Table of Contents
Understanding Risk Audits: A Key Component of Effective Risk Management
Introduction
Risk audit is the examination and documentation of the effectiveness of risk responses in dealing with identified risks and their root causes, as well as the effectiveness of the risk management process. Conducting a risk audit is essential for developing a comprehensive event management plan. This involves identifying and assessing all potential risks to formulate a plan to address any undesirable events that may cause harm to people or detriment to the organization.
Some companies use the term “review” rather than “audit,” but the purpose remains the same: to ensure the effectiveness of risk management strategies.
Application of Risk Audits
Performing a project risk audit can ensure that your project stays on track and on budget. These audits are often performed throughout the project lifecycle to maintain project health. The primary goal is to ensure that each process is functioning as intended. It’s crucial that these audits remain objective, as the project's well-being is at stake.
Procedures for Conducting Risk Audits
The project manager is responsible for ensuring that risk audits are performed at an appropriate frequency, as defined in the project’s risk management plan. Risk audits can be included in routine project review meetings, or separate risk audit meetings can be held. The audit format and objectives should be clearly defined beforehand.
A risk audit can involve:
- Checking for possible hazards
- Observing other similar projects to understand participant interactions with the event environment
- Reviewing project management systems, policies, and procedures to ensure they are up to date
- Interviewing project personnel to check if they have received appropriate training
Instructions for Conducting a Risk Audit
- Deciding the Risk Auditor
The first step is to assign someone as the project auditor. Ideally, this would be the project manager. If objectivity is a concern, or if stakeholders heavily rely on the project, an external auditor or audit company can be hired. - Interviewing Team Members
Begin by listing the people to be interviewed during the audit. This usually includes the project manager, stakeholders, and project team. Others involved in the process, such as external resources, may also need to be interviewed. It’s critical that all staff, including volunteers, are adequately trained and understand procedures, especially in emergencies. - Determining Critical Success Factors
Develop a scoring system to evaluate the effectiveness of processes. This can range from 1 to 10 or use terms like excellent to inadequate. Key factors include the effectiveness of internal controls, oversight processes, task completion speed, budget adherence, and resource utilization. The audit should check if these critical success factors are met:- Project organization
- Project planning
- Milestone achievements
- Project control
- Resource management
- Scope management
- Testing
- Gathering Evidence
Schedule and conduct interviews with team members, project managers, and stakeholders separately to prevent influence between them. Conduct interviews close together to minimize cross-contamination of information. Aim to complete this phase within five days or 20 hours to maintain data integrity. - Analyzing Evidence and Creating a Report
Analyze the gathered evidence and compare it to project timelines, goals, and objectives. Determine if the project is on track and prepare your findings. Recommendations to improve processes should be included in a thorough report, detailing results and necessary actions if the project is off-track. - Follow-up Audits
After the initial audit, conduct follow-up audits to verify that recommendations are being implemented. These audits should be less intensive but must ensure ongoing adherence to the proposed improvements.
Conclusion
Conducting a risk audit is a vital part of project management, ensuring that risks are effectively managed and that the project remains on track. By following these procedures, project managers can maintain control over their projects, mitigate risks, and achieve successful outcomes.