How to Monitor Risks
There are four key steps in the standard risk management process: identification, assessment, treatment, and monitoring. This article explains risk monitoring, a broad category that includes tracking the implementation of treatment plans, reviewing identified risks, identifying and analyzing new risks, reporting to key stakeholders, and evaluating risk process effectiveness.
The Importance of Risk Monitoring
Experience suggests that risk monitoring often receives insufficient focus; projects start with a solid commitment to risk management, but this wanes as typical project pressures mount. This lack of focus is a grave mistake. Risk monitoring ensures that risk management efforts remain responsive to the evolving nature of a project. Initial risk assessments and response strategies can quickly become outdated as the project progresses and its environment changes, leading to unidentified and inadequately managed risks potentially derailing the project. Effective risk monitoring enables project managers to adapt to new information, changing conditions, and unforeseen challenges. It facilitates timely decision-making and resource allocation to address emerging risks before they impact project objectives. Effective risk monitoring is essential for maintaining the integrity of the project management process, safeguarding the project's success, and ensuring that the project delivers its intended value and outcomes.
Tracking the Implementation of Treatment Plans
Risk analysis involves the creation of appropriate treatment plans. Once we put these plans in place, we must track their implementation. Doing so involves regular reviews of the actions taken to mitigate, transfer, avoid, or accept risks. We must determine if the responsible parties have executed the risk responses as planned and assess if doing so has reduced the risk to an acceptable level. This step also requires us to adjust response plans when they are not meeting their intended goals or when the project's context changes.
Reviewing Identified Risks
We must constantly review previously identified risks. Doing so involves regularly reassessing the project environment to confirm that the likelihood and impact of identified risks have not changed. If they have, we must record the change and adjust the risk treatment plans accordingly. We must also determine when a risk triggers (its probability becomes 100%). At this point, the risk becomes a project issue and is subject to the issue management process. Although triggered risks could be considered failures, transparently recording them is vital for maintaining credibility and facilitating recovery efforts.
Identifying and Analyzing New Risks
Projects are inherently dynamic, with new risks potentially emerging at any stage. Effective risk monitoring necessitates the identification and analysis of these emergent risks. Project managers must vigilantly observe both internal changes within the project and external shifts in the environment that could present new challenges.
Reporting to Key Stakeholders
Effective risk monitoring also entails regular reporting to key stakeholders. Such reports may be generated monthly or weekly, depending on the project cadence. It is common for them to form part of the standard project status reporting to stakeholders. Such risk reports may include the following elements:
A top-ten list of current risks.
A list of new risks identified.
A list of risks that have triggered.
The current status of treatment plans.
Risk reporting ensures that project stakeholders are informed about critical information and motivated to act accordingly. After investing significant time and effort in the initial phases of the risk management process, it's essential to convey this information to all involved parties effectively.
Evaluating Risk Process Effectiveness
Finally, an essential component of risk monitoring is evaluating the overall effectiveness of the risk management process. The key question is whether the process minimizes the project's overall risk exposure. Here are some other questions to ask:
Are we identifying all risks?
Are our risk assessments accurate?
Are the risk treatment plans effective?
Are we communicating risk information clearly to stakeholders?
Regular evaluations help to refine the risk management process, making it more efficient and effective for current and future projects.
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