7 Steps Of Risk Management Process with Example
- Michelle M
- Jun 20
- 5 min read
In every project uncertainty is a constant. Whether you're building rocket ships, skyscrapers, launching a new product, developing IT systems, or leading project teams, the unexpected lurks in every corner of your planned activities. That's where risk management becomes a critical tool.
Risk management is the disciplined approach businesses use to identify, assess, mitigate, and monitor risks that may derail objectives. It enables teams to transform fear into foresight and uncertainty into informed action. Understanding and following a structured 7-step risk management process ensures that you don’t just react to risks you anticipate them.
In this blog, we will explore the 7 Steps Of Risk Management Process with Example of a realistic project scenario to bring the theory to life
Scenario Example
Let’s assume a company is developing a new mobile banking app. The project involves software developers, cybersecurity experts, UI designers, and banking stakeholders. This will be our ongoing example to illustrate each of the seven steps.
Step 1: Risk Identification
What It Means:
Risk identification is the process of uncovering potential threats or opportunities that could affect project outcomes. This is the foundation for every other step that follows.
How It Works:
Risks are identified using:
Brainstorming sessions
SWOT analysis
Checklists from past projects
Interviews with subject matter experts
Assumption analysis
Risks can be internal (resource limitations, skill gaps) or external (regulatory changes, economic fluctuations).
Example:
In our mobile banking app project, identified risks include:
Data breaches or cybersecurity threats
Delays in third-party API integration
App rejection by app stores due to policy violations
Scope creep due to unclear stakeholder expectations
These are documented in a risk register, including descriptions, risk categories, and affected objectives.
Step 2: Risk Analysis
What It Means:
Risk analysis determines the likelihood and impact of each identified risk. This step helps prioritize which risks deserve the most attention.
There are two types of risk analysis:
Qualitative: Uses ranking systems (e.g., high/medium/low).
Quantitative: Assigns numerical values and probabilities to assess overall project risk exposure.
How It Works:
Evaluate how probable a risk is to occur.
Analyze what the consequences would be if it did.
Use risk matrices to classify and score each one.
Example:
The team performs a qualitative assessment for the app development:
Cybersecurity threat: High likelihood, high impact → Critical
API delay: Medium likelihood, high impact → High
App store rejection: Low likelihood, medium impact → Medium
Scope creep: High likelihood, medium impact → High
This helps the project manager prioritize risks for mitigation.
Step 3: Risk Evaluation
What It Means:
Risk evaluation compares the results from the risk analysis against the project’s risk appetite and tolerance. This determines whether the identified risks are acceptable, or if they require action.
How It Works:
Align risk severity with decision criteria.
Categorize risks into acceptable and unacceptable thresholds.
Discuss with stakeholders to confirm risk thresholds.
Example:
The mobile app project's stakeholders set a low tolerance for cybersecurity threats, as breaches could damage customer trust. Therefore, even a moderate risk in this area would be unacceptable.
Cybersecurity threat → Unacceptable, must be mitigated
App rejection → Acceptable, monitor only
Scope creep → Requires some control measures
This step helps decide which risks move to the planning phase.
Step 4: Risk Treatment (Response Planning)
What It Means:
This is where you define and implement actions to reduce or manage risk to an acceptable level. Depending on the type of risk, different strategies are applied.
Common Treatment Strategies:
Avoidance: Change the plan to eliminate the risk.
Reduction: Minimize likelihood or impact.
Transfer: Shift risk to a third party (e.g., insurance).
Acceptance: Do nothing but monitor the risk.
Exploit/Enhance: For positive risks (opportunities), increase the chance of occurrence.
Example:
Risk response strategies for the mobile app:
Cybersecurity threat → Reduction: Hire a third-party firm to perform penetration testing.
API delay → Transfer: Include delay penalties in the API vendor contract.
Scope creep → Avoidance: Use a detailed scope baseline and enforce strict change control.
App rejection → Acceptance: Prepare for alternate app versions, but take no proactive action now.
All planned treatments are documented, assigned to risk owners, and scheduled.
Step 5: Risk Monitoring and Review
What It Means:
Even after risk responses are implemented, risks need to be monitored continuously. New risks may emerge, existing ones may evolve, and mitigation actions may need adjustment.
How It Works:
Review risk register regularly in team meetings.
Track key risk indicators (KRIs).
Update status and treatment effectiveness.
Monitor assumptions and changes in external environment.
Example:
In the app project:
Weekly risk reviews are conducted.
The API vendor’s performance is tracked for signs of delay.
Penetration tests are reviewed to verify security enhancements.
Any scope changes are logged and analyzed for risk impact.
If a mitigation strategy is not working, it's revisited. New risks, such as compliance issues from regulatory updates, are added to the register.
Step 6: Risk Communication and Reporting
What It Means:
Effective risk management depends on clear, timely, and tailored communication of risk status to stakeholders. This builds transparency and facilitates quick decisions.
How It Works:
Customize communication by audience (executives, tech teams, clients).
Use dashboards, scorecards, and reports.
Highlight critical and trending risks.
Ensure two-way communication channels.
Example:
The project team sends bi-weekly risk summaries to senior management:
Top 5 current risks
Mitigation status
Heat maps to visualize risk levels
Any urgent decision points
Meanwhile, detailed logs are maintained for developers and business analysts to act on operational risks.
Step 7: Risk Documentation and Lessons Learned
What It Means:
Once the project is complete, or during significant phase gates, all risk information is archived. Lessons learned are extracted for future reference.
How It Works:
Update the final risk register with outcomes.
Capture what worked and what didn’t in a lessons learned log.
Use these insights to improve risk approaches in future projects.
Example:
Upon release of the banking app:
The cybersecurity threat was effectively mitigated thanks to proactive testing.
Scope creep still occurred, highlighting the need for even stronger stakeholder engagement in future.
API delays caused a two-week slip this is now a known risk for similar integrations.
All documentation is shared with the PMO and stored in the knowledge base.
Why This 7-Step Process Works
Following the seven-step risk management process:
Promotes early detection of problems.
Fosters a culture of awareness and accountability.
Saves time and money by avoiding surprises.
Aligns risk responses with the organization’s appetite and priorities.
Improves project delivery success rates and stakeholder confidence.
Organizations that follow this structured approach are not just reacting to uncertainty they're mastering it.
Summary of the 7 Steps with the App Project in Mind
Step | Description | App Example |
1. Identify | List potential risks | Data breach, API delays, app rejection |
2. Analyze | Assess impact and likelihood | Cybersecurity = high/high |
3. Evaluate | Decide acceptability | Cyber threats = unacceptable |
4. Treat | Plan and assign responses | Hire security firm |
5. Monitor | Track progress and status | Weekly risk reviews |
6. Communicate | Share risk insights | Heat maps to execs |
7. Document | Archive lessons | Reuse mitigation strategies |
Conclusion - 7 steps of risk management process with example
Risk is inevitable but mismanaging it is a choice. The 7-step risk management process offers a clear, practical framework for addressing risk with logic, transparency, and control. When implemented diligently, it doesn’t just protect your projects it propels them forward by turning potential threats into strategic advantages.
Whether you’re building apps, bridges, or business units, risk management isn’t just a box to tick it’s a competitive edge.
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