The Identify Risk Process: A Comprehensive Guide

The Identify Risk Process is a crucial step in any project or business venture. It's a systematic approach to identifying potential risks that could impact your goals.

Risk identification involves gathering and analyzing data to pinpoint potential risks. This process can be facilitated through brainstorming sessions, risk assessments, and other tools.

To begin the identify risk process, you need to define your project scope, goals, and objectives. This will help you identify potential risks that could affect your project's success.

The risk identification process typically involves identifying internal and external risks, including those related to people, processes, and technology.

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Risk identification is the process of finding and documenting potential risks that could impact a project or business. It's a crucial step in the risk management process.

A risk is any event or situation that could have a negative impact on a project or business. This can include things like natural disasters, equipment failures, or even human errors.

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Effective risk identification requires a thorough understanding of the project or business, including its goals, objectives, and potential pitfalls. This involves reviewing project plans, identifying potential hazards, and gathering input from stakeholders.

Risk identification can be done through various methods, including brainstorming, interviews, and reviews of historical data. For example, a company may identify a risk of supply chain disruptions by reviewing its supplier contracts and analyzing past delivery records.

Identifying risks early on can help prevent or mitigate their impact, saving time, money, and resources in the long run.

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The Risk Identification Process is a crucial step in identifying potential risks that could impact your project or business.

Risk identification involves gathering and analyzing data to identify potential risks, which can be categorized into internal and external risks.

Internal risks are those that come from within the organization, such as inadequate resources or poor communication, while external risks are those that come from outside, such as market changes or regulatory issues.

The risk identification process can be facilitated by using techniques such as mind mapping, SWOT analysis, and brainstorming sessions.

These techniques help to identify potential risks and opportunities, and can be used to develop a risk management plan.

Data gathering is a crucial step in the risk identification process. It involves collecting relevant information to understand potential risks.

There are multiple techniques to gather data, and some of the widely used methods include surveys, interviews, and observations. These methods help gather information from various stakeholders and sources.

Surveys can be conducted online or offline, and they provide a cost-effective way to collect data from a large number of people. They can be used to gather information on attitudes, opinions, and behaviors related to risk.

Interviews, on the other hand, provide a more in-depth understanding of the risks and can be conducted with key stakeholders, such as employees, customers, or suppliers. They can help identify specific risks and their potential impact.

Observations can be done by monitoring the behavior of people, processes, or systems, and they can provide valuable insights into potential risks.

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The risk register is a crucial tool in the risk identification process, where all individual risks are registered with unique names and/or numbers, along with a description of the risk.

A risk register should include a list of all risks found in the identification process, as well as the owner of the risk, if identified. This ensures that the information doesn't get lost.

Potential risk responses should also be registered, including any responses identified during the risk identification process. This helps to keep track of potential solutions to mitigate the risk.

Any additional relevant information, such as risk triggers, deadline for action, and current risk status, should also be recorded in the register. This information helps to keep the register up to date and ensures that all necessary details are captured.

The risk register should be kept up to date as the risk identification and risk management process is an ongoing process throughout the project.

Analyzing risks is a crucial step in the risk management process. It involves calculating the probability of a risk event or scenario and estimating the potential consequences if it happens.

There are dozens of methods available for both qualitative and quantitative risk analysis, many of which are described in IEC 31010, a standard on risk assessment techniques.

A more quantitative approach to risk analysis, such as the Factor Analysis of Information Risk (FAIR) model, can be used to perform detailed cyber-risk calculations that could be more helpful in assessing risks than color-coding.

Some common factors to consider in risk analysis include time factors, financial reporting systems, and the frequency of risk events.

Here are some factors to consider when evaluating the likelihood of a risk:

These factors can help you estimate the need for additional budget for risks and opportunities of the project.

Analyzing categories can be a game-changer when it comes to identifying potential risks in your project. By reviewing a list of common risk categories, you can identify risks that you may not be aware of and prevent yourself from forgetting about some risk sources.

Most organizations carry out projects of a similar nature, so a new project inherits all the same sources of risks from the environment. Risk categories are just a list of these common sources of risks in your organization.

You can reuse this technique throughout your whole career, as it's based on lessons learned in risk management. Ideally, project managers should share these lessons with others, but that's rarely the case.

The list of risk categories comes from lessons learned in risk management, and it's not something you'll typically find in your organization. However, you can use a pre-made list of categories, such as the one provided.

The process is simple: get through the list to identify risks that may apply to your current project. You can approach this in different ways, such as reviewing the list alone and shortlisting the categories, then discussing the shortlist with your team.

Here are some ways to use the list of risk categories:

The best time to do this is when you already know the project's scope of work.

Root cause analysis is a method used to identify the underlying reason for a risk, also known as the "why" of a risk.

In practice, I use root cause analysis for risk identification in three scenarios: analyzing severe problems of past projects, solving systematic problems, and grouping identified risks by their root cause.

To analyze severe problems of past projects, you can use notes from lessons learned or a list of risk categories. You can also analyze a similar project carried out by another project manager.

When trying to solve a systematic problem, root cause analysis can help you identify the primary sources of problems and identify even more risks.

You can use the fishbone diagram, the "5 Whys" technique, or a scatter plot diagram to conduct a root cause analysis session. Later, develop a systematic risk response plan for the next project.

Don't assume that the same risks won't occur in the next project. On the contrary, they undoubtedly will – especially those related to your project management approach and your organization's environment.

Here are three scenarios where I use root cause analysis:

By identifying the root cause of a risk, you can solve all underlying risks at once.

Analyzing assumptions is a crucial step in identifying potential risks. It's essential to keep track of all major assumptions, just like keeping a separate list of project-level assumptions.

Assumptions involve risks, and if they're wrong, a project is in trouble. We make assumptions all the time, but most are made right at the start of a project, which can impact the project later down the road.

Assumptions that you make due to problems in the organization are the most risky, including assumptions about getting required resources in time, the availability of a Subject Matter Expert (SME), and third-party deliverables on time.

You need to work hard to validate an assumption and either make it a fact or transform it into a known risk. Educating people about risk management techniques can help them use them on the fly, including risks and assumptions in all their conversations.

To identify the most impactful risks, analyze assumptions related to specific requirements right in the specification document. By regularly reviewing and validating assumptions, you can uncover potential risks before they become major issues.

Here are some examples of assumptions that can lead to risks:

Analyzing Risks is a crucial step in the risk management process. It involves identifying and evaluating potential risks to determine their likelihood and potential impact.

To conduct a risk identification process, refer to Chapter 11 of the Project Management: A guide to the Project Management Body of Knowledge (PMBOK guide), 6th Edition (2017). This chapter provides a walkthrough on how to conduct a risk identification process.

A very good reference for all things risks in projects, portfolios, and programs is the Standard for Risk Management in Portfolios, Programs, and Projects. This standard is a valuable resource for risk management professionals.

Risk analysis results enable the various risks to be sorted and ranked based on their importance to the organization. This is done to highlight the risks that are most likely and would be most impactful.

Plotting the results in a risk heat map, also known as a risk assessment matrix, helps to visualize the relative importance of each risk. This can benefit both the risk management team and business stakeholders.

The final ranking of risks could be influenced by factors that are important to the stakeholders involved, such as customer trust. If senior management has expressed that customer trust is a key value for the enterprise, risks that might affect customers could be prioritized above others.

Qualitative Assessment is a crucial step in analyzing risks, and it's used to prioritize response plans on the most critical items. This involves ranking and prioritizing each identified risk and opportunity by occurrence probability and impact severity.

The Risk Owner and the Risk Manager will use a criticality scale to determine the probability of occurrence (P), which is usually on a scale of 1 to 99%. This is based on experience, the progress of the project, or by speaking to a risk expert.

The impact severity (I) is also evaluated using a scale to classify the different impacts and their severities. This ensures that the assessment of each risk or opportunity is standardized and reliable.

The criticality level of a risk or opportunity is obtained by the equation: Criticality = P x I. This helps to objectively prioritize risks and opportunities.

To give you a better idea, let's consider an example. Suppose the risk that "the inability of supplier X to conduct studies on a modification Y by the end of 2025" is 50% probable. This could be determined from feedback and analysis of the supplier's workload.

Here's a brief overview of the criticality equation:

Note: The exact values may vary depending on the project's criticality scales.

Quantitative Assessment is a crucial step in analyzing risks, where we aim to establish a financial evaluation of a risk's impact or an opportunity's benefit. This is typically done by the Risk Owner, Risk Manager, or management controller, depending on the company's organizational set up.

To conduct a quantitative assessment, we need to evaluate any additional costs incurred by the risk, such as hours of internal engineering, subcontracting, and additional work to do. These costs can be substantial, and it's essential to factor them into our risk management plan.

The cost of a risk's consequences is calculated by adding these values, giving us a clear picture of the potential financial impact. This step allows us to estimate the need for additional budget for risks and opportunities in the project.

One way to evaluate potential costs is to use the FAIR model, which is a detailed cyber-risk calculation method. This can help us assess risks more accurately than relying on color-coding or general terms like "high risk" or "low probability."

Here's a breakdown of the costs to consider:

The key to a successful risk identification process is using the right tools and techniques. You can apply universal techniques like brainstorming to anything on a project, while specific techniques like requirements analysis are used once for a piece of project documentation.

Some project managers prefer to use a combination of techniques to uncover risks, known as a hybrid approach. This can involve reviewing project schedules with the team, brainstorming possible threats, and then checking common risk sources in risk categories.

To get started, consider using the following risk identification tools and techniques:

Using techniques for risk identification is a crucial part of any project. You can use techniques like brainstorming, which is universal and can be applied to anything on a project, to identify potential risks.

You don't always need to use all techniques on everything, but you might apply several techniques to one input. For example, you can review the project schedule with the team and brainstorm possible threats, then check common risk sources in the risk categories. This is a good way to efficiently use your time and resources.

Some techniques, like expert judgment, can be very helpful in identifying risks. Experience and subject matter expertise can be enough to identify some project risks. You can consult experts to ensure that you haven't missed key risks.

You can use a combination of techniques, known as a hybrid approach, to uncover risks throughout the project. This is a common method used by project managers.

The following techniques can be used for deeper analysis:

It's also a good idea to identify individuals or groups that can act as experts when identifying project risks. These experts can be people with experience in a specific area relevant to the project or those with specialized knowledge that relates to the project.

In a brainstorm, the goal is to generate an overview of potential risks for the project. The brainstorm should be carried out by the project team, but experts should also participate.

A risk breakdown structure is a hierarchical representation of risks, starting at the highest level and moving down into more detailed levels.

It's not unlike the Work Breakdown Structure, which helps managers create an overview of the risk categories.

A risk breakdown structure can be a very useful tool for creating a clear and organized picture of potential risks.

It's a way to break down complex risks into smaller, more manageable parts, making it easier to identify and assess them.

By creating a risk breakdown structure, managers can get a better understanding of the risks involved in a project or situation.

The output from identifying risk is a crucial step in the process. It involves three key components: the risk register, the risk report, and updates of project documents.

The risk register is a central repository that holds all the information about identified risks. It's a vital tool for tracking and managing risks throughout the project.

A risk report is also generated as part of the output, providing a summary of individual project risks and sources of overall project risk. This report helps stakeholders understand the risk landscape and make informed decisions.

Updates to project documents are another important aspect of output, ensuring that all relevant information is current and accurate. This helps maintain a clear and consistent view of the project's risk profile.

To collect stakeholder input, it's essential to consult with them during project planning. As Black shares, "Communication is key to capturing as many risks as possible. While you may not perceive something as a risk, another stakeholder or project contributor may experience a significant impact."

Risks change over the lifecycle of a project, so it's crucial to review them often. Imbarrato states, "New risks can arise as the project unfolds. It is critical for project managers to understand that risks are not something they can document and then store."

Analyzing risk impact is a critical part of the risk identification process. White suggests conducting a risk analysis: "Analyze how risk can impact your project and evaluate the outcome of the risks."

To identify risks, it's helpful to review similar past projects. Zucker suggests, "Many risks from prior projects will manifest in future ones, so old risk registers can be a good starting point for review."

Here are some best practices for identifying risks:

The steps and phases of the risk identification process are crucial to ensure that all potential risks are identified and addressed. There are six phases in the project risk identification lifecycle, which include creating a statement template, conducting a SWOT analysis, researching risks, reviewing internal and external risks, cross-checking risks, and creating a final risk statement.

To identify risks effectively, you can follow the six phases mentioned earlier, which include creating a risk statement template, conducting a SWOT analysis, researching risks, reviewing internal and external risks, cross-checking risks, and creating a final risk statement. These phases will help you to identify risks and create a risk statement for each risk.

The four essential steps of the risk management process are: identify the risk, assess the risk, treat the risk, and monitor and report on the risk. These steps will help you to manage risks effectively throughout the project lifecycle.

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Here are the six phases of the project risk identification lifecycle:

When to Perform Risk Identification is a crucial aspect of project management. It's essential to identify risks at various stages of the project.

You should use an integrated risk management approach, where you and your team discuss possible risks for each activity during the project. Track all the assumptions you make, check if the requirements are ambiguous, and don't hide uncertainties – instead, transform them into risks.

Some important moments to consider for dedicated risk identification sessions include when clients identify the project goal, after you've identified key stakeholders, and when you've reviewed risk categories for the first time.

Here are some specific critical points to consider for risk identification sessions:

Risk identification is an iterative process that should begin before project risk assessment and project risk analysis, and before you finalize your project risk management plan. It's essential to continue identifying risks throughout the project lifecycle.