Project management & leadership | February 28, 2022

A Risk Management Plan. Example of IT Outsourcing

Every experienced project manager knows that risk management means in fact the acceptance of risk and the ability to mitigate its effects, and for this, you need an action plan.

Why is Agile misunderstood?

If you are looking for information on how to avoid risk in business, we do not have the good news for you. The risk cannot be avoided as it is not always related to internal factors and one’s own actions. Risk is a part and parcel of running a business, especially in times full of challenges such as the economic effects of the COVID-19 pandemic

What is a project risk actually?

Risk in project management is an obstacle that unexpectedly appears and blocks your way to achieving the goal. Recent studies show that optimists in the workplace are 103% more inspired to get involved. In project management, however, realism is what counts the most, and it is perfectly normal to assume that something might go wrong.

Project delivery – an ideal scenario

The work goes according to the plan, the vision can and does change, however, the budget is flexible giving the recruitment team unlimited possibilities of recruiting new employees. The delivered software may have some bugs, but everything is detected and resolved on time before going live.

Project delivery – a real scenario

The team starts working on the project, but someone reports that “it would be good to have a functionality…”. It turns out that small change requires more work, the functionality needs to be thoroughly tested, and there are no people with the appropriate testing competencies in the company. The recruitment department is trying to recruit additional specialists, while the development team, pressured by time, strives to deliver the project on time. Time pressure causes tiredness… resulting in human mistakes. The deadline is breached.

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What is risk management in project delivery?

This is, of course, a slightly exaggerated image of the project scenarios, however using it, we can identify some of the potential risks in project implementation.

  1. Changing Business Requirements – there’s nothing wrong with being visionary and thinking out-of-box. However, a change in vision during project implementation may have an impact on its duration. Sometimes even small changes can translate into additional days or weeks of work.
  2. Staff rotation – this is a real problem at a time when the best specialists (e.g. DevOps, cloud architects, Java Developers) get dozens attractive job offers every month.
  3. An extended time of project delivery – this may result from inadequate estimation as well as from any of the issues listed below. A new vision of the product, unforeseen expenses, personnel rotation, and associated with it lack know-how, as well as human errors are common risk factors in project implementation.
  4. Unforeseen expenses – in the course of work, it may turn out that budget estimates were inadequate or hidden costs have come to light (e.g., involving more specialists).
  5. Lack of knowledge management – ideally, you should avoid situations in which the specialist leaves the project and knowledge disappears with him. Skillful knowledge management, and keeping the processes transparent will ensure that new people joining the project will have a lower entry level.
  6. Human mistakes – only those who do nothing are not mistaken. Mistakes cannot be avoided, and it is not just only about software development. The lack of adequate security standards in place can cause security breaches. These are the situations that even the largest companies face. When it comes to the companies from the SME sector, according to available data, 48% of them do not reopen after a cyberattack and data leak.
  7. External factors – unavailability of external systems and services, temporary shutdowns and unavailability of network, natural disasters, political decisions translating into applicable regulations or geopolitical tensions – all of these may affect the implementation of the project. How much non-business related factors can impact the economy, we learned (and we are still seeing) during the COVID-19 pandemic.

So how can we minimize the risk if we cannot avoid it?

Avoid all-in decisions

The all-or-nothing approach can seem bold, especially if you expect quick and tangible results. Unfortunately, the outcomes of such a strategy can be far more painful in the event of failure. When you decide to outsource IT services, you can gradually transfer responsibility for a given service or project. IT outsourcing companies perfectly know the businesses’ concerns and needs and address them by proposing flexible models of cooperation. Starting outsourcing or nearshoring collaboration with hiring 1-2 specialists, allows you to check how they fit into the team and what value they bring.

Have a plan B, and C, and D

Having a plan B can feel like a sense of security. However, having only two options can turn out to be risky. It is wise to have not only a plan B but also C and D. Such an approach is also necessary in the outsourcing of IT services. Companies that cooperate with many vendors implement a vendor management strategy. This allows them to minimize the risk in managing the outsourcing process by efficiently delegating tasks to other trusted suppliers from their list.

Agile risk management

The agile approach is an excellent way to minimize risk. First, breaking down a larger project into small pieces allows you to maintain better control at a given stage. When working on software development, agile teams meet and communicate regularly. Take, for example, a Scrum framework. Thanks to Daily, Review, and Retrospective meetings they keep on track of the project.

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The Scrum Master ensures if there are any obstacles and if so – helps to overcome them. In Kanban, on the other hand, team members have constant insight into the workflow thanks to Kanban boards. Visualization allows them to quickly detect and eliminate any blockages.

What are the 5 stages of risk management process?

Here are the measures that will help you move smoothly through the risk management process. The risk management plan will allow you to act proactively.

  1. Identify – at this stage, consider what internal and external elements may represent risk factors for your project. You may use our list mentioned above in the chapter “What is risk management in project delivery?”
  2. Evaluate – give priority and consider severity. How will the risky event affect your project? How quickly should you react to it?
  3. Prepare a plan – based on the previous evaluation, point out steps to be taken in the event of an incident, assign people responsible for given areas. Prepare alternative paths of action (that will be your plan B and plan C).
  4. Implement – should the risky factor occur, put the strategy in action and monitor the results. If necessary, use one of the other strategies.
  5. Verify – at least once a year check the plan you have prepared, verify the impact and priorities. Are they still the same? Maybe you have some lessons learned and now you are better prepared to face challenging situation? Or perhaps new risks appeared, and you need to include them in your risk management action plan?

Risk sharing – a revolution in outsourcing?

A trusted technology partner is one that feels responsible for the solution delivered. If a company offers expert support in risk assessment and risk management as part of the service, it means that it does not shy away from responsibility and is aware of “what can go wrong”. Such an approach is presented by companies with extensive experience gathered in various projects. Also, make sure to sign an SLA agreement, defining the scope of services and support.

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