Assessing Risk in PRINCE2 – Part 1

Assessing Risks In PRINCE2

Having identified the risks, the next step is to put some measures on the risks and the two most common measures are risk impact and probability were along with considering proximity which determines how soon the risk may happen.

Calculating risk impact can be difficult and you need define your scale carefully. You may do this just for a particular project or you may have a standard scale in your organisation. Whichever way, it is set down in the risk management strategy document.

What PRINCE2 cannot offer is a standard scale that all organizations can use. The reason for this is if you just consider risk costs – For a large multinational then an impact cost of the risk of around one million dollars – Assuming that you are insured for it, might only ranked as a medium impact. For smaller single side company such a cost impact would be considered catastrophic!

Assessing Risk - PRINCE2 Impacts

When Assessing Risk in PRINCE2, there are several areas of PRINCE2 risk impact that you need to consider:

Risk impact – Time

This includes risk impact delays to the final project delivery, but also parts within the project. For example, you have other deadlines, such as taking products into operational use at different points in the project and not just at the end?

Risk impact – Cost

Consider the risk impact total amount and also the timing. For example, if a risk may cause delay, then some costs that you expected the project to incur in this financial year may instead fall into the next one.

Risk impact – Physical resources

You may face risk impacts on availability of specialized equipment or accommodation for example. Is something gets to lay down your project, you may need some specialized equipment for the next activity now rather than next month as you had originally planned. But another project has already bought that equipment for next month.

Risk impact – Staff resource

As with physical resources timing can have a big impact. Although machines do not have feelings, additional risk impact such as low morale and motivation may become significant.

Risk impact – Other projects

Where the other projects depend on this one, perhaps to receive one or more of the products or because it moves to another project after working on a part of this one, the risk impact of certain risks may lead to significant impacts for them. This may affect your choice of management actions and justified more expense to speed up this project so that it doesn’t affect other ones.

Assessing Risk in PRINCE2 - business benefits

Business benefit levels

A risk can affect projections of the project benefits. For example, if a competitor runs its project faster and so beats you to market with a new product, that may mean you have to reduce your sales projections.

Business benefit timing

Level of benefits may be the same, but the risk impact is that it may now start three months after the end of the project rather than the two months you had had previously expected.

Assessing Risk in PRINCE2 - quality and reputation

Quality

The risk impact may affect quality which is an example of interactions between risk impact areas. 

Pressure on time because of a risk happening and a fixed project end date may mean that you cannot to some of the planed tests, with the risk that the project may deliver reduced quality.

Reputation

Often forgotten, this is another interaction between risk impact areas. A quality impact can lead to an impact on reputation if you give a 40 product to a customer.

PRINCE2 Risk - Scope

A risk impact can affect scope in two ways. It can be interactive for example, if you face the timing problem you no longer have time to do everything and you have to reduce the scope of the project to deliver by the fixed deadline.

But a further impact in complex projects may be that something just isn’t technically possible after all, which obviously affects the scope.

Most people involved with the management of products obsessed with time and cost. One impacts you can easily overlooked is reputation damage.

Sometimes the knock-on effect of this is huge, and just one element go wrong somewhere can kill even a large multinational. Carefully think through impacts and don’t just stick with those that relate to time and cost.

Interestingly, reputation damage works the other way around to financial impact in terms of large and small organisations.

If a multinational company or government department as a major project problem, it is picked up in the press and featured in newspapers with international circulation.

If a small company as a major project problem, the press is really interested and it can go unreported and therefore not have any significant impact on reputation.

Where a project goes into an unknown area and you do not know whether doing something is even theoretically possible, you can think about including a “Proof of concept “ product early on in the project to prove if it is possible. You can even include  this “bottleneck “ product in the product flow diagram.