Risk Management Plan Template and Example
This article discusses how to write a project risk management plan and provides a template to support your risk response planning. Actually, risks may not have destructive effects on the project goals all the time. Sometimes taking some risks can make a contribution to your project’s success. However, without having a clear understanding of the project risks, you may take the wrong decisions. Therefore, you need to follow some basic steps established in the project risk management processes to respond to each risk successfully. Typically, risk management processes include identifying, classifying, and analyzing risks to develop response strategies. A project risk management plan is a key project document that is prepared to identify and classify the project risks. It includes a risk assessment matrix to define the level of risk to support organizational decision-making.
Project Risk Management
There is no risk-free project available in the world. No matter what type of project you are building, you need to face risks throughout your project’s life cycle. Typically, risks can be defined as uncertain conditions or events that may have effects on the project objectives. So that the purpose of the risk management process is to increase the possibility of occurrence of positive risks and decrease the possibility of occurrence of negative risks. In other words, project risk management practices aim to develop strategies to maximize the effects of positive risks while minimizing the effects of negative risks.
What Type of Risks Do You Need to Consider?
So what types of risks do you need to think about while writing a risk management plan? Most project risks can be classified into the following categories;
- Systematic Risk – Inherent to the market.
- Unsystematic Risk –Inherent to a company or industry.
- Regulatory Risk – Related to changes in regulation.
- Financial Risk – Related to the capital strength of the company.
- Interest Rate Risk – The effect of changes in the interest rates.
- Country Risk – Inherent to a country.
- Social Risk – Related to social norms.
- Environmental Risk – The effect of environmental changes.
- Operational Risk – Related to the company’s operations.
- Management Risk – Related to the managerial decisions.
Note that each of these risks given above may have either positive or negative impacts on your project’s objectives. For example, a change in the market conditions may increase your sales, or a change in government legislation may decrease your profitability.
Project Risk Management Plan
A project risk management plan is one of the most important project documents which includes plans to identify, analyze, develop responses, and monitor and control response risks. In other words, it explains how risk management activities will be performed in the project. The risk management plan is a complementary plan to the project management plan.
While creating a project risk management plan, you need to think about the processes given below.
• Plan Risk Management
• Risk Identification
• Risk Analysis
• Risk Response Planning
• Risk Monitor and Control
Plan Risk Management
In the plan risk management process, you make the overall plan to define how you are going to perform the miscellaneous risk management activities. You answer the “how” question when it comes to structuring the project risk management plan.
For example, you will answer how you’re going to identify, analyze and classify the risks at this step.
Risk identification is the first step before thinking about analyzing and managing the project risks. But how are you going to identify the project risks correctly? You need to adopt some methods which are below;
- Review the documents and historical records
- Employ methods such as the PEST Method, Delphi Method, etc.
- Brainstorm with your project team
- Interview with the important project stakeholders
Once you have identified the project risks, list them into the risk register according to their level of impact on the project objectives.
Analyzing and evaluating the risk process comes just after the risk identification process. While analyzing and evaluating the risks, you need to consider the likelihood and level of impact of each risk. You can create a matrix and list each of the identified risks and give a score according to their level of impact and likelihood. Thus, you can prioritize the different types of risks.
Risk Response Planning
Since the risks are divided into two categories which are positive and negative, you need to develop your strategies to deal with them considering this classification. Because risk response strategies for positive risks are different than for negative risks.
In order to deal with negative risks, you need to perform Avoid, Transfer, Escalate and Accept strategies. On the other hand, for the positive risks, strategies are: Enhance, Exploit, Share, Escalate, Accept.
Accept and escalate risk response strategies are applicable to both positive and negative risks.
Note that the project risks can also be classified as internal and external risks. Internal risks are the issues that can be controlled by your organization such as managing risks, human factor risks, technological risks, and physical risks. External risks, on the other hand, are the risks that are out of your control such as economic risks, natural risks, and political risks.
Risks Monitor and Control
As the project proceeds, new risks may appear and some of the identified risks may disappear. Therefore, you need to keep all the risks under control by monitoring them regularly. Since risk management is a living process throughout the project life cycle, the project risk management plan should be kept updated in order to respond to risks effectively.
How to Write a Risk Management Plan in 7 Steps?
The practice for writing your own risk management plan follows 7 simple steps;
1. Identify the Risks
Everything starts with identifying the potential risks for your project. This process does not only take place at the beginning, but it also happens throughout the project. In order to identify each risk, you can brainstorm with your team members, check past project records, and interview key project stakeholders.
2. Evaluate the Risks
Evaluate the project risks by considering their importance and impacts. Bear in mind the qualitative and quantitative impact each risk. Create a risk assessment matrix to define the level of each risk by giving an impact and a likehood score.
3. Assign Responsibilities
Listing project risks and scoring them is not enough for a proper risk management. You need to assign a responsible team member to deal wih them. Thus, everybody will know who the risk owner is and contact when necessarry.
4. Develop Strategies
The aim of creating a risk management plan is to provide team members a clear path to respond them in the case of their occurence. Risk response strategies can be divided into two categories.
Risk Response Strategies for Positive Risks
Risk Response Strategies for Negative Risks
While writing a project risk management plan, bear in mind the significance of each risk. You should develop strategies seriously for the risks that have higher probability and impacts. On the other hand, you can take less time to develop strategies for the risks that have a low impact and probability.
5. Develop a Contingency Plan
What will happen if the risks become realized? Develop a contingency plan and describe the actions to be taken if the risk occurs in order to prevent the negative effects of it. While developing a contingency plan, you should determine the resources to be used to deal with the risks.
6. Review the Project Risk Management Plan
When you create your project risk management plan, come together with your project’s key stakeholders and review the plan to understand if the proposed plan responds the needs for dealing with risks.
7. Continue Monitoring and Reporting
Risk management is a live process to be conducted throughout the project’s life cycle. At the beginning of a project some risks may be serious. However, as the project progresses, new risks may occur and the previous risks may no longer be critical.
Tracking, monitoring, reporting and updating project risks will make everyone to be aware of what’s going on.
Project Risk Management Plan Template
As discussed above, project risk management is an important project document that helps you to deal with both positive and negative risks. The content of the project risk management plan varies depending on the project scope and requirements. Here below you can find a project risk management plan template to help you to create your own by adding and removing rows and columns considering your project’s requirements.
Risk Assessment Matrix
Use the risk assessment matrix below to fill the related sections of the project risk management plan template.
This risk assessment matrix will help you to define the level of risk by considering the category of likelihood.
Risk Mitigation Chart
Use the risk mitigation chart below and write down the actions to be taken for each case to fill the related sections of the project risk management plan template.
In our previous article, we provided a short guide to discuss the fundamentals of the project risk management plan. This article which provides you a project risk management plan template is complementary to the previous one. So that we recommend you read both of them to have a clear understanding of the concept. You can adjust the content of the template to meet your project’s requirements. We recommend you search online to understand how others handle the project risk management process. Comparing different templates and approaches will help you to create your own especially if you are new to the risk management processes. Note that you must know the difference between quantitative and qualitative risk analysis to create and maintain a complete risk management plan.
Let me know if you want to add or share anything by using the comments section.
Francois Simosa is the head of training for the Gragados Training Associates, which provides special project management and risk management training programs.