Risks spell danger for projects. There are potential problems lurking everywhere, waiting to become issues and trip up your progress. Identify was the first step in managing risks. The next step involves determining which ones to focus on.
Prioritize. Not all risks are created equal. If you spend your time pursuing those with very little impact on your project or are unlikely to happen, you won’t have time to manage anything else. The key to prioritizing them is to identify a Probability and an Impact for each identified risk.
This is not rocket science so a lot of time should not be spent on each risk. Simply ask the group how they would classify the likelihood of the risk becoming reality on a scale of 1 to 3 where 3 means that it is “very likely to occur” and 1 equals “might possibly happen.” Number 2 naturally falls in the middle.
Once you have agreed on a probability, determine the impact to the project. On a scale of 1 to 5, how bad will things get if the risk becomes an issue? Here a 5 is a major impact and 1 is very little impact with 2 to 4 filling in the difference.
By multiplying the Probability by the Impact you can calculate the PIF or Probability Impact Factor. This is a range of 1 to 15 that quickly ranks your project risks where those with a higher PIF value being the ones to focus on.
The group should then review the numbers to ensure that the risks they think are the most important show up at the top of the list. If not, discuss why and adjust the probability and impact if they don’t make sense. Don’t just change the PIF as we will discuss in the next section.
This step may seem simplistic but it is very effective in helping your team focus on the important risks.
Thomas Cutting, PMP is the owner of Cutting’s Edge (http://www.cuttingsedge.com/) and is a speaker, writer, trainer and mentor. He offers nearly random Project Management insights from a very diverse background that covers entertainment, retail, insurance, banking, healthcare and automotive verticals. He delivers real world, practical lessons learned with a twist of humor. Thomas has spoken at PMI and PSQT Conferences and is a regular contributor to several Project Management sites. He has a blog at (http://cuttingsedgepm.blogspot.com).