With its iterative approach, the Scrum framework enables teams to minimize risk and manage risks confidently. Risk can creep into various elements when managing a project and prevent you from delivering a valuable project. But it takes much more than risk awareness to head off these risks.
Author: Caroline Li
You need a strategy to help you manage, accept, prioritize, or transfer these risks. Enterprise risk management provides a formal and deliberate process to deal with all types of threats.
Dig in as we detail how to approach risk management in Scrum and how to do it properly.
What is enterprise risk management
Enterprise risk management is a top-down risk management strategy to identify, assess, and prepare for potential risks that may lead a business to incur losses. ERM uses a firm-wide approach to alleviate the risks that may impact your business objectives.
Enterprise risk management uses a holistic approach to launch firm-wide surveillance. It helps uncover potential risks invisible to individual business branches. ERM facilitates communication between departments to minimize risks and identify unique opportunities. The holistic approach enables the top management to make informed decisions when determining the risks, they wish to manage actively.
Successful ERM strategies help companies mitigate risks in core areas, such as financial, operational, compliance, legal, security, and strategic risks. A chief risk officer identifies, analyzes, and mitigates both internal and external risks when implementing an ERM.
Why ERM is Important in Project Management
Incorporating ERM into your scrum process is crucial in helping you establish and stable and reliable team. It enables you to identify, prioritize, budget for, or eliminate potential risks, accurately estimate costs and deliver usable products.
Seamless Project Execution
Since the scrum process is iterative, establishing a regular cadence and delivering a product frequently to the end users allows for crucial feedback. Using an ERM approach bolsters your team’s ability to improve the product with each subsequent Sprint. You can calculate the precise cost of each Sprint and provide stakeholders with an enhanced product version with every Sprint.
The stakeholders can use easily evaluate the project’s viability based on the potential and realized value in the product backlog and your team’s performance.
Exceptional Quality Control
Incorporating ERM into your scrum process enables your team to mitigate quality and defects. They can easily use the Done sets to set the production standards and quality control. Your team can promptly and effectively remedy the situation if a defect slips through. Scrum’s highly iterative nature enables teams to adjust their backlog to meet the customer’s needs.
ERM is essential when implementing a project using uncertain tools and technology. Since Scrum uses incremental development, your team can build and prove small portions. They can obtain and incorporate feedback and continuously improve the products. Your team can use input from the stakeholders and their own learning experience to improve the product.
Risk management is a whole-team activity, but the Scrum Master can help the team identify, prioritize, and mitigate risks. The Scrum Master can coach the team members on identifying and evaluating risks across the entire organization.
How do you start enterprise risk management?
Enterprise risk management empowers your team to make structured decisions and create value for your clients. Company size, business objectives, and risk preference are primary factors when implementing an ERM strategy.
Defining risk preference
The team should identify the client’s risk preference and define the appropriate risk strategy. The process entails strategic discussions between the stakeholders and an in-depth analysis of the client’s risk profile.
Create an ERM Risk Structure
An ERM risk structure combines all the risks associated with the different elements of your business. That allows for visibility, communication, and distributed reporting. The ERM risk structure must match the company structure to match the organization’s executive, functional, and business aspects.
Scrum environment allows team leaders to assign project ownership and responsibilities. Each node on the risk structure has defined objectives and is given to a team member, forming a risk management cluster. Each member is responsible for achieving the set goals and managing the associated risks. The Scrum Master is accountable for the risk management clusters and provides a top-down view of the ERM process.
Build an Enterprise Risk Map
Creating a risk map enables your team to take a systematic approach to manage the risk more effectively at a higher level. The process entails mapping risk to different parts of your risk management structure.
Creating enterprise risk maps involves:
- Global categories: Global categories let you map risks to their common causes, search and filter, and lump causes under a parent risk.
- Risk relationships: It enables managers to define relationships between various risks and assign them categories such as parent, child, or sibling.
- Scoring systems: the scoring system maps the risk clusters into three risk thresholds – low, medium, and high.
Elevate Your Risk Management Capabilities
It may be impossible to eliminate risk, but you can identify, calculate, analyze, prioritize, and mitigate it. Weaving sound risk management strategies into your Scrum framework gives your company a competitive edge. You can ensure tight collaboration, create effective action and response plans, and adapt seamlessly to change and disruption.
About the Author
Caroline Li completed her MSc in Economics at the University of Leeds in 2011, and has progressed through her career to become a freelance tech-writing consultant. In her spare time, she runs an art & yoga blog, cooks, travels and makes pottery.”