Risk checklists are much used tools in risk management. They can be a good tool in certain situations. However, it is important to understand the limitations of risk checklists. In this article, you will learn what the advantages and disadvantages of risk checklists are and why I recommend this tool only to a limited extent. Curious? Then read on!
Identifying Risks with Different Methods
Risks can be identified in different ways. With methods that are more likely to challenge the creativity of the participants, such as brainstorming, interviews, or scenario analysis. Then there are more structured, guided methods that are more experience-based, such as risk categories or risk checklists, and then there are software-based analytical methods that can automatically identify risks based on a database using data analytics or artificial intelligence.
The Advantage of Risk Checklists
Risk checklists are one of the most widely used risk identification tools in many organizations. They provide a comprehensive and organized inventory of potential risks to which an organization or project may be exposed. Risk lists are often specific to particular industries. They are usually based on experience gained, summarized and structured during previous company activities or projects, e.g. also on risks that have already occurred and typical risks in that industry or project type.
Checklists have the advantage that you can use them to perform a risk analysis relatively quickly and easily. This gives you a quick overview of the (common) risks of your project, for example. It makes sense to derive the risk checklist from the risk categories. The risk categories form the individual chapters in the risk checklist and the subcategories form the subchapters.
The biggest disadvantage of risk checklists is: they do not support “thinking outside the box”, i.e., thinking creatively, unconventionally, leaving limitations in thinking and questioning assumptions. However, risk checklists, when used correctly, can still provide a relevant benefit when you identify risks. But you will learn more about this later.
The “Problem” With Risk Checklists
Risk checklists have some advantages in identifying risks, but only if you use them correctly. A standardized risk list can help an organization or project quickly identify and understand the range of risks it may face. The risk list helps not to forget typical risks or risk categories during risk identification. One gets quick results with checklists and an overview of potential risks. One is guided and does not have to think “much”. However, checklists used incorrectly have major disadvantages:
- They give a false sense of security that all risks have been discovered
- They include only known and obvious risks. However, many risks are not included, especially those with a lower probability of occurrence or those that are difficult to predict.
- It is difficult to think beyond the checklist when completing it
- You do not identify risks in projects by activity or work package
- You don’t provide enough detailed information about the risks, their causes and impacts
- A risk list may be too rigid and inflexible and not adequately address changing circumstances or new risks
- They are not specific to a project or discipline
- They are not helpful in assessing, qualifying, and quantifying risks
Checklists Help to Find New Risks After Brainstorming!
If all means such as brainstorming, interviews with experts, etc. have been exhausted and you think that all risks have now been found, then checklists can still make an important contribution to your team as a last resort. They may then be able to uncover risks that they would otherwise have forgotten about. Experience shows that with a risk list at the end, up to 30% more potential risks can be uncovered.
One mistake that often happens in risk identification is to forget a risk category. Can you imagine the consequences if, for example, in a plant project in India, the risk categories contract risks or cultural risks are forgotten? Also look at recently completed projects. What risks were not identified there, what problems occurred there?
In the previous sections, you have seen that checklists and risk categories, used at the right time, can be a valuable tool. If you do not yet have a risk checklist with categories in your company, create one yourself. Periodically supplement the risk checklist with the experience you have gained in projects or in specialist departments. This will improve the quality of the list, which will benefit you and also the other project managers. If you then pull out risk checklists at the right moment, you can almost not forget any risks!
Finding Even More Relevant Risks With Artificial Intelligence
Software-based analytical methods that can automatically identify risks based on a database using data analytics or artificial intelligence have been around for a while. But with ChatGPT and other AI tools in early 2023, this functionality has received immense publicity, abruptly bringing the great advances in this technology in recent years to the public. You can read more about it in this article:
How Artificial Intelligence (AI) Can Help Your Project Risk Management (article to follow).
I hope I could convince you not to rely only on checklists for risk identification. But if you use checklists at the right moment, you will probably discover even more risks. It would also be worthwhile to get a second opinion from ChatGPT or any other AI application.
Here You Can Find More Knowledge
Would you like to learn more about how to make your projects more successful with Project Risk Management? My book Project Risk Management – Practical Guide takes you an important step further!
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