What is the connection between the seemingly disparate fields of risk management (enterprise-level, in particular) and project management? After all, the former concerns parrying threats to your company, whereas the latter deals with manufacturing new products and services. The truth is, that when the two are combined, they lead to a more efficient overall outcome.
Understanding Project Management
Project management is largely self-explanatory; in the context of a business, it involves the inception of ideas, the process of implementation, and the final stage of development. It is often regarded as the most tangible part of the pre-production process. Breaking it down further, these are the separate parts of project management:
- Phase initiation
- Timetable creation
- Distribution of information
- Change and Adjustment observation
- The compilation of data at the completion of the project
The Qualifications of a Project Manager
Due to the scope of a project managers responsibilities, the primary abilities she must have are organizational skills and an understanding of risk mitigation theory and techniques.
The Importance of a Project Team
In addition to having a capable project manager, if you’re engaging in large projects, then a team will be necessary to efficiently undertake the task. Otherwise, you’ll be encumbered with looming deadlines that abrogate your ability to meet objectives. An effective team is necessary for project stability on large projects; whereas a single person should be able to coordinate and integrate the various parts on a smaller project.
Risk Mitigation Begins with Project Managers Identifying Risks
Project managers assess risk in a multitude of ways; ultimately, the goal is to implement a program that takes into account the prioritized risks via the probability and the projected impact they would have on the final product. The first part of this process involves the identification and classification of risks as positive or negative.
Positive Risk: Positive risk refers to the potential for missed opportunities. For example, what if taking advantage of a development is projected to result in more sales? It may seem like an obvious route to take; but if other parts of the project management process are not aligned with this advantage, risking it could result in financial loss – as well as loss of reputation. Your project manager will have to assess – or assign someone competent to assess, in the case of a large project – this and denote it as a positive risk.
Negative Risk: Negative risk is easier to qualify; but just as difficult to quantify as positive risk (in some cases, at least). If, for example, there are too many hang-ups on the development side, this causes costly delays that sets the entire project back. Being behind schedule is the most prominent issue with negative risks – especially given that you’ve got waiting customers and a competitive environment, in which your competition will quickly fill the vacuum.
Taking Action: Creation of Risk Response
There are three main options in a risk response strategy:
- Risk avoidance
- Risk transference
- Risk acceptance – proceed with the project mindfully
Avoidance is fairly self-explanatory and comprises the primary response that most project managers would espouse. Whenever possible/feasible, this entails putting into practice the methods that will most efficiently stop the problem from adversely affecting your project.
Risk transference is the second most preferred option (for the most part; barring complications). What does this entail? As an analogy, consider insurance policies; it is a risk transference mechanism at heart. You, the policy buyer, are transferring risk to the insurance company – the latter charges you a monthly rate for the privilege.
Lastly, risk acceptance is a viable response – although you may initially balk at the prospect. Your project manager will first lay the groundwork by numerically assessing the risk associated with the occurrence of an event. It’s simply a cost-benefit analysis that determines whether the costs associated with risk avoidance are too high, and risk transference or risk acceptance is a better play.
Regulatory Compliance and Automation for Project Management
All this talk of risk responses ties neatly into regulatory compliance; given that the latter offers a series of steps that, when followed to the letter, naturally optimizes your risk tolerance and response. It all begins in the implementation phase and propagates through the project lifecycle.
In particular, the ZenGRC SaaS program is an automation mechanism that automates the most important aspects of your project by ensuring compliance with SOC 2 and SOC 3, specifically. Software has obvious benefits when it comes to project management; including reducing the need for a robust project management team unless the project is very large. ZenGRC includes audit reports, self-assessment tools and many other industry-standard metrics for reporting your compliance efforts.
Learn more about enterprise risk mitigation at Reciprocitylabs.com
Ken Lynch is an enterprise software startup veteran, who has always been fascinated about what drives workers to work and how to make work more engaging. Ken founded Reciprocity to pursue just that. He has propelled Reciprocity’s success with this mission-based goal of engaging employees with the governance, risk, and compliance goals of their company in order to create more socially minded corporate citizens. Ken earned his BS in Computer Science and Electrical Engineering from MIT.