How to Save Time and Money By Evaluating Risks

Evaluating risks save you time and money. Too often, project managers assign resources and spend money to manage risks that are unnecessary. Because these project managers do not know whether certain threats are significant, they may respond in ways that cause more harm than good.

Photo courtesy of DollarPhotoClub.com (edited in Canva)

Photo courtesy of DollarPhotoClub.com (edited in Canva)

I learned a lot about evaluating risks as a cotton scout in the early 80s. My father was the County Extension Director who advised and helped farmers feed and clothe the world.

One of the programs that my father facilitated was a cotton scouting program — yes, cotton like you use to make blue jeans and cotton shirts. Farmers wanted a way to determine when they should respond to pests. Why was this program so important?

love_bug_flying_smile_400_clr_1769Imagine farmer John who sprayed his cotton at the first sign of a boll weevil, increasing his expenses and killing beneficial insects early in the season. Imagine Bill, another farmer, who sprayed his cotton once the boll weevils reach a certain threshold later in the season. Guess who made the most money?

My job was to walk across the fields and perform random checks, looking for insects, weeds, and diseases (while being careful to not step on a rattlesnake). After scouting the fields, I would complete scouting reports.

Each day, my father would review the reports, looking at the number and types of pests; he also looked at the trends from one week to the next. When the pests reached a certain threshold, he would tell the farmers how to treat the cotton — what to spray and how much.

Contrary to what many people think today, most farmers are the consummate environmentalists. They want to do what’s right for the environment. Farmers also want to make a profit. These goals are met through scouting programs that help farmers make the best risk management decisions, minimizing adverse impacts to the environment, reducing expenses, and increasing production.

In essence, farmers save time and money by evaluating risks.

With this analogy in mind, let’s talk about evaluating risks: 1) what is risk evaluation, 2) how do we evaluate risks, and 3) when should we evaluate risks?

What Is Risk Evaluation?

Risk evaluation is the process of determining the significance of risks. The result of the risk evaluation technique is an update to our risk register showing the priorities of the risks. Project managers use risk thresholds to determine which risks are urgent and require treatment.

Evaluating Risks

There are many ways to evaluate risks. We can simply assign a Low, Medium, or High rating for each risk. A better method is to evaluate the probability (likelihood) and impact (consequence) of each risk, assigning a numeric rating such as 1 to 5, 5 being the highest. In my upcoming articles, we will look more in depth at how to evaluate risks qualitatively as well as quantitatively.

When To Evaluate Risks

Project managers should start evaluating risks early in their projects; they should continue evaluating risks in an iterative fashion until the project is completed.

Make Money or Lose Money – It’s Your Choice

Is it possible to spend too much time evaluating risks? Absolutely! However, if we take a wise and prudent approach, it will save us money. We will not be like the farmer who is responding to threats at the first sign of a problem. We will also not be like a farmer who should be responding but is not. Evaluate risks and save time and money!

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