From the course: Project Management Simplified

How to create a Risk chart

From the course: Project Management Simplified

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How to create a Risk chart

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- All projects are risky because by their very nature they involve doing things that we haven't done before, and in step eight we plan for risk. So the objective is to identify the possible risks and then make them less of a problem, and then report to our boss, customer, or stakeholders what the risks are that we have not been able to get rid of. To use the posh language, what is the risk exposure after we've taken all of our mitigating actions? So the first thing you do is get a list of all of the possible risks to your project, Probably by looking at the history of previous similar projects. And also, perhaps by having a brainstorm meeting with your team. Then once you have that list of risks you put them in a table like this that allows you to access how likely they are to happen, the risk factor, and how serious they would be if they did happen, which is the impact factor. People often give scores to both of these, maybe out of five, and then multiply them to get a total risk factor out of 25. So for example, if you're having a barbecue you might identify three main risks, rain, food poisoning, and being hassled by wasps. You then give them scores, and so you might estimate that rain has a likelihood of three out of five, and a seriousness or impact of four out of five. So it has a total score of three times four, which is 12, which is into double figures so it's quite high. We need a plan to reduce that risk, maybe by putting up a marquee to give us cover if it rains. Meanwhile, food poisoning is less likely than rain, maybe it only gets a likelihood of two out of five, but a seriousness of five out of five. So it gets a total score of 10, which is also high enough to worry about. So I think I would get a proper chef to keep an eye on the cooking to get the likelihood down to almost nothing. And finally, being hassled by wasps, which is pretty likely, maybe four out of five, but not very serious, perhaps only a one. So it scores four times one, which is four and is therefore not high enough for me to worry about. This method is not 100% scientific because it's a bit of a guess how likely these things are to happen, and it's a matter of opinion how serious they would be. But at least it points you to where you need to take action. Next, once you've identified the risks that are high enough to need attention you try to reduce either how likely a risk is to happen or how serious it would be if it did happen, or both. We saw in the barbecue example just now that I can't make rain less likely, but I can make it less serious by having a marquee. And for food poisoning I'd rather make it less likely by having a chef and some hygiene than trying to make it less serious by having medics on standby and a good insurance policy. It's always better to prevent risks from happening in the first place, if you can. So after we've done the prevention and the protection actions, you can then revisit your scores. The rain is now just as likely but less serious. Maybe it's now three times one, which is only three. And the food poisoning is now less likely, let's say it's down to one. So the total score is now only one times five, which is five. So we don't have to worry about these risks anymore, as long as we keep doing those actions. So then the final question is just, what do we have to worry about? What are the problems in our project that we just can't get rid of? In my barbecue example I got all of the risks under control, but you can't always do that. And at least if we have a list of these than A, the stakeholders can't say they weren't warned, and B, the stakeholders can decide if they still want to go ahead with the project. So risk analysis allows us to reduce the risk as much as we can, but also enables the stakeholders to know what they're getting themselves into.

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