How to create a Project Risk Management Plan [The Best Free Guide]

a project risk management plan in a table

Planning and documenting are two mandatory actions in project management because they’re the foundation of a project management risk plan.

They’re a vital step for the project’s success by establishing what actions need to be taken, who is responsible for what in the project’s life cycle, and how to respond when risks and obstacles hit.

This plan will document potential risks to an organization and a project and the steps the team working on it will follow to mitigate and address risks.

Regardless of its scope (it may involve every group in the organization or only the project manager and their team), a project risk management plan states how to identify potential risks and how to perform risk analysis.

Read our guide to know what it is and how to create a project risk management plan. You’ll find everything you need to know about it.

This guide includes:

What is a project risk management plan in project management?

A project management risk plan is a document that outlines how a project’s risk management process will be executed. It establishes how to approach risk management: funds, which tools used to identify, understand, and manage the risks related to the project, and what are the responsibilities of each team member in managing risk.

This plan should be outlined even before the start of the project and be a constant reference to those working on it.

It’s not a static plan and can be adjusted, but it must ensure that the process to manage risk is working and that risks are being addressed.

Such a plan can be guided through these questions:

  • What is this project, and why is it being worked on now?
  • What will the team do to identify, log, assess, and monitor risks throughout the project?
  • What categories of risk will we manage?
  • What methodology will be used to evaluate risk severity?
  • Who owns the risks, and what is expected of them?
  • How much risk is too much risk?
  • What are the risks, and what are we going to do about them during the duration of the project?

8 Benefits of a project risk management plan

A project risk management plan is an obligatory part of project management.

This type of plan allows and enables the project managers to oversee the entirety of their plan from every perspective, having the ability to check every resource needed.

These are the main benefits of creating and enforcing a plan.

1. Identification of problems

This identification of problems and risks is needed right from the beginning to assess the issue and create a response.

A risk management plan identifies the risks in stone, having them constantly present during the project’s trajectory.

2. Better quality data

To make better decisions, the best quality data is necessary. Having a project risk management plan in place requires gathering information, especially technical one if it applies to your specific project.

Structuring the plan will be the driving force behind gathering as much data as possible.

3. Better communication

The plan will also demand a better and more efficient way of communicating risk information up and across the organization.

TIP: Get the best tips to improve your team communication.

4. Avoidance of more risks and surprises

A robust and comprehensive risk management plan is a big help in mitigating unexpected negative surprises and new risks.

5. Better compliance with budget

All the factors presented in this list result in successful implementation and better budget application from the beginning of the project.

In our blog, you find out why time budgeting is important for project management.

6. Avoidance of team distractions

By having clarity regarding their roles and what is expected of them, team members’ performance will be engaged at all times.

A good risk management plan will also create realistic goals and expectations with all stakeholders.

7. More effective adherence to processes

Formal processes that are established in a risk management plan will be more effectively complied with, meaning that problems and issues can be easily managed and solved.

8. More proactive responses

Having a risk management plan in place will help the team have a more proactive attitude when responding to risk events. Being proactive instead of reactive will benefit the project and its outcome.

a illustration of a project risk management cycle

How to create a project risk management plan

Every single one of these steps can be adjusted and adapted to the type of project at hand, and this is a general draft of the steps required.

1. Gather all the needed support documentation

According to the best project management blogs and courses, there are supporting documents that are essential to have when planning a project risk management plan. These are the project charter, the project management plan, and the stakeholder register.

This last document gathers information on the project stakeholders and the different set of risks associated with them. 

The project management plan reviews all the methodologies used in managing and monitoring the project, and the project charter establishes formalities, like who the project manager is and what are the final goals of the endeavor.

6 people having a work meet

2. Provide context

Now it’s the time to give context, understand and explain the business value of the project and the negative impact that the effect of the risks can have.

The ultimate negative effect is the project not succeeding. The context will be beneficial when discussing risk management with the team.

Read also: Everything you need to lead a meeting

3. Define the methodology to identify/assess risks

The chosen methods to identify risks need to be sustainable for the team to do throughout the project, and adaptable to different kinds of projects, of course.

A brainstorming session with the team members and stakeholders defines what categories of risk you’ll consider on this particular project and what responses should be given. It’s also good to establish the severity scale of every risk category.

The word RISK written in wooden blocks

4. Identify the risks

Now, it’s time to think about all the things that can go wrong during the life cycle of a project. Another group brainstorming or a risk workshop might be a good idea to identify, evaluate and plan the response to specific risks.

An overview of the project from every participant group: including team members, stakeholders, and sponsors, is advisable to avoid missing any kind of risk a specific risk may not consider.

It’s also helpful to look at past projects that can inform what can go wrong/is going wrong with the current one.

5. Assign owners to the identified risks

As the risks are identified, they have to be assigned to owners. A project manager doesn’t own all the risk responses but is responsible for choosing the correct person to handle the problem, considering the person’s skills, experience, and area of expertise.

It’s important to ensure that all risk owners know their responsibilities and have access to and read the risk management plan at all times.

Learn how the waterfall project management method can help you improve your management skills.

6. Use the risk register to keep track of everything

Use the risk register to keep everything documented through all the phases, especially after identifying and assigning ownership. This register can include photographs as well if there are any visual materials used during the workshops and brainstorming sessions.

Keeping a risk register updated may seem like a time-consuming bureaucratic task, but it’s fundamental in risk management. Each risk and its key details are registered and then analyzed according to key areas: description, risk response category, risk response, and risk owner. This will allow for establishing a correlation between risks if they exist.

a man monitoring a project management risk in a pc

7. Keep monitoring the risks 

Of course, the risks need to be watched over until their resolution. The owner has to keep the manager in the loop of things through calls or e-mails to have an accurate picture of the project’s overall progress.

Keep the risk register updated promptly. If possible, within your project conditions, it’s a good idea to run risk workshops periodically throughout the project. 

8. Make sure the risk management plan is accessible

The risk register of any given project can be beneficial for future reference and the foundation of any future projects

a man and woman analyzing a project risk management plan

Extra tips for creating the perfect project risk management plan

To further strengthen the project risk management plan, there are extra habits and tips that can be helpful. Here are a few examples:

  • Avoid multitasking – dealing with risk-related tasks demands full attention, so avoid dealing with other work while you’re focused on the risk because multitasking decreases productivity.
  • Use time tracking tools – time tracking tools are handy by helping keep track (and record) of workshop sessions’ duration, risk registration periods, time-sensitive risks, block periods for total focus, etc. A time tracking tool will help you also to create better time estimations for your project and tasks. TIP: Timeular’s time-tracking features can be quite useful here.
  • Keep everything well documented – Aside from the required documentation, keep notes of meetings and handle processes by e-mail, so there’s always a record.

How is a project risk management plan fundamental in project management?

Every project put in place by a team or an organization has a percentage of risk looming over it.

It’s kind of an interpretation of the Law of Murphy, but less dramatic: anything that can go wrong will go wrong. To avoid the presence of unwanted risks, the documentation that builds the project risk management plan is essential.

Every step of this plan will help identify and anticipate scenarios that can put the project at risk and ways of mitigating said risk and responding to the problems caused. The lack of a risk management plan jeopardizes all the work invested in the project, quickly preventing it from achieving its wanted outcome. Risk management is critical during project initiation, planning, and execution.

FAQs

Who is responsible for risk management in a project?

Risk management usually is part of the responsibilities of the most senior member of a project team, who risk management professionals can assist.

Who approves the risk management plan? 

The risk management plan is usually approved by the project manager or the most senior member of the company/business.

What are the steps of project risk management?

The main steps of project risk management are identifying, analyzing, prioritizing, assigning, monitoring, and responding to it.

What are the best risk management tools?

Risk analysis tools include a Monte Carlo simulation, a risk matrix, a risk breakdown structure, and information-gathering tools such as the risk management plan itself. Many software in that market gather all these, such as SAP Risk Management, AuditBoard, Proofpoint Intelligent Compliance, A1 Tracker, and others.

What is the risk matrix formula?

A risk matrix is a formula used for risk assessment. One of its axis is used to assign the probability of a risk, and the other is used to determine the consequence or severity. So, risk equals probability times severity.

Conclusion

It takes time to define and structure a risk management plan, but it’s the best investment possible in project management terms.

A good project risk management plan is synonymous with a strong foundation for your project. It can save time, and money, reduce stress levels and be an excellent support for a work team.

Defining this kind of plan is a way to pave the way for success by prioritizing the identification of risks and allowing the preparation for dealing with such issues.

Collaboration and communication improve by having a good project risk management plan in place since a layer of security are added to the project.

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