Assessing Risk in PRINCE2 7 – Part 2
Many projects neglect risk management, and that’s a common cause of failure. Yet risk management is not hard to do, not time-consuming and the logical sequence of using PRINCE2 is a snap!
Assessing Risk in PRINCE2 – probability
Risk impact can be difficult to work out, but it is easy compared to probability.
Probability and its estimation can be seen as the weak link of risk management. The difficulty in working out probability revolves around a lack of information.
You can sometimes calculate probability on the basis of previous cases that are relevant to the current project. Examples of this occurring medicine, in insurance, and in all exploration
In many cases there is no algorithm you can use for working out the probability or using repeated earlier experience – So often probability is based on your best estimate.
Assessing PRINCE2 Risk Proximity
Proximity is simply how soon the risk can happen and in the strategy you set down whatever categories you have for specifying it.
There can be helpful to see what risks can happen at any time, in the current stage, in the project and beyond the project. However, you need to be aware of two other dimensions in the risk
Fixed Proximity
Fixed Proximity is always a set time away. This includes the “Now “proximity.
An example is a staff member going off sick. He may walk up to the project manager in five minutes’ time and say that he feels really ill and needs to go home.
But fixed proximity can also be a set time into the future. Today, the proximity of the risk is four weeks. But in two weeks’ time of the proximity is still four weeks.
That may sound odd until you consider a simple example, a team member resigning and leaving the organization. If the personal notice he needs contract is for weeks, initially resigns today yet he leaves the team in for weeks’ time.
But if he resigns in two weeks’ time he still works is period of notice and leaves four weeks after that.
Date specific Proximity
Some proximity is our fixed to calendar dates.
If you face a risk that the project is not able to recruit enough bricklayers in October when you are due to start the new brickwork, then the proximity gets shorter and shorter as you Get nearer to October.
Using a probability impact grid for PRINCE2 Risk
For the two measures of impact and probability you can use measures of very high, high, medium, low, and very low, or a numeric scale of 1 to 5 or 1 to 10.
You can then plot the risks on agreed as shown in the diagram below. This technique is very useful because you see the big picture of where risks are.
For example, have you got a lot of low impact but high probability risks?
The diagram is called a p-I grid because that is what most people call it.
n the PRINCE2 Manual however, it is known as a Summary Risk Profile with the p-I grid then being the same matrix, but with values set for each cell to give each one a severity factor, after deciding an exact scale up each axis:
Assessing Risk in PRINCE2 with Risk Metrics
Some organisations like to use a simple agreed scale with just three measures on each axis of high, medium, and low, but risk experts recommend never using a scale of less than five, otherwise you just don’t think hard enough.
But equally in most projects you are best not going above 10, or you may find yourself scratching your head when you try to decide whether for a risk is a level 562 or a level of 576 on your 1-1000 probability scale.
When Assessing Risk in PRINCE2 and you decide to use numbers for risk and probability measures, you can then multiply them together to give an overall assessment of severity.
For example, a risk that has a low probability and a lower impact as a severity of 1 by 1 =1.
A risk with a very high probability and very high impact is more worrying, which would have a severity factor of 25 (5 times 5).
Although the higher the number, the greater your concern and more attention you need to give to the risk in risk management, you also need to be careful about some of the lower numbers.
Do not play number games here because they do not work.
The profile is also great for showing movement since the last reporting point.
Using the summary risk profile and also show risk movement as in the dotted line on my diagram.
The top right of the profile is the high severity area and the project board may define a zone at the top right Where they want to be told if any risk goes into or comes out of that zone.
You must report back to them the same day and not wait for the next regular progress or highlight report.
You must tell the board straight away that this highly dangerous risk is now much less likely. This helps board members sleep better at night!
One of the drawbacks of the grid is that it can get rather busy – Imagine a project with 100 risks or more, in that situation, the solution is to split the risks up and have several grids, each specializing in particular risk categories.
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