Project Management: Developing a Risk Management Plan

Today’s speed of business has increased project risk by introducing more potential risk events and elevating the consequences of those risk events being realized. Tied to any manufacturing project are production deadlines, product promotions, advertising dollars and as always - the ROI. As the project manager on a project, we are responsible for ensuring timely project completion under any and all circumstances. We manage risk to ensure success.

Developing a Risk Management Plan

The risk management plan is one of the first steps when creating the project plan. To develop the plan, we conduct a collaborative brainstorming session with the major stakeholders for the project, including the client, asking what could go wrong and how we mitigate that risk. The discussion and outcome of this meeting will:

1. Identify major risks (a good way to start this process is to require each person at the brainstorming session to identify at least one risk event)
2. Determine probability (this could be as simple as a High, Medium Low ranking, or it could be more quantitative in nature by assigned specific numerical values to each risk)
3. Determine impact (i.e. If a supplier might be late on delivering a machine or sub-system, how will it impact overall performance?)
4. Assess consequences of the impact (again, this could be simply assigning a High, Medium or Low ranking, or assigning a specific numerical value)
5. Establish the strategies to mitigate each risk (examples: set additional verification trips, seek photographic or video updates, add contingency money to the budget)
6. Assign risk owners to maintain focus on risks (and establish accountability by requiring regular updates on progress)

Risk Management Plan: A Bottling Line Example

As a theoretical example, let’s say that a beverage client has engaged us to install a new bottling line for a new type of beverage. As part of the project, an international equipment supplier is scheduled to deliver the filler, a critical component of the new bottling line, on a specific date.

Identifying Impact and Likelihood

As part of the risk assessment, we would ask, “What if the filler does not arrive on time?” If this occurred, the whole project could be delayed, and the customer’s entire product launch could be compromised, costing significant investments in advertising, customer expectations, and reputation. The impact of seeing that risk event would be severe. The probability of that scenario could also be high due to known delivery patterns or geographic and economic conditions affecting the supplier. Therefore, we would build a plan to mitigate the risk.

Mitigation Strategies

One solution might be to require periodic photo or video updates on the manufacture of the equipment. It may also be wise to consider that if the filler is late, how could the installation schedule be altered/crashed in order to accommodate the late arrival. Finally, it might be wise to set up a contingency budget plan for transportation so that air freight could be used in lieu of sea freight if the delivery schedule falls behind.

The risk management process is simple, but effective. Through comprehensive risk management, we are able to deliver within project scope, on time and within budget.