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Risk Management Myths and Misconceptions Demystified: Insights and Tips for Project Managers

Risk Management Myths and Misconceptions Demystified: Insights and Tips for Project Managers

What is risk management? What are some common myths or misconceptions that new and aspiring project managers should know about, and can you demystify them for us?

Ruchi Gupta: Risk management is a proactive approach to managing uncertainties or unknowns on a project.

One of the common myths about risk management is that it is time consuming, too hard, or mostly relevant for larger scale projects. The truth is that we passively accept all risks on the project if we do not actively plan a risk response strategy. Risk management can provide overall project savings by avoiding or mitigating threats and/or taking advantage of opportunities.

Another common misconception is the difference between risks and issues. Issues are unforeseen problems in the current state. Whereas risk is defined as something that is less than 100% certain. Risk signifies the possibility of adverse or beneficial effects in the future. Any statement with a probability of 100% is not a risk but a factual statement. Each time an issue is managed using a workaround, we can evaluate if these issues are indicative of larger risks that might happen in the future. Project assumptions, constraints and dependencies are often a good starting point to identify risks.

Can you share some common mistakes executives make in risk management? How can we avoid making the same mistakes?

Ruchi Gupta: Generally, executives regularly keep all the stakeholders updated on the statuses of the projects. Risks and their potential impact should also be actively communicated to stakeholders on a regular basis. Including the top risks on the project report generally reduces the probability of their occurrence by keeping a focus on those risks, since everyone will be watching out for them.

Once the overall level of risk exposure for the project has been determined, risk reserves can be set aside for contingency planning purposes. By taking these uncertainties into account, project executives can be confident that the schedule and cost objectives for the project are realistic.

Can you share a couple of tips for incorporating risk management into a project management strategy?

Ruchi Gupta: Try to use a combination of methods to identify new risks on a project. In addition to the traditional techniques like brainstorming, pre-mortems, expert interviews, and sticky notes, etc., utilizing anonymous techniques like the Delphi method may help uncover risks that stakeholders are not comfortable discussing openly. To quantify risks, ask for a range, rather than a single estimate, for example, pessimistic value and optimistic value.

Actively maintain a project risk register to measure the success of your risk efforts. Assign a risk owner, or risk owners, to each risk. The risk owner is responsible for watching out for triggers, warning signs, and threshold breaches, etc. If the risk occurs, then the risk owner also manages the execution of pre-planned risk responses as appropriate.

If you could share 3 important pieces of advice for new project leaders, what would they be?

Ruchi Gupta: Risk identification is not a one-time process during project initiation but should be repeated iteratively throughout the project life cycle. Risk factors such as potential impact, expected timing, likelihood of occurrence and frequency can be reviewed and fine-tuned during each iteration.

Perform periodic risk reviews with stakeholders to monitor residual risk, adjust the prioritization of top risks, brainstorm new risk response planning ideas, and validate existing assumptions.

Watch out for motivational bias when performing subjective or qualitative risk analysis. Biases could be present due to differences in perception or may be intentional in one direction or the other.

Ruchi is a seasoned information technology professional with a track record of over twenty plus years in delivering market-leading solutions at top financial institutions and innovative solution providers.

Ruchi is passionate about giving back to the continuing education community. To that end, she teaches Agile, Project Management, Program Management, Risk Management, and Business Analysis Certification courses to working professionals. She also creates assessments and authors new training content.

Ruchi has served as the Director of the Strategic Risk Management Solutions Team at Citigroup. Prior to that, Ruchi had global oversight of the Fund Controllers Technology Initiatives at Goldman Sachs. Ruchi has also worked at JPMC as Cash Securities Program Manager, at TIAA-CREF as Senior Business Analyst, and at Merrill Lynch as Technology Consultant.

Disclaimer: The ideas, views, and opinions expressed in this article are those of the author and do not necessarily reflect the views of International Institute for Learning or any entities they represent.

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