The best-laid plans of mice and men oft go astray. Why? Individuals, teams, and organizations lack the healthy habits of identifying and managing the uncertainty that surrounds their world. Today, let's look at a step-by-step process to improve your strategic planning, analysis, and alignment with a particular focus on risk management.
Strategic risk management is a process for identifying, analyzing, and managing risks most critical to the achievement of your goals. While many individuals, groups, or organizations perform risk management informally, a more structured approach has its benefits. For instance, strategic risk management can help you invest your precious time, money, resources and energy where it counts most.
The Scope of Strategic Risk Management
PMI Talent Triangle
The Project Management Institute says, "The ideal skill set (for a project manager) is a combination of technical, leadership, and strategic and business management expertise." —PMI Talent Triangle
Organizations are looking for project managers who can manage projects. Additionally, they want individuals who can help define the organization's strategies and ensure that the projects are aligned with the enterprise goals.
Strategic risk management may be applied to enterprise, portfolio, program, and project levels of an organization.
What I found over the years is the most important thing is for a team to come together over a compelling vision, a comprehensive strategy for achieving that vision, and then a relentless implementation plan. —Alan Mulally
Let's Do Some Strategic Planning
So, here is a step-by-step process to help you improve your strategic planning, analysis, and alignment.
In the broadest sense, strategic risk management starts at an enterprise level. Even if your organization does not have an Enterprise Risk Management (ERM) Program, you can apply this process to improve your portfolio and program risk management. Lastly, if you only manage projects, consider this process as the context for your projects. Do you understand how your projects align with the organizational vision, mission, values, and goals?
1. Define the Vision, Mission, and Values. What is your preferred future? What is the purpose of your organization? What do you value?
2. Define Long-Term Goals. What are the long-term goals (typically 3 year goals) to support the mission? These goals will likely be broader than your annual goals.
3. Define Annual Key Performance Indicators (KPIs). What will you measure? For example, you may have a KPI for profit or expenses. What is the target for the KPI? How do you calculate the KPI?
4. Define Annual Goals. Using the KPIs, we can define specific, measurable goals. For example: “To increase profit by 5% over the prior year by 12/31/XX.” Cascade the goals. Lower level goals should align and support higher level goals.
5. Define Strategy. How will you get from your present state to the desired future state? Strategies may include action plans, projects, and programs.
6. Identify Risks. Here is where risk management comes into play. What are the opportunities and threats for each goal? Who are the risk owners?
7. Analyze Risks. What is the priority of the risks? Which risks matter most? At a minimum, complete a Qualitative Risk Analysis to prioritize the risks. In some cases, you may wish to complete a Quantitative Risk Analysis.
8. Plan Risk Responses. Develop the risk response plans for the highest risks.
9. Build a Scorecard. Develop a scorecard where actual results are reported for each of the goals. Determine the frequency of reporting (e.g., monthly, quarterly, bi-annual, annual).
10. Monitor Risks. Periodically review the risks. Update assessments and response plans as needed.
Start Your Strategic Planning
You may be thinking—interesting article. But I want you to be more than interested. I challenge you to take action, particularly if you are an enterprise, portfolio, or program manager. Develop your strategic plan, identify your risks, and start managing those risks. Most importantly, add value by keeping your eye on the achievement of your goals.