PRINCE2 7th Edition Risk Management Technique
Identify
Define context and objectives.
This step involves obtaining information about the project to ensure a common understanding of the specific objectives at risk and to formulate an appropriate risk management approach.
The following will influence the project’s risk management approach:
- user’s quality expectations
- the number of organizations involved and the relationships between them
- the needs of the stakeholders engaged in the project
- the importance, complexity, and scale of the project
- the delivery method being used (linear-sequential, iterative-incremental, hybrid)
- what assumptions have been made
- the business environment (legislative or governance requirements)
- business policies, standards, processes, and procedures
- whether the project is part of a programme.
This information will be derived from the project mandate, project brief, and project product description.
It is a standard error to try to identify specific risks before completing this process.
With a shared understanding of the objectives at risk, the uncertainties identified are related to the objectives.
There is no risk if the uncertainty does not impact one or more of the defined objectives.
Identify threats and opportunities.
Risks can be identified at any time during the management and delivery of the project. Any project, business, or stakeholder member may raise a risk.
Risks are captured in the risk register as soon as they are identified. More information about the risk is gathered and developed through the subsequent steps.
Assess
Prioritize risks
The next step is to assess the probability of each risk and its impact to ensure that stakeholders understand the most critical risks.
This involves assessing:
- The probability that the risk will occur (often estimated by considering its probability or frequency)
- The impact of each risk in terms of the project objectives (for example, if the objectives are measured in time and cost, the impacts should also be measured in units of time and cost)
- the impact of the risk on the stage plan, project plan, and business case
- How the impact of the threats and opportunities may change over the life of the project
- Whether the project team is best placed to manage the risk or the risk needs to be escalated to the project board, an overarching programme, or a corporate body.
The risk register should be kept up-to-date with this information.
Assess the combined risk profile.
The combined effect of the individual risks needs to be understood to determine if the overall risk exposure of the project remains within the risk appetite determined by the business and applied by the project board.
If the risk exposure is greater than the overall risk appetite, control actions must be planned in response.
In line with PRINCE2’s continued business justification principle, the project’s justification should be evaluated in the context of risk exposure.
There is no such thing as a risk-free project, and understanding how risk exposure compares with risk tolerance informs how much effort is put into risk responses.
Plan
This step involves identifying and evaluating the appropriate risk response to remove or reduce threats and maximize opportunities.
Any chosen response needs to be included in the appropriate level of plan. For more significant risks, it may be relevant to establish early warning indicators to identify whether the risk is likely to materialize and plans for managing the risk should it occur.
The risk response must identify the most appropriate body to manage a risk. This may not be the project team, especially if:
- The project team needs to have the ability to implement an appropriate risk response within its scope of influence.
- The realization of the risk will materially impact the project’s business justification.
- The project is part of a programme, and it would be more appropriate for the risk to be managed at the programme level. For example, if a specific project identifies a common risk across projects within the programme.
- Implementing a risk response will cause the project to exceed agreed tolerances. This typically occurs in a regulated organization where the business reports specific risks or where the realization of the risk might cause a breach of a regulatory condition.
- If the risk falls within the tolerances set for the project, the project manager may decide the appropriate response. Otherwise, the decision is escalated to the project board.
Subject to the risk tolerance, the risk might be escalated to the business. The escalation of risks is good practice and should be seen as a success. The earlier the risks are escalated, the more time is available to implement corrective actions.
Implement
Planned risk responses must be actioned, their effectiveness reviewed, and corrective action taken where responses do not match expectations.
It is critical to ensure that the responsibilities of the risk owner and risk action owner are identified and agreed upon for each risk.
In some cases, the risk owner and risk action owner are likely the same person.
The risk owner should be the person most capable of managing the risk. The allocation of too many risks to any one individual should be avoided.
Communicate
Communication should be undertaken continually. This step ensures that information related to the project’s threats and opportunities is communicated both within the project ecosystem and externally to stakeholders from the organizational ecosystem.
Risks are communicated in:
- checkpoint reports
- highlight reports
- end-stage reports
- exception reports
- issue reports
- end project reports
Other communication methods could be considered alongside the PRINCE2 management products (bulletins, notice boards, dashboards, information radiators, discussion threads, and briefings).
Project teams should refer to the communication management approach for the most appropriate method to communicate risk information with stakeholders.
A project’s exposure to risk is never static; effective communication is critical to identifying new risks or changes in existing risks.
This depends on maintaining an exemplary communications network, including relevant contacts and sources of information, to facilitate the identification of changes that may affect the project’s overall risk exposure.
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