The power of PRINCE2 in effective risk management

Be it big or small, every project comes with a certain amount of risk. Whether it’s a delay in delivery, a budget constraint or a change in requirements, project managers need to have an effective risk strategy in place to minimise the likelihood of risks occurring, and reducing the consequences if they do.

What is risk?

A risk is an uncertain event, or set of events, that should it occur would have an impact on the project’s objectives, either positively or negatively. This uncertainty can affect the project’s schedule, cost, quality, scope, and benefits.

What is the PRINCE2 approach to risk management?

PRINCE2 concentrates on identifying potential risks during the project planning stage. Once these have been found, prioritisation is key. PRINCE2 recommends evaluating the likelihood and impact of risks to check which of them pose the greatest threat to the project, so that resources and budgets can be allocated accordingly. All this information should then be logged in a risk register to use as a reference point throughout the project.

Mitigating risks is the next step. PRINCE2 suggests developing a risk management plan that outlines the approach for addressing and monitoring risks. This plan should include risk responses, which fall into four categories:

◉ Avoid: Adjusting the project itself to remove the source or course of a risk

◉ Reduce: Taking steps to minimise the probability of the occurrence or impact of a risk

◉ Transfer: Shifting the responsibility or consequences of a risk to a third party, such as a contractor or vendor

◉ Accept: Acknowledging that a risk exists but consciously deciding not to take any action to mitigate it

Finally, controlling risks is crucial. Regular reviews should occur to monitor risks and ensure that the mitigation strategies are working effectively. The risk register should be updated during the Controlling a Stage process to reflect changes in the risk status or to make any additions for newly identified uncertainties.

What are the benefits of using PRINCE2 to manage risk?

Adopting PRINCE2’s risk management processes offer several benefits:

• Decreases the likelihood of risk occurrence and impact: By identifying and assessing risks throughout, project teams can develop responses that help to mitigate risks before they can occur
• Limits the impact a risk has on the success of the project: Having a planned response to all risks means that when they do occur the project team can react quickly and efficiently to reduce its impact
• Ensures the project team stays focused on delivering the project’s objectives: Maintaining control over any potential risks means the project team can focus on the actions needed to deliver the project successfully
• Provides an effective mechanism for communicating risk: Encouraging regular reviews means that stakeholders are kept informed of the project’s identified risks and the team’s planned responses.

Source: prince2.com