Welcome to “From Zero to Hero”, a series where you can pick up or revise the fundamentals of complex concepts in just under 10 minutes of reading. Stay with us till the end to learn:

What is risk analysis?

• How can you benefit from it?
• What are the most reliable risk analysis methods?
• What are our valuable tips on analysing risk?
   

The Basics of Risk Analysis

Risk analysis is a process of identifying risk factors and assessing the probability and impact of potential risks. At hero/dot, we first conduct it as a part of the pre-implementation analysis in order to take proactive measures before the project even starts. Then, we monitor the situation at different stages of the life cycle. The goal is to provide you with valuable information and precise mitigation strategies, ensuring a smooth and hassle-free delivery.

Each industry and project faces unique challenges, but here are some common examples of risk associated with IT projects:
 

1. Project Management: From unrealistic deadlines and scope creep to communication problems, those challenges can be navigated more swiftly by implementing proactive measures before the project begins.
2. Technical Challenges: While simple bugs are more common than a major data breach, the latter can have a devastating effect on project outcomes. Either way, it's crucial to evaluate the likelihood of technical-related risks, big or small.
3. Resources: Resource allocation is always a tricky task, regardless of project size. Budget constraints, limited staffing, or inadequate infrastructure can hinder the project's success.
4. External Factors: When there's dependency on third parties, issues like delays or stakeholder resistance must be considered and effectively managed.
5. Changing Landscape: The ever-evolving landscape, due to factors like Covid-19, economic recession, or the rising popularity of Chat-GPT, requires businesses to develop resilience and seize opportunities.
    

Benefits of Risk Analysis

Contrary to popular belief, the objective of risk analysis extends beyond solely minimising the adversely effects of certain factors. In reality, a comprehensive risk assessment brings forth a multitude of potential benefits:
 

1. Reduce Costs: Cut down on costly reworks, delays, and other unexpected expenses. Say goodbye to financial stress and hello to smooth resource allocation!
2. Inform Project Planning: Make data-driven decisions and set realistic goals based on data acquired during the analysis stage.
3. Uncover Opportunities: Play to your strengths and work on your weaknesses, and soon you'll discover that beneath every liability lies the untapped potential for growth.
4. Improve Quality: Whether it's user satisfaction or overall product performance, you can take preventive actions to consistently deliver higher quality service.
5. Enhance Stakeholder Communication: By involving stakeholders in the process, you build trust, manage expectations, and foster transparent communication.
6. Build Resilience: Take a proactive approach to risk management and empower your company to become a more agile, adaptable, and resilient business.
    

General Risk Analysis Process

While the specific approach to conducting risk analysis varies from project to project, depending on the client's individual needs and methods employed, here we present the 4 general steps:
 

1. Identify Risks: Kick off the risk analysis with gathering data through desk research. Then, create a comprehensive repository of identified risks through the use of various tools that will be explained below.
2. Asses Probability & Impact: By visualising the likelihood and severity of possible outcomes for every potential risk, you can prioritise them and make data-driven decisions.
3. Develop Risk Mitigation Strategies: The next step is to establish a plan for addressing the most critical risks by implementing risk-reduction measures or transferring the responsibility to a third party... but that's a topic for another day!
4. Monitor the Situation: To ensure a smooth and successful project delivery, it is imperative to re-analyze risks and review the assessments as the project progresses. This way, you can uncover arising problems and manage them effectively.
   
    

Risk Analysis Methods

Brainstorming

If you're sick of hearing about this technique over and over again, it's because it works so well in numerous contexts! When it comes to risk assessment, the goal of a brainstorming session is to provide a non-judgmental, stimulating environment for generating a multitude of ideas and insights. By focusing on quantity over quality, teams can generate a comprehensive list of potential risks. They can serve as a jumping-off point to build upon in later stages.

Risk Checklist

Fortunately, in the IT world, there is a tool we can leverage to avoid reinventing the wheel with every project. A Risk checklist provides a structured list of pre-defined liabilities commonly associated with a specific industry. You can even customise it or create your own one based on your team's experience with past projects. However, no list can be all-encompassing, so we do not recommend it as a substitute for interviewing the stakeholders.

Delphi technique

Speaking of interviews... The Delphi technique, named after the ancient Oracle of Delphi, is a structured method of forecasting that relies on opinions of experts gathered through interviews, surveys, or in an open discussion. The selection of participants is crucial, as it should include a diverse range of professionals, such as project managers, developers, and the client. The objective of the Delphi technique is to reach a consensus through an iterative risk analysis process of synthesising knowledge, feedback and discussion.

SWOT Analysis

It's indeed one of the most widely used risk management tools. SWOT analysis offers a framework for assessing the strengths, weaknesses, opportunities, and threats of a project. One key advantage is its ability to distinguish between internal and external factors that can adversely affect the desired outcome. What sets this method apart from other types of risk analysis, is that SWOT analysis provides a holistic overview of all contributing factors, including potential strengths and advantages that can be leveraged to achieve project success.

Ishikawa Diagram

The Ishikawa diagram was designed specifically to facilitate analysis of the root causes of an issue. Also known as the fishbone diagram, it's instantly recognizable because of its distinctive appearance. Placing the main problem at the head and potential causes by the fish bones, provides a structured and visual way of identifying and categorising risk factors. Through uncovering all potential threats, the diagram enables you to make more informed decisions in the later stages of the risk assessment process.

Risk Matrix

Have you identified all the possible liabilities? Great, because now the risk matrix will come in handy. This visual risk management tool provides a structured framework for evaluating risks based on their likelihood and potential consequences. Picture a grid with probability levels along one axis and impact levels along the other. By filling up the table, you gain a clear-cut perspective on which issues require the most attention. Consequently, you can direct your efforts and resources towards an effective risk mitigation strategy for optimal results.

Our Best Practices

Practice makes perfect! At hero/dot, we believe in sharing our experiences and valuable advice for maximising project success. So in this final section, let's delve into our battle-tested strategies for making the most out of every risk analysis method.

Involve All Stakeholders

Experts come in many forms; from those with experience in similar projects, to those who provide exclusive industry-specific insights. At hero/dot, we value input from every individual involved, including project management, the project team, and the client.

Combine Risk Analysis Methods

While risk checklists are useful for generating a list of potential risks, tools like the Ishikawa diagram and risk matrix excel at visualising different aspects of these issues. By combining these methods, we can achieve a more comprehensive assessment from various perspectives.

Monitor & Review the Risk Register

Our first step is always to create a risk register that serves as the official repository for the project. By consistently updating our assessments throughout the project lifecycle, we can identify new liabilities before they escalate into major obstacles.

Look For Opportunities

In our experience, many risks contain untapped potential for improvement, offering a competitive advantage. At hero/dot, we adopt an approach of seeking opportunities in every challenge, often uncovering the silver lining. For example, ChatGPT poses a threat to developer's job security, but it can also be used by them as a powerful tool for increasing productivity. 
 

Conclusion

Thank you for staying with us till the very end! Now that you've learnt about the ins and outs of risk analysis methods, we're sure you can navigate this topic with full confidence.

If you're looking for a partner who can masterfully map out not only potential risks but also opportunities hidden beneath them, contact us today! And if you want to discuss the topic of risk management in more detail, you can book a 100% free consultation with our top Business Analyst in the form of a 2-hour pre-implementation analysis workshop.

Stay tuned with our “From Zero to Hero” series and uncover our most reliable risk mitigation strategies!

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