Building a good risk management plan will help protect your company’s resources, reputation, and people.

In addition, each organisation communicates risk differently, and has their own internal culture and risk management protocol. The risk management process should integrate both the internal and external context when planning for risk.

Projects of all sizes require risk management in some form. If you think of your project as a road, risks are potholes and sharp bends. Risk management is learning the roads, examining the conditions of the route you’re about to take and any potential issues.

It isn’t enough to be prepared for the damage if the risk were to occur. A vital part of the role of a project manager, is to put in place strategies to avoid, manage, and recover from risk.

All industries and organisations manage risk a little differently. However, there are 7 key risk management principles that you can draw on when you’re looking at integrating a risk management plan into your project.

Risk management principles

1. Ensure risks are identified early

This is probably the most important principle of risk management – make sure you’re ahead of the game by completing your risk assessment before the project commences.

Identify the cause of a potential risk and design preventative measures and a response if it was to occur. After risks have been identified and sourced, risk needs to be measured.

2. Factor in organisational goals and objectives

Ensure your risk management plan ties in with your organisation’s overall goals and objectives. If a risk that you have flagged, does end up occurring how will it impact the organisation, financially and reputationally?

Each organisation is going to have different desired outcomes and priorities and these should be integrated into the risk management plan. The risk strategy should be consistent with the overall goals and culture of the organisation.

3. Manage risk within context

Context is extremely important when considering project risk, as each organisation will have different tolerance levels to risks. Various factors (political, technological, legal, societal, etc.) will impact organisations and industries differently. For example, one organisation might be particularly vulnerable to its legal environment, while another may need to consider their societal impacts more closely.

In addition, each organisation communicates risk differently, and has their own internal culture and risk management protocol. The risk management process should integrate both the internal and external context when planning for risk.

4. Involve stakeholders

When you’re planning for risk, it’s important to call on the expertise of those who will be involved in the project (e.g team members, contractors), as well as experts within your organisation that can provide you with advice for planning for risk (e.g senior managers).

Throughout the risk management process, stakeholders should be involved in the decision-making process. By drawing on stakeholders for your risk planning, you will identify and gain insights into potential risks you may not have considered.

5. Ensure responsibilities and roles are clear

While the risk management plan may be owned by one individual such as the project manager or change manager, it should be operated with transparency and visibility. Everyone should know the role they play in mitigating risk and responsibilities should be clear and inclusive throughout the risk management process.

Allow different voices to be heard and encourage questions and discussion. The more people that are participating, the more risk can be managed creatively and effectively. Each team member needs to be dynamic, flexible, and responsive. Everyone should be empowered to deal with risk at their own level.

6. Create a cycle of risk review

Once you have identified the risks and made a risk management plan or strategy, it’s important not to have a set and forget mentality. During each step in the process, all risks should be evaluated and any interventions or preventative measures should be implemented if needed.

You can keep everyone in the loop related to the project by reporting on the risk and communicating any changes with stakeholders in a timely fashion. By reporting throughout the project you may be able to step in and address any problems that arise before they come to fruition.

7. Strive for continuous improvement

Once a project has been completed, review how your risk management plan went and whether there was any room for improvement. Always strive to adapt to how you manage risk and take these learnings with you to your next project.