wherein the manager should routinely evaluate the potential risks that might affect the strategic objectives of a project or program. Refined and updated risk management plans should then be presented to the governance board for approval. This practice is particularly important for individuals preparing for the Program Management Professional (PgMP) exam, which demands a comprehensive understanding of risk management.
1. Understanding New and Existing Risks
New and existing risks are two prevalent categories of risk in project and program management. New risks are unexpected and can arise anytime during the lifecycle of a project or program. They are often triggered by changes in the business environment, technology, or regulations. Existing risks, on the other hand, are inherent and have been identified at the inception stage of a project or program.
Both types of risks must be adequately assessed to ensure they don’t interfere with the strategic objectives of the project or program.
2. Regular Evaluation of Risks
Continuous risk evaluation is critical in project and program management. The process involves identifying potential risks, evaluating their possible impact, and formulating strategies to control their effect on project outcomes.
Regular risk evaluations should be an integral part of your program management cycle because the risk landscape is continuously changing. You might need to implement new contingency plans, revisit your risk tolerance limit, or consider adjusting your project plan to accommodate these changes.
3. Updating the Risk Management Plan
Each risk evaluation should result in an updated risk management plan that outlines the identified risks, profiles them according to their potential impact and likelihood, and describes the planned response strategies.
For example, a simplified risk management plan might look like the following:
| Risk | Likelihood | Impact | Risk Response |
|---|---|---|---|
| Tech Failure | High | High | Contingency plan for alternative tech |
| Market Volatility | Medium | High | Adjust project timeline to accommodate market fluctuations |
| Resource shortage | Low | Medium | Identify potential resource backup in advance |
4. Presenting the Plan to the Governance Board
After revising the risk management plan, it is your responsibility as the program manager to present the updated plan to the governance board. This step is crucial because the approval of the governance board signifies agreement with the identified risks and corresponding response strategies, thus enabling the efficient execution of risk management plans within the project or program.
In conclusion, as a PgMP candidate, understanding the importance of regular risk evaluations and how they contribute to successfully achieving strategic project and program objectives is crucial. Remember, an accurately conducted risk evaluation and an updated risk management plan approved by the governance board can be a potential game-changer in your journey towards delivering successful outcomes. Always adapt appropriately to risks, never let them control the strategic orientation or outcome of your project or program.
Practice Test
True or False: The process of regularly evaluating new and existing risks is crucial in identifying potential threats to a project’s strategic objectives.
- True
Answer: True.
Explanation: Regular evaluation of risks allows an organization to identify and mitigate threats before they become a problem, thereby enhancing the protection and success of strategic objectives.
What is the primary purpose of presenting an updated risk management plan to the governance board for approval?
- A. To communicate changes in the project scope
- B. To identify resource constraints
- C. To ensure risk mitigation strategies align with strategic objectives
- D. To provide updates on project progress
Answer: C. To ensure risk mitigation strategies align with strategic objectives.
Explanation: An updated risk management plan is presented to the governance board primarily to ensure that the proposed risk mitigation strategies align with the organization’s strategic objectives.
True or False: The risk management plan needs to be updated at the start of the project only.
- False
Answer: False.
Explanation: The risk management plan needs continuous updating throughout the project lifecycle to accommodate new risks and changes in existing risks.
Multiple Select: Which of the following are recommended steps in regularly evaluating risks that impact strategic objectives?
- A. Identifying potential risks
- B. Continuing executing the project without assessing its risks
- C. Documenting and continuously updating a risk management plan
- D. Presenting the risk management plan to the governance board for approval
Answer: A. Identifying potential risks, C. Documenting and continuously updating a risk management plan, D. Presenting the risk management plan to the governance board for approval.
Explanation: These are all crucial steps in effectively managing risks within a project with the exception of “B”, which is not advisable in any project.
True or False: The governance board is not concerned with risk management plans.
- False
Answer: False.
Explanation: The governance board plays a significant role in approving risk management plans. Such plans impact the strategic objectives of the project, which are the governance board’s key interest.
Which of the following strategies would be most effective in dealing with newly identified risks?
- A. Ignoring the risk
- B. Assessing the risk and updating the risk management plan
- C. Complaining to the team
- D. Cancelling the project
Answer: B. Assessing the risk and updating the risk management plan.
Explanation: New risks should be assessed and integrated into the existing risk management plan to reduce potential harm or negative impact on the project.
How should change in project risks be communicated to the governance board?
- A. Through informal chats
- B. During coffee breaks
- C. Via an updated risk management plan
- D. It shouldn’t be communicated
Answer: C. Via an updated risk management plan.
Explanation: Changes should be documented in the risk management plan and presented to the governance board formally for approval.
True or False: Risk management plans need to align with the strategic objectives of the project.
- True
Answer: True.
Explanation: Risk management plans are designed to protect and enhance the achievement of strategic objectives. That’s why they need to be in alignment.
What is the main responsibility of the governance board in relation to risk management plans?
- A. Developing the risk management plan
- B. Assessing all the risks
- C. Approving the risk management plan
- D. Ignoring the risk management plan
Answer: C. Approving the risk management plan.
Explanation: The governance board oversees the project at a high level, their key role is to give approval to the risk management plan.
True or False: Evaluating new and existing risks should be a reactive process.
- False
Answer: False.
Explanation: Evaluating new and existing risks should be a proactive process in which threats are identified and managed before they become serious issues.
Interview Questions
What is the primary objective of regularly evaluating new and existing risks that impact strategic objectives?
The primary objective is to ensure effectiveness in managing risks, predict unforeseen circumstances, make necessary amendments, and align the strategic objectives with the evolving market trends and the risk landscape.
What can be the results of failing to regularly evaluate new and existing risks that impact strategic objectives?
Failing to evaluate risks may result in flawed decision-making, devastating impacts on the strategic objectives, financial loss, reputation damage and potential failure in executing project goals.
How often should you evaluate new and existing risks that impact strategic objectives?
Risk evaluation should be a continuous process. However, a formal evaluation should be performed at least annually, or whenever there is a significant change in the operations affecting the strategic objectives.
How detailed should the updated risk management plan presented to the governance board be?
The risk management plan should be detailed enough to cover all identified risks, their potential impact, the strategies to mitigate them, the response plan, and the responsible person to manage each risk.
Why is it important to present an updated risk management plan to the governance board for approval?
The governance board provides insights and oversight that improves the quality of the risk management plan. Their approval assures that the plan is effective and aligned with the organization’s goals and objectives.
What components should an updated risk management plan presented to the governance board include?
It should include risk identification, risk analysis, risk response strategies, risk monitoring and control measures, and the roles and responsibilities of all involved in risk management.
How can a program manager ensure that the new and existing risks are effectively evaluated?
A program manager can ensure effective evaluation by using reliable risk assessment tools, involving all stakeholders in the process, and promoting a culture that favors open communication about risks.
What is the role of a program manager in the regular evaluation of new and existing risks?
A program manager is responsible for identifying, analyzing, and prioritizing risks. They also develop risk response strategies, monitor and control risks, and communicate risks to stakeholders.
How does regular risk evaluation affect the success of the strategic objectives?
Regular risk evaluation helps to identify potential obstacles, enabling proactive planning and allowing organizations to take advantage of opportunistic risks, ultimately enhancing the chances of achieving strategic objectives.
What factors should be taken into account while evaluating new risks affecting strategic objectives?
Factors such as likelihood of the risk event, potential impact, risk vulnerability, risk velocity, capability to respond, and risk proximity should be considered.
What is the best way to present an updated risk management plan to the governance board?
The plan should be presented in a clear, concise manner, explaining the significant risks and how they will be managed. Visual aids such as charts, graphs or diagrams can be used for clarity.
What role does risk tolerance of the organization play in the evaluation of new and existing risks?
Risk tolerance influences how risks are perceived, rated and how resources are allocated for risk treatment. Organizations with a higher risk tolerance might accept risks that others might not. Therefore, it is a fundamental factor for risk evaluation.
Does the use of technology aid in the regular evaluation of new and existing risks?
Yes, technology provides tools and software that can be used to identify, analyze, evaluate risks, and automate the process, thus ensuring efficiency and accuracy.
What is the role of quantitative risk analysis in evaluating new and existing risks?
Quantitative risk analysis provides numerical estimates of the overall risk and is used for understanding the potential impact on project objectives allowing decision-makers to manage risks effectively.
How can risk trends in an organization be detected in the risk evaluation process?
Risk trends can be detected through continuous monitoring, analyzing previous risk events, and comparing the changes in the risk situation over time.
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