Risk management process - basic definitions
Let's start with organizing basic issues and a few definitions. The first and most important concept is the risk. Risk is the possibility of losing something of value. However, the risk and loss are not enough, we still need to understand what the probability is. Probability, as the dictionary says, is the extent to which something is likely to happen. This allows us to build the most important equation in the procedure:
Risk = probability x amount of loss.
However, the risk management process is not only counteracting loss, so we should also explain such terms as an opportunity which is a situation that makes it possible to do something you want to do. And here we can see the analogy to risk:
Opportunity = probability x profit amount.
Another term we should define here is uncertainty, that refers to a situation in which something is not known. What’s more, it also applies to predictions of future events. What is the difference between risk, opportunity, and uncertainty? Risk focuses on losses, opportunity focuses on profits, uncertainty is the concept, effects of which we can not predict. All three types are extremely important, therefore cannot be omitted by us.
How to prepare a risk management plan?
Where do we start with the risk management process in our project? Surprisingly, our first activities start much sooner then the project begins. At the stage of familiarizing ourselves with the assumptions of our product, we already perform several activities allowing us to better define areas that can generate losses or profits. During full design workshops, we learn the product's business basics, analyze its assumption and its future surroundings. Here are some examples:
- Lean canvas - allows us to define the concept as a whole, which clearly shows the cohesive areas of the business model.
- List: What we do not know - allows us to define “Uncertainty”
- Macro- and microenvironment - enabling to recognize trends on the market and the threats resulting from them, how do our competitors work, and do we include them in the concept of our product?
- Persona - do we know who we are building our product for, or have we considered the specifics of our future customers?
Then we focus on the functionality and outline technical solutions that will be implemented. Alongside them, we learn about their strengths and weaknesses. High-level estimation allows us to highlight the challenges faced by the project team, the costs of proposed solutions. This is a good basis for the prioritization of future backlog.
First project meeting
With gathered knowledge, we can hold the first project meeting which is the project kick-off. One of the most essential points is to discuss potential risks, opportunities, and uncertainty of the project. The presence of the entire team provides a look from different perspectives and, as a result, great effects. Seeking possible risks and problems arising from them may not be a very cheerful start to work together, but it is necessary. Understanding the challenges and opportunities of the project by the entire team allows you, above all, to become aware of the situation and to plan the methods and order of work accordingly. The two main techniques we use at this stage are brainstorming at the meeting, if necessary, Risk Breakdown Structure is also used.
The outcome of the meeting is a list of risks and opportunities which also includes estimated the probability of occurrence and the impact on the project for each defined point. Thanks to that, it is possible to identify the most urgent risks that could jeopardize the whole venture and the greatest opportunities that allow you to get additional values.
Prepare your actions
At the same time, the best possible reactions to specific risks are planned. This can be an action that completely excludes risks (avoidance), but also those that can only mitigate their impact (minimize the effects), or only transferring responsibility beyond the project. In the worst case, there is no possibility of any reaction and to accept the possibility of the problem (acceptance) is the only thing you can do. However, awareness is always better than its lack.
The last step is to enter the reporting person and the person responsible for managing the risk. This is a crucial step to avoid the effect of dispersal of responsibility and all its negative effects. Picking out one person increases the effectiveness of action.
All together - full commitment
At Merixstudio, we work in a spirit of cooperation. We are all one big team to which we invite our clients. Risk management is no exception, in this case, you can also observe full collaboration. Each project team provides information about the most important risks, opportunities and situation in the project to management and sales representant, who established cooperation. One could ask why to engage these additional people? There are two main reasons: perspective, and possibilities of action.
Business Analyst is the first person who makes contact with the client and gets to know his needs. He can bring important insights that will help the team find better solutions or a more effective approach. Management members have extensive experience, but they also have a broader perspective on current activities. They can suggest a solution that worked in another project or support the project in a different way. The most important thing is to act and look for solutions together.
However, without the client's support, no project can succeed. In each project, we engage him and try to find out where the greatest risks and opportunities are from his perspective. We share our point of view as soon as possible. Then we try to plan the appropriate remedial actions in case of risks. When talking about opportunities, choose a strategy that will allow you to get the most possible benefits. However, that's not all, as time passes we examine customer satisfaction. We care about getting to know his opinions constantly, we do not want to ignore them. I should even say that we can not allow it. That is why we put great emphasis on getting wide customer feedback.
How do you reconcile risk management with Agile?
Scrum, Kanban, and Scrumban have in their design mechanisms that reduce risk, e.g. the length of sprints is limited to minimize several typical, project threats. At Merixstudio, we see the benefits of different methodologies, which is why our procedures are designed to strengthen their positive effects. The three main pillars of Scrum are also the pillars of our risk management. Our common care for the product lasts throughout the entire project thanks to the use of transparency, inspection, and adaptation. In each iteration during the retrospection, we try to return to the risks and opportunities defined earlier, thanks to which the whole team checks how the planned activities proceed in the following weeks. All assessments and plans are adapted to the current situation. They are collected in registers and readily available to the entire project team. Customer’s feedback is collected and management is informed of progress. So that together we can effectively work on the most urgent matters.
Why should you trust our risk management process?
Thanks to masterful agile skills, our teams are certainly able to implement such valuable processes as risk management. Our recipe is based on solutions from PMBoK, but it is adjusted to each project with an objective to bring the best benefits. The implementation itself is based on a Deming cycle that maintains flexibility and efficiency. However, the procedure itself is also evolving and becomes more effective. To ensure you, I invite you to check our clients' opinions on Clutch.