Do your project teams have the risk management documents they need to get risk management right? If you’re convinced of the benefits of risk management, then we don’t need to tell you the improvements you can see to your business are significant. But do you teams have the supporting documentation required in order to manage risk in the most effective way?
In this article we’ll look at the 5 pieces of essential risk management documents that project managers should have in place. As a senior leader shaping the way risk is implemented in your business, you can ensure these are present for every project and that project teams have the level of detail required to make good decisions about how to handle risk.
1. Contract and Statement of Work
The contract with the client and the statement of work set out the formal requirements. These may include formal processes for dealing with risk including risk identification, review periods and risk ownership.
If your contracts don’t include explicit information about how you will manage risk, it is worth including a section about this so that you and the other party know exactly what to expect. If you are buying in services, knowing how your vendor is going to manage risk will give you confidence and allow your own project team to interface with their risk management processes in the most effective way.
Equally if you are selling services and offering your standard contract to a client, you can set some standards for risk management early in your relationship so they know what to expect from you. You may also find that being transparent about your approach to risk management can help you seal the deal!
2. Project Assumptions
These are the informal requirements for the project and will include other guidance that the project team picks up in meetings and so on.
Ideally you should ensure that project assumptions are documented as these often have associated risks – in particular, the risk that the assumption is incorrect.
3. Work Breakdown Structure
This is a tool used to identify the entirety of the project’s tasks. It’s organized in a way that lets project team members see the total scope of the project so they can adequately plan the tasks.
This is a crucial document to support risk identification. Your experienced project managers will be familiar with work breakdown structures and may already use them. However, many project management approaches don’t make it essential to produce one. Creating a work breakdown structure can be quite time consuming so project teams sometimes feel as if they can skip this step.
While we are big believers at ensuring the tools are right sized for the job at hand and we’d never force the creation of documentation for documentation’s sake, there are many projects that would benefit from having a work breakdown structure. If you are leading a project that doesn’t have one, it’s worth questioning the team to find out why.
The document helps with risk identification and ensures that the team can easily see how tasks fit together overall. It can visually display the project scope so you can be sure the risk management activities apply across the board.
4. Detailed Cost Estimates
The detailed cost estimates are also supported by the work breakdown structure. The costs should be estimated at the lowest level of the work breakdown structure and then aggregated to give you a cost for the project overall.
This is a good document for supporting risk management because risk management activities should have a separate budget. With cost estimates at a task level you can add the appropriate amount of risk budget to each workstream (or task, if necessary). Then you can add this to the overall budget to be sure you are allowing enough funding for the work to continue. Alternatively, if the cost estimates plus risk budget look too high, you can take the decision to rethink or close the project.
By thinking about risk at a task level and associating it with the cost of dealing with that risk you have a comprehensive take on risk management for that project.
5. Project Schedule
Finally, your project teams should all have a project schedule. Risk management activities have an implication for your plans. If a risk materializes, it will likely add time to your schedule. Equally, dealing with a risk in the first place also adds time and tasks to your schedule. You’ll have to work together to establish which of these is the best scenario for each risk: do nothing and deal with the time implications if it happens, or actively manage the risk and invest the time now to make sure you can either manage it away or mitigate it to the point where it isn’t a significant problem any longer.
Either way, your project managers need to be on top of their project schedules. They should be incorporating risk management activities into their plans including regular risk reviews. To do lists should include check ins with risk owners and time to catch up with the people involved in handling the work.
If your project teams are not actively managing their schedules, this is the first place to invest some management time. Help them set up the project management tools they need to be able to accurately manage their project plans in a constructive way.
These 5 risk management documents are important at a project level for ensuring risk management processes can be implemented. And they’re important to make sure that these processes are carried through appropriately. Work with your Project Management Office team to ensure all projects have these as a basic standard.