Sometimes, small and midsize businesses (SMBs) fail to forecast risks, which prevents them from mitigating or preventing said risks. This impacts project planning as it changes scope, budget, and resources.

To address this, SMBs need a viable risk management strategy with clearly defined steps for each stage of the project life cycle. The strategy will help them identify and forecast risks.

Small businesses that don’t build and implement a risk management strategy to mitigate project risks will fail to manage unplanned project delays. This will make it tough to sustain existing customers, and you won’t gain new ones because of your market reputation.

This article aims to help small businesses identify steps to mitigate all risks in project management.

Let’s take a look at a real-life case study to understand how businesses can benefit by implementing their own risk management strategy.

Case study: Benefits of implementing risk management strategy

During the maintenance of their factory units, a manufacturing company noted that shutting down production each time was leading to a drop in income and profits.

To mitigate the losses, the company applied risk management procedures. It assessed and tackled different risks, such as the lack of storage capacity, which occurred during maintenance.

These are some of the steps it took to mitigate and manage risks:

  • Prepared a schedule for maintenance work beforehand. Reviewed the length of the project’s critical path, which included time taken to assess and manage risks.
  • Found out the business’s threshold values, i.e., the point at which a business is capable of sustaining losses. (This was based on their past experiences.)
  • Identified risk sources and events for each stage in the project. Analyzed the impact and probability of each identified risk to develop an action plan for the critical or high-impact risks.

Outcome:

By applying risk management, the manufacturer was able to meet the original deadline of finishing the maintenance work and avoid a loss of about 5 million euros.

7 Most common types of risks faced by project managers

This section lists the various kinds of risks in business. We discuss the challenges and how to mitigate/prevent these risks in your small business.

1. Employee crunch: Attrition and PTO affect project deadlines

How to mitigate or prevent the risk:

  • Train your staff in advance so that they’re ready for the project at hand.
  • Inform your team about delivery deadlines to prevent unforeseen absences, foster collaboration, and balance the workload during emergencies.

2. Team conflicts: Clashes result from a conflict of interests

How to mitigate or prevent the risk:

  • Deploy an interactive style of management, i.e., a transparent management style, which ensures that conflicts are promptly reported. Focus on setting processes for conflict resolution before the project begins.
  • Foster collaboration and communication between the team right from the beginning. Ensure that all project communication is done on a centralized platform so that no team member feels alienated.

3. Conflicts with customers: Prevent a lack of trust in your business

How to mitigate or prevent the risk:

  • Establish an issue log to track and resolve customer issues and keep up their satisfaction levels.
  • Ensure that you keep your communication channels clear throughout the project life cycle and follow-up on action items.
  • Keep the project information updated at all times.

4. Schedule creep: Overestimation and overrun due to delays and unfulfilled dependencies

How to mitigate or prevent the risk:

  • Incorporate time for testing, bug resolution, changes, documentation, and staff unavailability when planning a project schedule.
  • Involve your team when preparing a schedule, so that you take their concerns and dependencies into account.

5. Change management: M&As and team restructuring can derail projects

How to mitigate or prevent the risk:

  • Ensure that your core team remains stable even if there are organizational changes. Try not to make drastic changes to team members’ responsibilities and roles—the project may suffer as a result.

6. No stakeholder support: Lack of updates leads to disengagement and delays budget approvals

How to mitigate or prevent the risk:

  • Communicate the project’s progress to all your stakeholders.
  • Foster relationships with them by frequently sharing project reports and roadmaps.

7. Noncompliance: Delays can result from regulatory changes

How to mitigate or prevent the risk:

  • Set up a legal team to comply with all the relevant laws and regulations. Unfortunately, this is an unforeseeable change that can only be mitigated once it’s taken place.

Steps to identify risks and mitigate them

Here are some pointers to build a risk management strategy for your small business and ways to mitigate certain predictable risks:

chart iconGet insights from your stakeholders and team

  • Identify key stakeholders in top management levels and ask them specific questions about project processes. Gather insights about the foreseeable risks based on stakeholder experience and their feedback.
  • Brainstorm with the core project team to understand the risks to the project schedule, budget, quality, and scope.
  • Use stakeholder insights to develop solutions that reduce the likelihood of each risk at the individual and team levels. Understand the occurrence and frequency of each risk to plan risk prevention and mitigation.
  • Use a nominal group technique for group meetings that encourage each member to write about the problem and discuss it jointly to resolve it. This ensures that the discussion isn’t dominated by any one individual and everybody participates. It also helps to get everybody on board with the process change.

Create a risk checklistCreate a risk checklist and document new risks for analysis

  • Review past projects to capture and anticipate the most significant risks.
  • Train your team to do sanity checks on all projects using this checklist.
  • Use this list to customize solutions for the new projects.

And if you are running a project for the first time, keep these things in mind:

  • Run an assumption analysis—have your project managers document assumptions and associated risks.
  • Use flowcharts to critically assess work processes. Identify each step in the process and think about the associated risks for each.
  • Document each risk in the process to maintain a checklist for future projects.

Account primary and secondary risksAccount for primary and secondary risks

Primary risks are those that you can predict or foresee. Secondary risks are a result of mitigating the primary risks. While we may anticipate primary risks, we may miss out on registering secondary risks because of their ambiguous nature. To deal with them, here’s what you should do:

  • List your doubts every time you’re doing risk management on primary risks. For instance, a small business owner may not implement an innovative project fearing the obvious risk of failure. But a lack of innovation puts the business under the secondary risk of getting out-competed.
  • Use cause-and-effect diagrams to identify primary risks that can give rise to secondary risks; employ these assertions to reduce or eliminate the risks.

Identify high impact risks and tap opportunitiesIdentify high-impact risks and tap into opportunities

  • Identify risks that could have a huge impact or a higher probability of occurrence. Allocate more time to these risks and categorize them as “high priority” to ensure that the team is able to efficiently manage them.
  • Visualize unforeseen scenarios during project execution to identify breakthrough opportunities that will give your project a new direction. Ideally, approach project analysis with an open mind to understand the market threats and opportunities that have high payoffs.

Maintain a risk logMaintain a risk log to monitor risks and respond appropriately

  • Maintain a risk log to keep tabs on the progress of your responses for risk mitigation.
  • Use log reports to improve the risk mitigation steps and be more agile.
  • Inform team members about each risk that has the potential to derail—or has derailed—the project, with the help of log reports and records.
  • Integrate risk management in everyday tasks to keep your team members focused on the project. This way, they won’t miss any important information.

Next steps for successful implementation of risk management strategy

Emphasize the importance of risk management. Review case studies with your team to develop a methodology for your small business. After that, document the steps being taken—and, to be taken—to manage risks better.

Include risk management in the project process. Ensure that your risk management approach is proactive, not reactive. Build a risk management plan into each step of the project life cycle.

Know that all risks can’t be covered. Know that you can’t anticipate all risks. Look for quick wins and identify, analyze, and cover the high-impact risks first.

Delegate responsibilities to risk owners. Identify owners with the knowledge and experience that suits specific parts of the project. Delegate the responsibility of implementing the risk management decisions and executing the plan.

Take time to assess risks. Create a risk management schedule to efficiently manage the process. If done incorrectly, risk management can cause project delays.

Review risk assessment. Track progress every six months, for instance, and evaluate new practices for risk mitigation. It’ll help you understand whether your actions reduced the number of risks or whether risk levels have changed. Make changes to your risk management strategy with thorough and careful consideration.