Why Project Risk Management Tool Is, Must-Have For Organizations
Why Project Risk Management Software Is, Must-Have For Organizations
Reasonable sized (considering resource, cost, duration) projects have elements of risk, complexity associated with them. Given the way business ecosystems are changing, the challenges to deliver projects have become multi-dimensional. It is not rare to see that project delivery timelines are missed. It is not pretty rare to see that project goals are not achieved or the delivery happens within agreed constraints of cost, timeline and quality. A lot of these deviations are attributed to the risks associated with the projects and inability of organizations to properly manage these risks.
Before we jump on to the main topic 'need of project risk management software', let’s talk about basics of project risk management and related challenges. Of course, project risk management is not a new phenomenon and practicing project managers knows the importance of risk management. Yet the risk management as a domain or as a practice is evolving and many project managers have limited understanding of risk management.
The Basics of Risk Management
Well in other post, we looked at risk management and it mentioned that there are four basic steps for risk management:
Risk Identification & Analysis
Risk Assessment/ Evaluation
Risk Response/ Control
Risk Identification & Analysis
involves risk identification, establishing context for the risk analysis, knowing reasons and organization’s processes of highlighting risks.
looks at two aspects of risk (1) risk probability and (2) risk impact. These aspects combined together gives estimate of Risk Exposure as follows:
Risk Exposure = Probability (Risk) * Impact (Risk)
Here we have to understand that estimating the probability of risk is not easy like step-1-2-3 kind of task and moreover it can hardly be cent percent accurate. Why? Because if the risk can be estimated to such highest accuracy, then hardly it is a risk.
Yet companies are using techniques to use qualitative information and have mathematical models to estimate quantitative probability. Many organizations user Barry Boehm’s list of risk item to help its project manager in analyzing risks. Though these risks items are in the context of software projects, nonetheless it will be useful to look at it.
Personnel lack of skills/shortfalls
Unrealistic estimates of project delivery time and implied cost
Gold plating (scope creep)
Last moment changes in project scope/ changes to requirements
Developing the wrong user interface
Shortfalls of external supplied components and delivered activities
Developing the wrong utilities/functions along project delivery timeline
Real-time performance shortfalls
Straining science capabilities
Yet there are other such risk importance checklist/item list developed by other researchers. One can check risk management document for further reference.
Lack of an effective project management methodology
Looking at the research paper and the list of risk items mentioned thereof, one would know that the list is not limited and it keeps evolving. Hence it is imperative for project managers and in turn companies to review risk analysis, risk control and risk response methodologies over the time.
There are certain ways that will help you to evolve your risk management processes considering existing and newly identified risk items. It is greatly influenced by the project management methodology, risk management processes, change management processes on one had and on the other hand easy identification and highlighting of risks, accessing historic information about risk & risk analysis.
There would be certain project management methodology and risk management processes adopted and practiced by organization. These can be improved, supplemented by right risk management tool. A right risk management tool will facilitate the second part of the risk management process as mentioned above.
This is a crucial step that lets you decide how are you doing to response to a given risk (be negative or positive aka opportunity). Project manager can decide to accept the risk, mitigate it, contingent, transfer or avoid.
Project risk management software enables you record all information pertaining to project artifacts like project risks (identification, assessment, communication, response plan, assignment), project tasks, project plan, if this data is not recorded centrally or organized effectively; it will be lost forever, so will the knowledge & expertise of your company
It provides you the central place where project team and in turn organization register, track, manage, communicate the risk details
The project risk management software allows you to precisely identify and categorize business risks within your organization
The biggest advantage of risk management software is theclear visibility it provides to stakeholders about health of the project, the vulnerability/stability of the project
It also creates an immensely valuable knowledge base that organization can utilize to prepare better risk management practices, processes and policies thus place itself in a better position to tackle risks. Even if type of risk differs, organization & its resource can follow/comply with laid down process and thus reduce the risk impact on project/ company
Not all SMBs recognize the importance of proper risk management practices. The great degree of resources (people, material, time and money) they can save with risk management practices. The project risk management software can make their process easier to start practicing risk management
Additionally, the compliance requirements enforced by governments and expectations of consumer/customer groups have mandated companies to get their risk register audited by third parties/auditing firms. No better way of managing such activities than using project risk management software
Good number of managers we talked to, have been raising concern about the difficulty, frustration they face in managing umpteen number of spread-sheet versions of risk register. It is funny but I wonder if they have risk recorded, for such risk-management practice itself; where having risk register in spreasheet is a risk in itself. Excel/speadsheet are pretty much like a hammer to every data-set/data-problem look like a nail. You need a proper, right project risk management tool to manage risk and not a spreadsheet based (inherently non-collaborative) risk register.
If one has to holistically manage projects, he certainly need to consider risk management such that
It should be an integral part of organizational processes – structured & systematic
It should be inclusive, transparent, collaborative and make stakeholders accountable
It should utilize best available inputs and application of resources
It should register ambiguities and assumptions separately
It should be agile and flexible to evolve continuously
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