Every startup’s project comes with its own inherent risk. While some risks might barely impact the project, others threaten to delay it or shut it down completely. For instance, the failure of half of the production equipment will hurt the progress of a project.
With the tight budgets and time frame your project team might be restricted to, taking chances with common risks could be fatal for the business. Even worse, some of these risks could end up ruining your reputation if they fly under the radar and end up affecting the customer.
However, constrained resources might not allow you to deal with all threats to your project in the same way. Understanding the impact of a threat and your current risk tolerance can help you prioritize the different risks. All it takes is the right level of planning and execution to prop your project up for success.
Here is how to approach risk prioritization for your startup’s projects:
Start with Risk Recognition
Despite having best-laid plans, issues like design errors, omissions, and cybersecurity breaches could derail your entire project. Identifying such risks beforehand gives you the upper hand at handling them before they can turn into a reality. All risks should be listed down regardless of their prospective impact on your project. You should also consider risks that affect concurrent business processes and projects since they could take resources from the project.
The best way to start risk identification is to hold brainstorming sessions with your team. Consider also taking lessons from past experiences. You could have run projects in the past that stalled due to threats that could affect your new project.
Another popular method for risk identification is to consult industry experts. These individuals can provide valuable insights on risks that might not be obvious to you. The more information you can gather about your project’s risk landscape, the more successful your project will be. Be sure to record these risks in a risk register.
Prioritizing the Risks
All risks aren’t created equal. While one risk could lead to the end of your current project, others will barely cause any impact. Other risks are less likely to happen, whereas others will happen more frequently. Ideally, you need to understand the likelihood and impact of a risk before you can start prioritization.
Assessing The Risk Impact
You should take your time to weigh the impact risks can have on your project. The way you rank the impact of the different risks will be at your team’s discretion. For instance, you can opt to use a scale of 1 to 5, with high severity risks falling at 5 and low severity ones at 1. However, the impact of a risk can change within the lifetime of a project. As a great example, technical bugs are costlier to fix if identified in the later stages of the software development life cycle. You can get insights on quantifying a risk’s impact by reviewing past projects, doing basic calculations, or consulting experts.
Assessing Risk Likelihood
How often do you expect a risk to bother your team? Some risks have a low likelihood of ever happening, while others will happen quite regularly. Identifying where a risk belongs will help you set up the right control measure. Just like in impact analysis, you will need to quantify your risk under a scale and you can always draw insights from past events, calculations, or expert opinions.
Create A Risk Matrix
A risk could happen quite often but have a low impact. On the other hand, a high impact risk’s chances of occurring could be quite low. Since following up on this information about your risks landscape can be complicated, you can always rely on a risk matrix to uncomplicate it. A risk matrix is based on a formula that multiplies the likelihood of a risk happening by its impact.
You can then use the resulting figures to weigh the different risks as high, medium, or low. If all project risks appear high, then you should reprioritize them since managing all your risks with the same level of attention can be an uphill task.
Controlling and Mitigating Risks
While some risk control measures might work for other businesses or projects, they might not work well for your current situation. You ought to assess the intricacies of your current situation to pick tailored control measures. Ideally, choosing the best risk mitigation measures will require you to factor in your current resources, risk tolerance, and the residual risk. There are four risk treatment alternatives to choose from, which include:
Risk Acceptance
You can choose to do nothing and accept a risk as-is. This choice works best for risks that have a low likelihood of occurring and a low impact. It can also apply for emerging risks that might not get actualized within your project’s lifetime. By accepting these risks, you are confirming that you have a risk tolerance to accommodate them.
Risk Reduction
You should mitigate risks that sit slightly above your risk tolerance. These are risks you can effortlessly handle in-house with your current resources. Risk acceptance strategies can vary in complexity. For instance, you can purchase software to prevent common cybersecurity risks and have two people sign every check to prevent fraud. The ideal solution for reducing risk should be effective while failing to demand too much from your resources.
Risk Transfer
Some risks could be above your risk appetite but aren’t within your capacity to handle. They could demand too much from your resources, or expose you to even more risks. Such risks are best transferred to a third party. Common options for transferring risks include outsourcing a task or even purchasing insurance.
Risk Avoidance
This option works best for risks that you have zero tolerance for. It involves closing all opportunities for the risk to turn into reality by avoiding any tasks that lead to it. For instance, you can choose to avoid installing a specific feature in your corporate app to prevent its inherent risks. Although it is an attractive option, risk avoidance closes all opportunities you can get from pursuing the avoided task.
Monitoring Risk Control Measures
Your project’s risk landscape can be dynamic. Today’s risk could easily grow into something more impactful tomorrow. For instance, hackers could easily find a new way to gain access to your project’s data. It is also possible for the risk control measures you put in place to no longer be as effective. The earlier you can spot such changes, the easier it will be to keep these threats at bay.
Ideally, you need to schedule risk monitoring. While some risks might need to be monitored at every phase of the project, others can be monitored weekly or monthly. Be sure to record the necessary risk monitoring schedule for each risk on your risk register.
You should also give each risk monitoring role to a specific individual in your team. This delegation promotes accountability while allowing you to keep your risk landscape in check.
