The Risk Management Lifecycle Explained: 5 Steps to Managing Risks

by Henri Gisclard-Biondi, on 5/20/21
The Risk Management Lifecycle Explained: 5 Steps to Managing Risks

Managing risks throughout the lifecycle of your project is an integral part of project management. During the planning phase and onwards, all uncertainties must be taken into account and assessed to ensure the good execution of the project.

Understanding the risk management lifecycle can help you master the methods designed to anticipate adverse events that could negatively impact the project. You can then plan an appropriate response should they arise. Being able to develop alternative solutions to reach your objectives under all circumstances is the most important challenge in risk management.

This guide will give you an overview of the risk management lifecycle. Then, we’ll dive deeper into the risk management process and help you identify the risks attached to your project, assess their impact and imagine risk control strategies to mitigate risks.

What is the risk management lifecycle?

Referring to risk management as the risk lifecycle emphasizes the necessity for project managers to:

  • Identify,
  • Assess,
  • Control,
  • Prevent the risks faced by the project throughout its development.

This business process should take place at all stages of the project, with risks being reviewed periodically so that mitigation strategies are always up-to-date. The events that could affect the project and the actions the team could take to lessen the risk should be monitored continuously.

This approach to risk management could be seen as a continual improvement process, whose goal is to ensure steady progress and compliance with changing internal and external constraints. There are 5 steps to the risk management process, which are discussed below.

The 5 steps of the risk lifecycle

Identify - Assess - Control - Monitor - Report

© Ideagen

1. Identifying risks

As soon as the project starts, it is essential to:

  • List the different risks the project could face during its execution,
  • Define their characteristics considering the context in which the project will take place.

How to identify the risk of the project? There are various methods you can use to establish a comprehensive list of risks:

  • Set up a brainstorming session with your team or even other relevant people from or outside your organization,
  • Prepare a feasibility study to base your analysis on a thorough picture of your environment,
  • If applicable, study the data from previous projects in a similar industry to have an overview of the possible risks associated with this type of project.

💡 This document is called the risk register and provides the basis for most risk management processes. This document will be enriched with new information throughout the next steps of the risk lifecycle.

2. Assessing their impact

Once the risks have been listed, the next step consists of conducting a risk assessment. The goal is to assess the risk level, meaning to sort risks according to quantitative and qualitative criteria. These should allow you to categorize risks (high, moderate or low) regarding possible impact in terms of scope, delays or costs.

To classify risks, you should consider:

  • The probability of the risk occurring,
  • Its degree of importance and priority level.

3. Defining risk control strategies

Risk mitigation is based on control strategies and careful response planning. The goal is to describe the actions to be taken to:

  • Avoid the risk,
  • Mitigate the adverse effects produced by the risk if it cannot be avoided,
  • Find an alternative if the identified risk could compromise a key part of the project.

You should then designate the person responsible for this risk within your company, for example by using the responsibility matrix.

To define the appropriate risk response, base your conclusions on the sorted list of risks done during the previous steps. Consider their degree of urgency and priority: some will need to be dealt with immediately, while others could be solved in the medium or long term.

4. Monitoring your actions

Set up a process for tracking and monitoring risks throughout the project development. This ensures that new risks are identified and always controlled. For effective risk management, the risk register should be updated on a regular basis, and the risk monitoring phase should go on even after the project has ended.

When new risks arise, reevaluate the measures taken previously. This is to check whether the methodology you used was accurate and relevant, or if it should be revised.

5. Reporting the results

As a project manager, be sure to save your analysis and record your tracking to make the history available to others. This makes it possible to derive good practices for future projects from your experience. Accurate reporting is very important for stakeholders and your company as a whole.

The main type of risks

To help you fill out the risk register, you may start your analysis with the following types of risks:

  • Risks inherent to the planning of your project. These can be related to:
    • Costs: if the budget wasn’t accurate or if the scope of the project changes along the way,
    • Delays: the duration of tasks may have been underestimated,
    • Resources: resources may be unavailable, or the workload for each team member may not be appropriately divided,
    • Deliverables: goals and quality standards may not be met
  • External risks that could impact the project. Though they are unrelated to project planning, these should also be considered. They may be of different nature:
    • Economic: an unforeseen market dynamic could impact the profitability of the project and even cause a financial loss,
    • Environmental: natural phenomena such as earthquakes are security risks, or your activities could have adverse effects on the ecosystem,
    • Social: associations, support groups or any external party could be opposed to the project,
    • Legal: a new law could have a direct or indirect impact on the project

Managing risks throughout the project lifecycle

Mastering the processes associated with the risk management lifecycle goes a long way. Risk management should be agile, reactive and constant. It goes hand-in-hand with other key aspects of the project:

  • Optimize the project team: make sure all the required skills are present and team members are paired with complementary teammates,
  • Review risks regularly to adapt your risk control strategies,
  • Keep the documentation up-to-date for transparency purposes and to share the knowledge gained from your experience.

With the steps of the risk management process in mind and these last tips, you should be able to sail through the tides and to success!