

Varieties of risks

To understand how to master risks, one must understand what constitutes a strategic risk. Simply put, it is a system of analyzing potential opportunities or problems which are crucial to the organization. There are many kinds of risks that could affect projects, including market risks, strategic risks, operational risks, legal risks and risks from external sources. While project risk management is based on probability and linear events and reactions, strategic risks take into consideration complexities of organizations, systems and external environments. Strategic risks need greater focus on management of opportunities and don’t respond to tools of probability. Strategic risks are present at the programs, portfolio, operations and projects levels.

Good communication matters

Effective strategic risk management involves several steps. Checking the kind of communication present in an organization is a vital element. There should be a platform for debate and a culture of openness. The team should be able to take ownership of the risk process as a collective unit. Helping all the staff members understand what it is that the organization and PPM team are looking for would help in the search for risks or opportunities.

Risks should be split into branches where all the categories or details are looked into, so as to analyze the big picture. How the risk might unravel itself later should be understood in great detail. Other techniques that can be employed are concept mapping, pattern recognition, and spotting problems beforehand. Carrying out frequent reviews and updates are crucial tools of risk management and the whole staff should be involved. If all these efforts are made part of an everyday routine, overheads can be minimized.

Ways to manage risk

There are four ways to manage a risk that has been identified within an organization. They include acceptance, avoidance, shifting and mitigation. Acceptance does not require any further steps and seems to be the easiest. Avoidance comes into play when one particular vendor is replaced with another, for instance. Shifting is all about transfering a risk to a third party, essentially outsourcing a task to someone with expertise. Risk mitigation would mean taking up programs or steps that can lower the probability of risk.