source : indeed.com
Five Key Risk Mitigation Strategies (With Examples)
When a production team embarks on a new project, there are inherent risks that can be associated with a project’s processes. However, some strategies can help mitigate these risks as well as anticipating the consequences of these risks. These strategies can be used to identify, assess, evaluate and monitor risks and any accompanying consequences. In this article, we will explore five common risk mitigation strategies and how they might be used.
What is risk mitigation?
Risk mitigation refers to the process of planning and developing methods and options to reduce threats—or risks—to project objectives. A project team might implement risk mitigation strategies to identify, monitor and evaluate risks and consequences inherent to completing a specific project, such as new product creation. Risk mitigation also includes the actions put into place to deal with issues and effects of those issues regarding a project.
Five risk mitigation strategies with examples
Appropriate risk mitigation involves first identifying potential risks to a project—like team turnover, product failure or scope creep—and then planning for the risk by implementing strategies to help lessen or halt the risk. The following strategies can be used in risk mitigation planning and monitoring.
Assume and accept risk.Avoidance of risk.Controlling risk.Transference of risk.Watch and monitor risk.
1. Assume and accept risk
The acceptance strategy can involve collaboration between team members to identify the possible risks of a project and whether the consequences of the identified risks are acceptable. In addition to identifying risks and related consequences, team members may also identify and assume the possible vulnerabilities that risks present.
This strategy is commonly used for identifying and understanding the risks that can affect a project’s output, and the purpose of this strategy helps bring these risks to the business’ attention so everyone working on the project has a shared understanding of the risks and consequences involved. The following example shows how the acceptance strategy can be implemented for commonly-identified risks.
Risks impacting cost
The accept strategy can be used to identify risks impacting cost. For example, a project team might implement the accept strategy to identify risks to the project budget and make plans to lower the risk of going over budget, so that all team members are aware of the risk and possible consequences.
Risks impacting schedule
The accept strategy could help identify possible risks that could impact scheduling, such as keeping the project on track to meet deadlines.
Risks impacting performance
These types of risks can involve performance issues like team productivity or product performance (such as software or manufactured goods) and can be identified and accepted as part of project planning so all members are aware of potential performance risks.
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2. Avoidance of risk
The avoidance strategy presents the accepted and assumed risks and consequences of a project and presents opportunities for avoiding those accepted risks. Some methods of implementing the avoidance strategy are to plan for risk and then to take steps to avoid it. For example, to mitigate risk on new product production, a project team may decide to implement product testing to avoid the risk of product failure before final production is approved. The following examples are other ways to implement the avoidance strategy.
Risk to performance
Mitigation of performance risks, such as insufficient resources to perform the work, inadequate design or poor team dynamics, can allow a project team to identify possible ways to avoid these types of risk situations that may cause issues with project performance. For instance, a production team might test more durable product materials to avoid the risk of product failure with less durable materials. Similarly, if there is performance risk within the project team’s dynamics, interactive team management can be implemented to avoid issues within the team.
Risk to schedule
Avoidance of schedule implications can be implemented by identifying issues that could come up that would affect the timeline of the project. Important deadlines, due dates and final delivery dates can be affected by risks, such as being overly optimistic about the timeline of a project.
The avoidance strategy can help the project team plan ways to avoid schedule conflicts, for instance, by creating a managed schedule that illustrates specific time allowances for planning, design, testing and retesting and making changes as necessary. Non-working times could also be planned, so that risks to time management can be avoided.
Risk to cost
Avoiding cost issues is another implementation of this strategy. For example, a project team may outline all anticipated costs as well as account for any costs that could come up so that the consequences of going over budget can be avoided.
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3. Controlling risk
Team members may also implement a control strategy when mitigating risks to a project. This strategy works by taking into account risks identified and accepted and then taking actions to reduce or eliminate the impacts of these risks. The following examples highlight how control methods can be implemented for risk mitigation.
Controlling risks to cost
A project team might implement control methods that can detect possible issues with the project budget. For instance, controls for risk mitigation might include a focus on management, the decision-making process or finding flaws in the funding for the project before issues can arise. This can also give a project team insight into how funds are being delegated, and if there is a risk of going over budget, the team can identify this before it happens and take measures to control it such as reducing spending or eliminating a resource that could prove too costly for the project.
Controlling risk to schedule
Implications to scheduling can be controlled by diversifying tasks and the time it takes to complete them among the project team. Control methods could include tracking the time it takes to complete each task and assigning specific tasks to team members according to the time involved with each task. The project team might also take into account time management strategies to help control any risk to project scheduling.
Controlling risk to performance
Implementing control strategies for performance risk can include methods of directing a team’s daily tasks, quality control methods for new products and measures for taking action to control issues that could affect the overall performance within a project.
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4. Transference of risk
When risks are identified and taken into account, mitigating the consequences through transference can be a viable strategy. The transference strategy works by transferring the strain of the risk and consequences of another party. This can present its own drawbacks, however, and when an organization implements this risk mitigation strategy, it should be in a way that is acceptable to all parties involved. The following example shows how and when transference strategies are used for risk mitigation.
Transference for performance
If, for instance, a production team has built a new product, but the result presents defects. The defects may not be directly caused by issues in production, but rather, caused by issues with materials purchased from an outside vendor.
The product company may choose to assume the consequences and move forward with resolution strategies—like product recall—or the company may transfer the consequences to the outside vendor responsible for providing the product materials by requiring the vendor to cover the costs associated with the product defects.
Transference for scheduling
Sometimes a project takes longer to complete, and while this is a risk itself, transference strategies can be used to shift the burden of being behind schedule to the team members responsible for time management, rather than the company as a whole. With the consequences transferred to the team members responsible for scheduling, the production team, design team or others can focus on completing the rest of their tasks.
Transference for cost
Transference of consequences regarding cost can include holding accountants and financial advisors accountable for issues in budgeting. For instance, consequences for a project that goes over budget can include higher production costs and funding for materials. If the consequences are shifted to the finance teams responsible for tracking the budget, production managers and team members can focus on their responsibilities while the finance team takes measures to fix cost issues.
5. Watch and monitor risk
Monitoring projects for risks and consequences involves watching for and identifying any changes that can affect the impact of the risk. Production teams might use this strategy as part of a standard project review plan. Cost, scheduling and performance or productivity are all aspects of a project that can be monitored for risks that may come up during completion of a project. The following example illustrates ways to monitor and evaluate risk and consequences that can impact a project’s completion.
A finance team or budget committee can evaluate and monitor risks to cost by creating a reporting routine to outline each expenditure of the company. This strategy works by allowing teams to continuously assess the budget and change any cost plans accordingly.
Monitoring project schedules can include weekly updates to evaluate each team member’s tasks and how long it takes for them to complete each task. The team can then reassess and keep track of any issues that could risk the project falling behind schedule. Computer software, like calendars and project management tools, can help monitor and evaluate time management and project schedule.
Monitoring the performance of products, team members and resources used to complete a project are all examples of ways to implement performance monitoring. Evaluating and assessing different aspects of a company’s performance can help mitigate risks to a decrease in performance, and tools like productivity software can help track and evaluate performance processes within the project. Employee performance can be monitored by planning and implementing regular performance evaluations and product performance can be monitored by continuous product testing and review.
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