How to Mitigate Risk With a Risk Burndown
Risk management is a crucial aspect of any project. It involves identifying potential risks and taking measures to minimize their impact. One effective tool for managing risks is a risk burndown chart.
A risk burndown chart is a visual representation of the risks associated with a project. It shows the remaining risks over time, allowing project teams to track progress in mitigating those risks. By tracking risks on an ongoing basis, stakeholders can take proactive steps to address and resolve them before they escalate.
The process of creating a risk burndown chart begins with identifying and assessing potential risks. This involves analyzing the project scope, objectives, constraints, and dependencies to identify possible sources of risk. Once risks are identified, they must be prioritized based on their potential impact and likelihood.
Once risks are prioritized, the next step is to develop strategies for mitigating them. This may involve creating contingency plans, allocating resources, or updating project timelines. The goal is to implement measures that reduce the likelihood and impact of each risk.
As risks are actively managed, the risk burndown chart should be regularly updated to reflect changes. This allows stakeholders to see the progression of risk mitigation efforts in real-time. By monitoring the chart, project teams can identify trends and patterns, enabling them to make informed decisions about risk management strategies.
In conclusion, a risk burndown chart is a valuable tool for mitigating risks in any project. It allows project teams to visually track the progression of risks over time and make informed decisions about risk mitigation strategies. By actively managing risks, stakeholders can reduce the likelihood and impact of potential issues, leading to more successful project outcomes.
Businesses often hold postmortem meetings to reflect on projects, initiatives, or events with unfortunate outcomes. It’s a great learning opportunity, but it’s not always enough. After all, no one can course-correct in retrospect. And despite how commonplace meetings are (23 hours a week for executives), 75% of people aren’t sure how to conduct or participate in them.
I realized this after my company, Sapper Consulting, experienced a month of high employee turnover. To uncover the root cause and devise a potential solution, I scheduled a postmortem meeting. Then it hit me: Why didn’t we do this before the problem occurred? The post-mortem meeting is a useful tool, but teams should act preventively, not just reactively.
How to preemptively address challenges and risks
I decided to start scheduling a similarly structured meeting at a project’s beginning rather than the end. This type of meeting, known as a risk burndown, provides an opportunity for inverted thinking in the context of business challenges. It’s worked for us, and I think it’s applicable to any business. Here’s how you can get the most out of the exercise in a business world gone topsy-turvy:
1. Articulate what you don’t want
Charlie Munger, vice chairman of Berkshire Hathaway and business philanthropist, once said, “All I want to know is where I’m going to die so I’ll never go there.” Munger is an advocate of inversion, a thought technique that explores the outcomes we don’t want in order to identify those that we do. The model works best when dealing with many possible outcomes.
For instance, consider the question “What do you want to eat?” If you’re not sure, you could run through your list of options and decide what doesn’t sound good: “I don’t want barbecue, I don’t want Italian, I don’t want a hamburger,” and so on.
Not everyone knows exactly what they want in life or in business, so creating a plan with an infinite list of possibilities can be challenging. However, people generally know what they don’t want. For example, let’s say you’re attempting to set a sales goal but you’re not sure what number is appropriate. Do a quick calculation: What would revenue look like if you got 50, 75, or 100 new customers this quarter? If 75 new customers aren’t enough for you to achieve your long- and mid-term objectives, you’ll have to aim higher.
If you don’t really want to achieve the goals you set, you inevitably won’t. By the same token, you have to view the outcomes to avoid as nothing less than unacceptable. It’s fine to establish a goal range if you’re talking about sales numbers, revenue, or some other quantity, but make sure you’re still comfortable achieving the lower end of the spectrum.
2. Construct your risk burndown
Teleport yourself into the future and pretend you missed your goal. Then, list the reasons for failure. Maybe it was due to miscommunication, competitors that undercut you, or the turnover on a prospect’s procurement team. Yes, these lists will be long (and will require you to confront some worst-case scenarios), but when you identify potential challenges before they derail your efforts, you give yourself the opportunity to find proactive solutions. If you retroactively review your moves, you’ll likely have nothing but excuses.
Don’t get distracted by negative risk
Just remember that it’s important to balance the negatives and the positives. You also need to know what might go well and how you might get lucky. If you’re always evaluating the negative risk, you might scare yourself into underperforming.
“Although negative risk must be carefully managed, teams should embrace positive risk to maximize business value,” said Christopher Yang, vice president of engineering at Corporate Travel Management. “Risk matrices, risk burndown charts, and risk-modified user story maps should be included on agile walls and must be adjusted to help teams identify, monitor, and address both positive and negative risk.”
Once you know how events might play out, you can create a detailed action plan to ensure success. For example, my team and I were short on our cash collection goal one month. We faced the issue head-on and adopted new policies to only take new clients with credit cards rather than checks and ensure we were collecting payments on time. To guarantee that we hit our projections, we even factored in February’s 28-day month into our outliers for billing clients.
3. Regularly track metrics with key stakeholders
Because a postmortem meeting typically reveals the underlying problems that led to failure all at once, you’ll likely be bombarded by accounts of lots of little mistakes that, unbeknownst to you, had occurred along the way.
Instead of saving all that discovery for the end, make a plan to regularly track the metrics that will separate success and failure over the course of a project. I’ve found that weekly one-on-one meetings with key stakeholders are critical to not just a successful outcome, but also a smooth journey. During these meetings, we identify key results — things that must happen for us to avert failure — to help us block out the noise and stay on track to reach our initial goal.
Just don’t forget to follow up and follow through. Think of this step like a touchpoint email with a potential customer: To close the deal, you’ll need to help them through the sales pipeline. Ensure that you’re meeting your goals by checking in with the team members responsible for different parts of the project.
You’re likely already using Zoom or another videoconferencing tool, but I especially recommend them for these meetings and check-ins. Audio calls suffice in a pinch, but face-to-face communications improve engagement, clarity, and efficiency — as evidenced by the explosion of Zoom meetings from 10 million per month in December 2019 to 300 million this year.
Consistency is key
As you follow your goals, you’ll advance your progress toward possible success. Do this consistently enough, and you’ll eventually find yourself at a happy hour rather than a postmortem.
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I’m Andrew Brooks, a seasoned finance consultant from the USA and the mind behind phonenumber247.com.
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