When you are planning to fund a project within your business, you have to be open-minded and flexible to change. This is because you will always come across risks. Therefore project risk management is essential.
What exactly is a risk in business?
|When starting a business, there are those challenges you encounter that make your business strategy better or even threaten your business. We can simply relate risk to gravity; when you are using a parachute to land, gravity helps you to land easily as it helps your efforts to go down, however, the same gravity can also result to a deadly fall. This is what risks can do to a project in business; they can either make the business prosper or fall.|
Most large businesses in Australia always have an intensive risk management strategy as compared to small businesses. Even though large businesses face bigger risks, they are able to manage them easily due to their experience and comprehensive project risk management plan.
Small businesses, on the other hand, struggle a lot to treat risks because of their unpreparedness. What any business owner should understand is that risks are inevitable in any business-they usually exist when you do not expect.
Project risk management for businesses.
Since we now understand that any business is prone to risks, the question is, how do we deal with risks or how do we treat these risks to make sure the project runs successfully to the end? In most business projects, risks might come in terms of market competition. The way we mitigate the impact of the competition will determine the fall or strengthening of the business project.
In the planning stage of every project, you have to come up with the project risk management plan. This is a document that comprises of well sort techniques of dealing with any risk that the project might come across. In the project risk management plan, the key players in risk management are also highlighted for the smooth and swift reaction to risks.
Components of a project risk management plan.
A comprehensive project risk management plan should comprise the following;
- Identification of risks.
- Risk Analysis.
- Risk Response Plan.
- Review & Monitoring of Risks.
Identification of Risks.
When planning to implement a particular project, you have to view probabilities in 3D. This means that you must cover every aspect of the business in your plan from challenges to opportunities. This is where you try and analyse your particular environment and come up with possible risks that may occur.
A good example, in Australia, business owners suffer a lot from Government Regulations. This means that when starting a business in Sydney, you must bear in mind that Government Regulations will keep changing and might pose risks to your business. With this information, you can easily prepare a contingency plan.
By using a Project Risk Register, you can uncover and thoroughly describe a type of risk that may affect the business project in the various phases.
In this stage, you point out the identified risks and rank them according to their magnitude or impact on the project. The two best methods for doing risk analysis are;
- Qualitative risk analysis.
- Quantitative risk analysis.
You try to gauge the influence of the identified risks and rank them as being a threat or opportunity in the success of the project. This is where you determine the risks that will require further action or those that need no reaction.
Risk Response Plan.
Here, your main aim is dealing with the risks or rather treating them. As mentioned before, there are those risks that pose a negative challenge to the business while others are an opportunity. You come up with a plan to mitigate the impact of the negative risks and exploiting the opportunities.
Generally, in this stage, you come up with contingency plans, preventive plans and risk mitigation strategies.
Review & Monitoring of risks.
Risks keep occurring and reoccurring. After dealing with the risks by controlling the negative impacts and exploiting any opportunities that come with the risks, you have to actively keep checking those risks to prevent re-occurrence of the same. Monitoring helps to make sure the strategies that were applied are actually working. This also helps you to stay prepared for related risks that might hit your project. Remember, it is much better to be prepared to deal with risks related to your business than acting with urgency to risks you anticipated due to unpreparedness.
Finally, success of any project is determined by how well you are prepared to deal with risks that arise; both negative impact and opportunities!