The PMBOK Guide, defines a risk management process as the “systematic process of identifying, analyzing, and responding to project risks”. Risk Control fits into this definition in that it is the measures and strategies put into place to reduce risks throughout a project.
It is the outcome of risk analysis where you assign a risk and then determine the control to ensure the risk does not materialize.
In today’s dynamic business environment, implementing effective risk controls is crucial for any organization aiming to achieve its strategic business objectives.
A robust risk management framework not only helps in identifying and mitigating potential risks but also provides a structured approach to manage risks across various aspects of business operations. This article explores seven factors within risk control, forming the backbone of a comprehensive risk management process.
The Fundamentals of Risk Management
Before diving into specific risk controls, it’s important to understand the basics of risk management.
If you don’t have a solid foundation or knowledge in Risk Management, jump over to my article on Risk Management Strategies and other The Risk Blog articles. These should hopefully get you a decent understanding for moving forward.
Quickly though, risk management is the process of identifying, assessing, and controlling threats to an organization’s capital and earnings. These risks stem from a variety of sources including financial uncertainties, legal liabilities, strategic management errors, accidents, and natural disasters.
Key Steps in the Risk Management Process
The risk management process typically involves several key steps:
Risk identification
Risk assessment
Risk analysis
Risk Response Planning
Risk Response Implementation
Closing Risks
By following these steps, organizations can develop a holistic approach to managing risks and ensuring long-term success.
But if you want to focus on Risk Control, you need to get deep into the risk response planning and implementation. Doing this will help you grow and develop as a project manager, project risk manager, or practitioner in the field.
7 Critical Risk Control Measures for Effective Risk Management
1. Risk Avoidance
Avoiding your risk is where you simply eliminate specific actives or areas of the business that create too much risk for your project.
This decision to avoid is usually done after doing a probability and impact assessment of your risks. During this process, you find your risks that are above your risk threshold – then you find and implement processes to avoid them.
It’s important to ensure you are balancing risk avoidance against the potential opportunities of growing. Don’t just avoid everything and limit the value of change your project can build for your organization.
2. Risk Reduction
This is a risk control which focuses on the process needed to reduce risk throughout the project.
The goal of this control is to reduce the likelihood or impact of identified risks.
Popular and simple ways of accomplishing this control is b implementing safety measures, improving processes, or providing additional training to staff. By doing so, the chances of a risk materializing reduces – allowing you to focus on other, more high priority risks.
3. Risk Transfer
This risk control often involves purchasing insurance or outsourcing certain activities to third parties.
Doing so allows organizations to shift the potential financial impact of risks to other entities.
Risk transfer can also apply to project work and the project schedule. Hiring contractors to complete work ensure that you project can complete on schedule, as it allows the team to focus on specific work – delivering high quality to the customer.
4. Risk Acceptance
Sometimes it is just not worth doing anything about a risk. This might sound crazy, but sometimes the potential impact is less than the cost of the control measures.
When doing this, it’s usually critical to ensure your Project Sponsor understands and agrees with your decision. It is also appropriate to prepare contingency plans to respond with if the risk does materialize for the project.
5. Implementing Internal Controls
We all should have internal controls for our projects. These control measures are designed to ensure different areas of the project execute smoothy. Areas like:
Dedicated governance meetings
Realiable and accurate financial reportings
Compliance with applicable laws and regulations
For the PMP, many of these were Organizational Process Assets. And these can be used to ensure controls are effectively and efficiently used throughout a project.
6. Developing Contingency Plans
When we develop contingency plans, we are also developing responses to risks. But I like to think of these as not entirely project centric.
If email goes down, have a contingency plan to use a specific conference room.
When bad weather or a natural disaster happens, what’s your contingency plan to work at a different location until infrastructure is back up and running.
If a pandemic strikes, are you prepared to work at home?
These contingency plans here are more focused on disruptions to normal business operations. They are also something you and your project team should have plans to respond to. Especially if you live in an area that naturally sees a higher level of natural disasters.
7. Continuous Monitoring and Review
I will always say this. Ensure you are having regular reviews of your project plan, risks and issues, and your risk controls measures for the project. This is essential for ensuring resiliency through adversity and maintaining ongoing effectiveness for your organization.
Having regular review meetings to assess risks and adjust your response plans ensures if anything happens. You are ready to go right after!
Primary Risk Categories You Want to Develop Risk Controls For
Effective risk management requires addressing various types of risks, including:
Financial risks: These include market risks, credit risks, and liquidity risks.
Operational risks: These involve potential failures in internal processes, systems, or people.
Strategic risks: These are risks that affect or are created by an organization’s business strategy and strategic objectives.
External risks: These include political instability, economic downturns, and natural disasters.
Emerging risks: These encompass new and evolving risks such as cyber threats and disruptive technologies.
Now, this risk is not all inclusive – but it gives you the right idea. SMART goals start with Specific. So, when developing the controls for your risks, get specific on which category the risk fits into.
It is also important to remember the “Triple Constraint” of project management. You want to evaluate each of these risk categories for any impacts to:
Scope
Time
Cost
Quality
The goal of putting together an effective method of risk control is to evaluate your controls against the constraint and risk category they fall within. This ensures that your risk register encompasses all types of risks and are not solely focused on one, bright and shiny, category.
Strategies for Implementing Effective Risk Control Measures
Implementing an effective risk control measure is not as hard as you would image. You just have to:
Identify and assess potential risks through comprehensive risk assessments.
Select appropriate control measures based on the probability and impact of identified risks.
Integrate risk controls into daily business operations to ensure consistent application.
Identify risk owners to manage daily integration of controls and be responsible for responses.
Provide necessary resources, including personal protective equipment where applicable.
Regularly review and update control measures to address new or changing risks.
Evaluating Risk Control Strategies
Once established, next you need to measure the effectiveness of your risk controls. This crucial step is for maintaining the projects robust risk management framework. Consider the following:
Establish key performance indicators (KPIs) for your risk management efforts.
Conduct regular risk assessments to identify new risks and evaluate the effectiveness of existing controls.
Analyze any incidents or near-misses to identify areas for improvement in your risk control strategies.
Adjust your risk management plan based on these evaluations to ensure it remains effective and relevant.
Conclusion
Mastering risk management means understanding many different concepts. Risk Control is one one of those concepts.
Risk Control is looking pass just the risk assessment and assigning a risk rating. It is about achieving strategic objectives that align to risk management.
If you implement these seven risk control measures and maintain a comprehensive understanding of your organizations risk landscape. You can easily create a more resilient and adaptive organization, capable of navigating the project management landscape, with ease.
Always remember, risk management is not a one-time effort but a continuous process. Stay vigilant, be proactive, not reactive, and regularly reassess your risk control measures to stay ahead of potential threats and capitalize on new opportunities.
-Russ Parker
The Risk Blog is reader supported – Please consider contributing to the operating costs of running this blog!
