Manage stakeholder risk appetite and attitudes

Managing stakeholder risk appetite and attitudes is a critical component of a risk manager’s role, and an expected competency for those undertaking the PMI Risk Management Professional (PMI-RMP) examination. Stakeholders’ attitudes towards risk can greatly influence the success or failure of a project. Understanding and effectively managing these attitudes is essential.

I. Understanding Stakeholder Risk Appetite and Attitudes

Risk appetite refers to the level of risk that an organization or individual is willing to accept in pursuit of its objectives, before it becomes necessary to implement an action to reduce the impact or likelihood of that risk. On the other hand, risk attitude is an individual or organization’s general approach to risk.

Risk appetite and attitudes vary among individuals and organizations depending on factors such as corporate strategy, business objectives, regulatory environment, and individual personality traits. For instance, some stakeholders might be risk-averse, preferring a conservative approach towards risk, while others might be risk-tolerant, willing to accept higher risks to achieve greater benefits.

Consider an example of a software development project. Stakeholders such as project managers and team members might have a high risk appetite, willing to experiment with the latest technology to deliver an innovative product. On the other hand, the client or sponsor could have a low risk appetite, seeking stability, predictability, and quality.

II. Managing Stakeholder Risk Appetite and Attitudes

Managing stakeholder risk appetite and attitudes involves recognizing these differences among stakeholders and incorporating them into the risk management process to ensure that the project meets everyone’s expectations. To manage stakeholder risk attitudes and appetite effectively:

1. Identification: Identify the key stakeholders involved in the project and understand their risk appetite and attitudes. This can be done through face-to-face meetings, surveys, and workshops.
2. Communication: Communicate regularly with stakeholders about risks and engage them in risk management activities. This helps to alleviate concerns and misperceptions, align expectations, and build a risk-aware culture.
3. Decision-Making: Include stakeholders in decision-making processes. This ensures that stakeholder risk appetite and attitudes are considered when assessing risks, evaluating mitigation options, and deciding on risk responses.

Example:

III. Adapting Project Risk Strategies

As a PMI-RMP, you will be expected to adapt your project risk strategies to cater to different stakeholder risk appetites and attitudes. This includes:

1. Aligning strategies with risk appetite: The project’s risk strategy should align with the dominant risk appetites within the organization or among key project stakeholders.
2. Adapting communication methods: Risk-tolerant stakeholders might prefer direct communication about risk, while risk-averse stakeholders might prefer more structured, formal communication.
3. Modifying risk responses: High risk appetite stakeholders might prefer aggressive, opportunity-seeking risk responses, risk-neutral stakeholders might appreciate balanced responses, and risk-averse stakeholders might opt for conservative strategies focused on risk avoidance or mitigation.

In conclusion, a successful risk manager understands and manages stakeholder risk appetite and attitudes effectively, thereby promoting project success. It’s not about eliminating risks but about making better decisions considering the risk perspectives of all stakeholders. This skill is not only a requirement for the PMI-RMP examination but also a key attribute of a successful risk management professional in the real-world business environment.