Here’s the thing about your processes: they shouldn't be "set and forget.” You need to be consistently evaluating them to identify what’s not working, and then use that information to build more ideal systems for your team.
Imagine that your customer just sent you an urgent request. They need a specific deliverable as soon as possible and ask how long it will take to get it done. Knowing they need it urgently, you want to deliver as quickly as possible. You believe your team can turn around the customer’s request within the next two weeks, so you set a strict deadline, promising to meet your customer’s expectations. With the customer communication handled, you quickly reach out to your team to inform them of the request and urgent work. To your surprise, your team feels frustrated, annoyed, and bothered by the fact that you’ve promised such a quick turnaround — because it’s going to be nearly impossible for them to do the work in that short period. You thought a specific task would take 40 hours to produce from start to finish, but your team says it will take at least 80 hours to complete that task. The work has been scoped inaccurately, the customer has been promised a deliverable they may not receive, and your team’s morale plummets as they work extra hours to try and deliver on the guarantee you committed to. You and your team are knee-deep in a mess, and you wish you would have known more accurately how long the work would take to complete. You want to prevent this from happening again in the future to ensure both your team members and your customers stay satisfied and happy. That’s where the cycle time equation comes in. We’ve rounded up the fundamentals of cycle time, its benefits, two other formulas it works alongside, how it should be calculated, and how to track it. With a solid understanding of the cycle time formula, you can avoid ending up in these types of scrambles and deliver high-quality work in a timeframe that’s reasonable for both your customer and your team. What is cycle time? Cycle time is a calculation that comes from the world of lean manufacturing. The cycle time is the amount of time it takes to complete a specific task from start to finish. You can think of it as the time it takes to produce one unit or item from beginning to end. In our example from earlier, it’s the actual amount of time (80 hours) your team told you it would take to get the work done. The cycle time formula is all about revealing the speed of delivery. It’s a crucial metric that allows you to measure how long it takes to complete a product or deliver a service. It can also be considered part of continuous improvement efforts since it can expose areas of inefficiencies that you and your team could address. It’s also a valuable metric when it comes to measuring productivity and efficiency within a business. Cycle time can be applied across a broad range of industries and types of work. In software engineering, it refers to how long it takes to deploy code, or in supply chain management, it can explain how long it takes to fulfill a product order. But, industry aside, it also applies when managing projects of any size. Even if you aren’t working with physical product development, calculating cycle time can help you understand how long it takes to get work done — from beginning to end. What are the benefits of calculating cycle time? Calculating cycle time can be a huge benefit to your business. Here are some of the key benefits of calculating cycle time and why you should be using the cycle time formula if you aren’t already: Increased profitability from cost savings. With the speed of delivery top of mind, when you maximize cycle time, you reduce costs and increase your profitability. Having a clear understanding of how and where time is being spent is a quick way to understand where you can cut back. In one case study, an organization’s pretax profits increased from 2% to 13%, in part due to an in-depth understanding of cycle time alongside other lean principles. More consistent production. When you have an in-depth understanding of your production flow, you can implement processes and tools to ensure consistent production rates. By honing in on your production rate to standardize it, you’ll eliminate the chances of under and overproducing. Highly-satisfied customers. Have you ever been in a situation similar to the one in the introduction? Where you promised a customer a deliverable within a timeframe you weren’t able to meet? It happens all the time when we don’t have a clear understanding of how long it takes to complete specific tasks. When you calculate cycle time, you can figure out your production rate and provide more realistic timelines that you can stick to. More efficiencies within your team’s working structure. When reviewing and assessing your cycle time, the data offers an opportunity to address inefficiencies. For example, maybe your cycle time indicates that you can’t deliver quickly enough and provide the turnaround times that you’d like. In that case, you can determine whether you can increase your production batch to deliver more quickly. You can use cycle time as a major player when it comes to identifying process improvements. Improved project scoping. If you lack a clear understanding of how long it takes for your team to complete specific tasks in their work, it’s challenging to scope work accurately with your customers. This leads to frustration on your team when they realize a project is way more than they bargained for, as well as with your customers when they realize you need to push out your deadline. Cycle time will give you a more accurate project scope than simply taking an educated guess. Outpace your competitors. Want to beat your competitors and retain loyal customers? Outpace your competition by being the partner who delivers within the quickest production time. You can use the real-time data and visibility provided by your cycle time to stay ahead of the market. Calculating cycle time will help ensure you’re putting your business at a competitive advantage and blowing your competition out of the water. A better understanding of business spend. Based on the cycle time of any given task, you can determine the worth or value of individual processes. Having an understanding of cycle time and how many resources are being paid to complete production tasks within a specific period can give you a clearer understanding of business spend. In turn, you can focus on optimizing the processes that create the most value and bang for your buck. What are the challenges of calculating cycle time? There are plenty of benefits to using the cycle time formula in your project, but it can be difficult to use correctly. Some common issues that can arise when calculating cycle time include: Communication siloes: Team members each working on their own tasks without regular and effective collaboration can lead to issues in the project's workflow. Lack of prioritization with tasks: With so many tasks being worked on at once, it can be hard to pick out where efforts should be focused for the good of the team. Can throw supply and distribution channels out of whack: When altering cycle times, there is a risk that this will offset the balance of your project's supply and distribution, which is important to stay aware of. Cycle time vs. takt time vs. lead time To best understand the cycle time formula, we need to talk about how cycle time works in relation to a couple of its closest formula counterparts: takt time and lead time. First, it’s essential to understand that cycle time, takt time, and lead time are different. In particular, cycle time and lead time are necessary metrics in the Kanban project management method. These metrics often get confused for one another, and while they’re related, they differ and are used to measure productivity in different ways. Let’s take a quick look at each metric. 1. Cycle time As we previously mentioned, cycle time represents the amount of time it takes to complete one task, production, service, or process from start to finish. It’s the amount of time required to produce a product or service or complete an entire cycle. We’ll get into the specifics of the cycle time formula later, but keep in mind that the formula is calculated by examining net production time (NPT) and the number of units produced within that production time. 2. Takt time In contrast, takt time is the speed at which a product needs to be manufactured to satisfy customer demand. It’s similar to cycle time but emphasizes production speed in relation to how many customers are demanding your product or service. In a perfect world, cycle time would match takt time. It makes sense, right? The rate at which your team produces a product, project, or deliverable matches the customer demand you’re up against. If your cycle time exceeds your takt time, your customers will be dissatisfied because you can’t keep up with the demand. And vice versa; if your cycle time is less than your takt time, there may be opportunities to improve your processes and work more efficiently. Your process might be too complex, or you might have too many staff members for the amount of demand you need to deliver on. 3. Lead time The third formula we need to understand is lead time. Lead time is the amount of time it takes to run through the entire production cycle from the order stage to the final payment stage. This metric reveals the time that elapses between order and delivery and gives insight into how long your process takes from the customer’s perspective. In a nutshell, taking a look at these formulas together can provide insight into how efficiently your business is operating as a whole. The cycle time formula, takt time, and lead time allow you to understand your business processes from the inside out. When you use these formulas together, you’ll experience higher overall customer satisfaction because you’ll be able to provide accurate estimates on how long production will take. It’s a win-win scenario for you, your team, and your customers. So, how exactly can you use the cycle time formula to get a grasp on how long it takes to get specific tasks done? Let’s run through how to calculate cycle time and a few examples to help you get started. How do you calculate cycle time? How exactly is cycle time calculated? The calculation itself is a relatively straightforward division equation that goes as follows: Cycle Time = Net production time (NPT) / Number of units produced That’s pretty simple, right? Not so fast! When calculating cycle time, it’s essential to understand that the net production time shouldn’t take into account any breaks or waiting time that affect the production process. This number strictly measures the time it takes to complete the task or produce the product, minus the extra fluff and downtime. Let’s take a look at a few examples. Cycle time in professional services First, let’s look at a project-based example that applies to the professional services industries. Suppose you work at an organization and lead the internal marketing team. This year, you want your team to focus on building out your overall content strategy, which includes producing more online content and boosting your SEO rankings. With this in mind, one of the strategies you’re implementing is producing more blog content. You need to understand how many blogs your team members can produce before determining how the blog content will fit into the overarching content strategy. Let’s say you have five content writers. Each content writer averages approximately two and half hours of production time for a 1,500-word blog post. You want to understand the cycle time to generate 20 blog posts total because you’d like to publish 20 blogs per month. Using these numbers, we can calculate the cycle time for the entire team as follows: Cycle Time = 2.5 hours / 1 blog post totaling 1,500 words The cycle time is 2.5 hours, and if we multiply this by the total number of blog posts we want to generate, we can see that it will take 50 hours for the team to complete 20 blog posts. 2.5 hours x 20 blog posts = 50 hours Using this information, you can now build in the total number of hours needed to generate blog content into your team’s schedule and do a more effective job building out your content strategy. Cycle time in delivery services Here’s another example. Let’s walk through how cycle time applies in terms of a service delivery task. Suppose you work for the postal service and run the regular mail delivery routes. You run the same route every week, so you’re relatively quick at navigating the neighborhood. You’re working a 12-hour shift with a one-hour lunch break and an additional 30-minute break. In this example, we want to eliminate the breaks, otherwise known as downtime, to ensure we are strictly calculating the production time only. So your net production time is 12 - 1.5 = 10.5 hours. You manage to deliver bundles of mail to 300 addresses during your 10.5-hour production time. Cycle Time = 10.5 hours / 300 bundles of mail In this scenario, it takes approximately 0.035 hours, or 2.1 minutes to deliver one bundle of mail. That’s a speedy delivery! Cycle time in production settings We can also calculate cycle time in a production line setting to determine how much to price an individual item. Let’s say you’re starting a small business and will be selling handmade t-shirts. You need to know how many t-shirts you can produce in a certain period of time to know how much you should charge. In your pricing model, you want to cover labor and materials and make a profit. You’re working a 10-hour shift with a 30-minute break. So your net production time is 10 - 0.5 = 9.5 hours. You produced 50 handmade t-shirts today. Cycle Time = 9.5 hours / 50 handmade t-shirts It takes you just over 11 minutes (0.19 hours) to produce one t-shirt, so you can use this calculation to account for labor costs and add them to your material costs. Be sure to throw in a little extra to make sure you’re profiting off your small business and monitor your cycle time as you progress to adjust your rates as needed. Who calculates cycle time? Not sure who is responsible for calculating cycle time? Cycle time impacts the overall efficiencies and success of any business, which means many different industries and roles calculate cycle time. Whether you’re a project manager, product manager, manager of software developers, production line head, process improvement manager, manufacturer, supplier, or any level in between, you can and should be calculating cycle time. If you’re completing any sort of product delivery, service, or project from start to finish, you can calculate the cycle time for that task or set of tasks. The good news is that you don’t have to worry about calculating cycle time manually and get bogged down in the math. There are a variety of tools that make calculating and tracking cycle time easy for anyone responsible for doing so. For example, you can calculate cycle time using a tool like a cycle time calculator. And to boost your productivity tracking even further, you can use a project management tool to help you understand your workflows and calculate cycle time thoroughly and comprehensively. How to optimize your production workflows with Wrike Wrike can help you optimize your production workflows and stay on top of your cycle time calculations with ease. How does Wrike help track cycle time? Here are a few noteworthy features that can make your calculations simple, easy to understand, and easy to share. 1. Use cumulative flow diagrams Cumulative flow diagrams are data visualizations that work well with Kanban project management, and Kanban boards tie in well with cycle time and lean principles. These diagrams allow you to view cycle time, throughput, and work in progress. You can build a Kanban board directly in Wrike and use it to gather insights into productivity using your team’s analytics. 2. Compare estimated time and actual time You can enhance your team’s time tracking by comparing estimated time and actual time spent. Remember, you’ll need the actual production time to calculate cycle time, but it can be helpful to compare the production time against your team’s predictions on how long tasks will take them. To measure and report on the estimated time it will take to complete a task, you can set up a custom field and have your team members enter the estimated time for a task. Then, you can use the time tracker feature and have your team members calculate the actual amount of time they’re spending on each task. Run customizable reports to compare and contrast the estimated and actual time spent. 3. Streamline collaboration Wrike integrates with over 400+ leading software providers, which means you can optimize your production workflows without having to leave behind the tools you already know and love. Additionally, collaboration is a necessary component of optimized workflows, and Wrike has you covered. With the ability to collaborate directly within the software and share documents and reports instantly, you can easily visualize your team’s processes at every stage while communicating more effectively. 4. Rely on templates Working on a complex project that may include multiple cycle times as your team works through each stage of the project lifecycle? Use the Complex Project with Phases Template in Wrike to track cycle times from the initiation phase through the launch phase. Each phase of the project management lifecycle has its own folder, making it simpler to track multiple tasks within one project at the same time. Although cycle time is often tied back to Kanban methods, you can also use this metric as part of an Agile methodology framework. Agile encourages delivering high-quality products in short periods of time (see how that works nicely with cycle time?) Use the Agile Teamwork Template to start planning sprints and working in shorter iterations. Understand (and maximize) your team’s time Nobody likes that panicked, stomach-dropping feeling when they realize they’ve over-promised and are bound to under-deliver. Fortunately, tracking and understanding your team’s cycle time will not only help prevent overcommitments to your customers but will also help keep your team members happy and working efficiently. Cycle time isn’t just a measure of how much you’re producing — it’s a metric that will help you deliver high-quality work and leave you with loyal, satisfied customers. Whether you’re using cycle time for product delivery, a service, software development, or another type of project, the cycle time formula can help you improve your customer satisfaction levels and continuously improve the way you and your team get work done. Are you ready to start tracking cycle time for your team? Sign up for a free trial of Wrike and start optimizing your workflows and boosting customer satisfaction today.
A business plan is a straightforward document. In it, you’ll include market research, your overall goals for the business, and your strategies for achieving those goals. But what is a business case and why do you need one if a business plan outlines everything else? A business case takes a closer look at a specific problem and how you can solve it. Think of a business case as the reason you create a project you’re going to manage in the first place. The article provides a step-by-step guide on how to write a successful business case, including a checklist for identifying problems, researching solutions, and presenting to stakeholders. As a bonus, we’ll show you how to use Wrike to manage your product business cases with a requirements management template or implement them with a project scheduling template. What is a business case? A business case is a project you’ll assemble for identifying, addressing, and solving a specific business problem. The key to a business case is the change it creates in your business. Developing a business case starts with identifying a problem that needs a permanent solution. Without that lasting change, a business case is only an observation about what’s going wrong. A complete business case addresses how a company can alter its strategy to fix that problem. Front-to-back, a business case is a complete story. It has a beginning, a middle, and an end. It typically looks like this: Beginning: Someone identifies a problem within the business and presents the business case to the key decision-makers. Middle: With the project go-ahead, the company launches an internal team to address the business case and deliver results. End: The team delivers a presentation on the changes made and their long-term effects. In short, a business case is the story of a problem that needs solving. Examples of business cases The problem for many companies is that they can turn a blind eye to challenges that are right in front of their faces. This is even the case when the company has a compelling product to sell. Consider the example of Febreze. In the mid-1990s, a researcher at Procter & Gamble was working with hydroxypropyl beta-cyclodextrin. His wife noticed that his clothes no longer smelled like cigarettes, which was a frequent complaint. P&G had something of a miracle product on its hands. However, their approach was wrong. They initially marketed Febreze as a way to eliminate embarrassing smells. Predictably, the product flopped. But P&G stuck at it. They had a potential business case on their hands: a highly marketable product proved difficult to market. What was going wrong? Working on the business case from beginning to end provided the answer. After some focus group testing, P&G found out that few consumers recognized the nasty odors they were used to. Instead, they learned to use a different business case for Febreze: it was a cleaning product now, a way to make the house smell nice when the floors are vacuumed and the counters are wiped clean. They gave it its own pleasant smell and fashioned it into a cleaning product. And because it worked so well, so did the campaign. That’s an example of a business case overall. But let’s get specific: developing a business case is easier when you have a template to look at. Let’s build an example using a made-up company, ABC Widgets, and a hypothetical business case. Let’s call our business case example “Operation Super Widgets”: Business Case: ABC Widgets Section 1: Summary Briefly describe the problem and the opportunities. ABC Widgets’ latest widget, the Super Widget, is suffering from supply issues, requiring higher shipping costs to procure the necessary resources, and eating into profits. We need to switch to a new supplier to restore the viability of the Super Widget. Section 2: Project Scope This section should include the following: Financial appraisal of the situation. Super Widgets are now 20% more expensive to produce than in the year prior, resulting in -1% profits with each Super Widget sold. Business objectives. To get revenues back up, we need to restore profit margins on Cost Per Unit Sold for every Super Widget back to 2020 levels. Benefits/limitations. Restoring Cost Per Unit Sold will restore 5% of sagging revenues. However, we are limited to three choices for new Super Widget suppliers. Scope and impact. We will need to involve supply chain managers and Super Widget project management teams, which may temporarily reduce the number of widgets we’re able to produce, potentially resulting in $25,000 in lost revenue. Plan. Project Management Teams A and B will take the next two weeks to get quotes from suppliers and select one while integrating an immediate plan to bring in new Super Widget parts for manufacturing within four weeks. Organization. Team Member Sarah will take the lead on Operation Super Widget Profit. Both teams will report to Sarah. This is a bare-bones example of what a business case might look like, but it does hit on the key points: what’s the problem, how can you fix it, what’s the plan to fix it, and what will happen if you succeed? How do you write and develop a business case? When writing your own business case, the above example is a good guide to follow as you get started with the basics. But, once you’re more familiar with the nuts and bolts, it’s also worth being prepared for some potential roadblocks you could face along the way. Challenges of writing a good business case Why don’t more companies create a business case? It might come down to a lack of good communication. Many people don’t even know how to write a business case, let alone present one. “The idea may be great, but if it’s not communicated well, it won’t get any traction,” said Nancy Duarte, communication and author who wrote The HBR Guide to Persuasive Presentations. The key challenge, notes Duarte, is taking abstract business concepts (like lagging numbers) and turning them into an immediately recognizable problem. After all, if a company already had perfect awareness that it was making a mistake, it likely would find a way to stop the error in its tracks. A business case is challenging because it usually means you’ll have to persuade someone that change is needed. And change can be difficult. In a thriving business, it’s especially problematic because it’s easy to point to the bottom line and say that whatever the company is doing is already working. How do you present a business case? The tips and examples above give you some nice remedies for creating a business case without the typical problems. But you’ll still want to present a business case with the straightforward proposals and numbers you’d associate with any new project. Essentially, it all comes down to how well your business case can persuade the decision-makers. That’s why you shouldn’t just build a case off of raw numbers. The bottom line might be a compelling argument, but it’s not always what “clicks.” If you’re presenting a business case, you’re a salesperson. And not every sale is a matter of precise logic. It’s also about emotion—the story of why something’s gone wrong and what needs doing if you’re going to overcome it. The art of a good business case is the art of persuasion. Keep these specific points in mind as you craft one of your own: Point to an example of a bad business case and liken it to the present case. No one likes the idea of watching themselves walk into a mistake. Presenting an example of a business that made the same mistake your company is making and then translating it into the present moment is a compelling way to craft a business case that makes ears perk up. Build a narrative. Nancy Duarte pointed out that in one business case, a client convinced a CEO to follow through with a project by using simple illustrations. It’s not that the idea of adding illustrations to the business case was so great. It’s that the illustrations were able to tell a compelling story about why the case needed to go through. Distill the idea into an elevator pitch. Try this exercise: get your business case down to one sentence. If you can’t explain it any more simply than that, your business case might not be as memorable as it needs to be to sway decision-makers. Use analogies to drive the point home. Let’s say you discovered a problem in a growing business. Overall, revenues are good — but you’ve noticed an associated cost that has the potential to explode in the future and tank the business. But it’s not compelling to use dollars and cents when the business is doing so well. Instead, consider introducing the business case with a simple analogy: “Without repair, every leaky boat eventually sinks.” You now have their attention. Use the numbers to drive the point home, but not to make the point. If you’re presenting a business case to decision-makers, remember that it’s not only the logic of your argument that will convince people — it’s how persuasive you can be. Business case checklist Before you can check “learn how to write a business case” off your list, you have to know the essentials. Make sure you include the following elements in your business case checklist (and, of course, your business case itself): Reasons. This should be the most compelling part of your business case. You can tell a story here. And the most compelling stories start with a loss or a complication of some sort. What is the threat to the business that needs remedy? What are the reasons for moving forward? Potential courses of action. It’s not a complete story until we know the next chapter. A business case isn’t just about the problem — it’s about rectifying a problem through the solution. Recommend a few specific courses of action to help spur discussion about what to do next. Risks and benefits. Not every solution is going to be perfectly clean. There are going to be solutions with downsides. There are going to be costs along with the benefits. Make sure to include each of these to give a clear and complete picture. This is the time to manage expectations — but also the time to inspire action. Cost. What’s it going to cost to complete the project? The people making the decisions need to know the bottom line figure to assess which business cases to prioritize. Timeline. A good project isn’t only measured in dollars but in days, weeks, and months. What is the expected timeline for the business case? How quickly can the problem meet its solution? With every business case, specificity is key. A vague timeline won’t help — a timeline with specific weekly milestones looks more achievable. To make your business case more compelling, always look for the specific details that tie your story together. Business case template A business case template is a document that outlines the key elements of a business case in a structured format. By using a standardized template, companies can ensure that all relevant information is captured and shared in a clear and consistent manner. Depending on the size of your business and the scope of your project, your business case template can be as detailed or as simple as you like. For a smaller project, you can use a one-pager to get started, detailing the main points of your project, which include: Executive summary: An overview of your project, its goals, and the benefits of completing it for your business Team and stakeholders: A list of the relevant people involved in your project, and their contact information SWOT analysis: An analysis of how your strengths, weaknesses, opportunities, and threats weigh up against your competitors Risk analysis: An overview of the kind of risks that are involved with your project and how you may avoid them Budget and financial plan: Details of your budget and where you may secure financing for your project Project plan: A schedule of how you plan to implement your project and what tasks are involved Let's see what that might look like. Executive summary Team and stakeholders SWOT analysis Risk analysis Budget Project plan How to write a business case with Wrike Wrike’s project management software can step in and turn a business case from the seedling of an idea to a full-fledged initiative. The requirements management pre-built template can help you document and track project requirements in a structured manner. The template includes sections for capturing stakeholder requirements and business cases, as well as any constraints that may affect the project’s success. By using this template, you can ensure that all necessary requirements are identified and that potential issues are addressed early in the project planning process. If you want to move from the business case description to the actual implementation faster, consider using the project scheduling template. This template can help you create a detailed project timeline with milestones, identify task dependencies, and assign resources. By utilizing this template, you can ensure that the project is realistically achievable and meets all business needs, giving stakeholders confidence in the project’s success.
Imagine you’re the assigned project manager on a high-stakes project. The project scope is defined, key stakeholders are in agreement, you’re confident you can stay within the budget, and the project team is ready to dive in. They start working tirelessly to meet the agreed-upon objectives — and then an unexpected risk meets you midway through the project. You never saw this one coming, so you have no idea how you’re going to get the project back on track and see it through to success. If only you had identified and assessed the risk during the project planning phase, you might have felt more prepared to overcome it. That’s what a risk assessment matrix is used for and why you need one for your projects. What is a risk assessment matrix in project management? Risks in project management are unexpected events that may or may not occur and impact your project outcome in some way. According to the Project Management Institute (PMI), analyzing and managing risks is a key practice in project management. It improves the chances of successful project completion while reducing the consequences of any risk that occurs. Risks can appear related to any aspect of a project, including the budget, resources, processes, or technology, to name just a few. While it can be easy to assume that all risks bring negative consequences to the table, it’s essential to understand that positive risks can also occur during the project life cycle. A risk assessment matrix (sometimes called a risk control matrix) is a tool used during the risk assessment stage of project planning. It identifies and captures the likelihood of project risks and evaluates the potential damage or interruption caused by those risks. The risk assessment matrix offers a visual representation of the risk analysis and categorizes risks based on their level of probability and severity or impact. This tool is a simple, effective way to get a holistic view of the project risks for all team members and key stakeholders. Risk matrix example Let’s take a look at a simple risk matrix example for a project. We’re using a 5x5, five-point scale for the impact and probability in this matrix example, but use a scale system that works best for your team. For example, you can use a 3x3 matrix for less granularity. Impact or Severity Probability or Likelihood Insignificant Minor Moderate Major Catastrophic Very Likely Low-Medium Medium Medium-High High High Likely Low-Medium Low-Medium Medium Medium-High High Possible Low Low-Medium Medium Medium-High Medium-High Unlikely Low Low-Medium Low-Medium Medium Medium-High Very Unlikely Low Low Low-Medium Medium Medium In this example, you see risk categories ranging from low to high and likelihood ranging from very likely to very unlikely. Using it is as simple as any other matrix: You look for where both of your criteria meet to get your risk rating. Let’s say you’re the project manager for a new organization-wide software tool rollout and will be working with a consultant to implement it. For this project, consultant delays are possible due to a lack of resources on their end, and if a delay happens, the impact would be major because it would impact the entire rollout plan. We’d categorize this risk as medium-high based on the example matrix. What are the benefits of a risk assessment matrix? You might be wondering if it’s worth spending the time to assess risks and create a matrix for all of your projects. Well, the benefits of a risk assessment matrix speak for themselves: You can prioritize all risks with an understanding of the level of severity. Having an overview of all potential risks allows you to prioritize them against one another if multiple risks occur. This prioritization will benefit your project team and help keep them on track if the project does go awry. You can devise strategies and allocate resources for the unexpected. While it’s impossible to fully plan for uncertainty, acknowledging and understanding what risks could occur provides an opportunity to create action plans for those unexpected events. Appropriately planning for risks increases the likelihood of project completion and success. You’ll reduce or neutralize the impact of risks that occur. The unexpected consequences of a risk that’s not thought about in advance might feel more severe and damaging than a risk identified and analyzed early on. Having an awareness of the potential impact can reduce or neutralize the effect of a project risk before it occurs. Hope for the best, but prepare for the worst. What are the challenges of a risk matrix? While risk matrices can be very useful for identifying and preparing for project risks, they are not an answer to all your project problems. Here are some of the challenges of risk matrices: Inaccurate assessments: The risk matrix categories may not be specific enough to compare and differentiate between risk levels accurately. The severity and likelihood of certain risks are often subjective and therefore unreliable. Poor decision-making: Incorrectly categorized risks can lead to poor decision-making since you do not have an accurate picture of potential issues. Doesn't account for timeframes: Risk matrices don't differentiate between risks that could occur two weeks from now and risks that could occur in two years' time. There is no consideration of how risks could change over the years. Can oversimplify risks: The complexity and volatility of risks can be oversimplified — some risks remain the same over time, while others can change overnight. How do you calculate risk in a risk matrix? A risk matrix is a valuable tool for your project planning, and creating one doesn’t have to be complicated. Follow these steps to calculate risk for a project of your own. Step 1: Identify the risks related to your project To complete your risk assessment matrix, you need to start by having an in-depth understanding of your project — the scope, budget, resources, timeline, and goal. You’ll need this information to help you spot the potential risks. Identify as many risks as you can with your project team. Consider aspects like scope creep, budgetary constraints, schedule impacts, and resource allocation as the starting points for your risk identification process. Create a risk register complete with all of the identified risks, as it will make it easier to create your matrix. Step 2: Define and determine risk criteria for your project No two risks and no two risk matrices are alike, which means you’ll need to work with your project team and key stakeholders to define and determine the risk criteria you’ll use to evaluate each risk you’ve identified. Remember that two intersecting criteria need to be specified, each with its levels: the probability or likelihood that the risk will occur and the severity or impact the risk will have. Step 3: Analyze the risks you’ve identified After you’ve identified and described all of the potential risks, the next step is to analyze them. In your analysis, use your risk criteria to categorize each risk within its appropriate severity level and probability. Many matrices assign a number value to criteria. So, sticking with our example, you might rate the impact ranging from one (insignificant) to five (catastrophic) and do the same with likelihood, where one represents very unlikely, and five represents very likely. Using the matrix, it’s then easy to multiply severity times likelihood to get a number value. A risk that’s catastrophic and very likely would rank as a 25, whereas one that’s insignificant and very unlikely would rank as a one. It’s a simple and intuitive way to compare and understand risks. Step 4: Prioritize the risks and make an action plan Your final step is to prioritize the risks and create risk management plans to mitigate or neutralize them, with your risks categorized accordingly. You’ll want to outline the steps you’ll take if the risk does occur and the strategies you’ll deploy to help get the project back on track. How do you create a risk matrix in Excel? Wondering how to make a risk matrix in Excel? Start by building a table that reflects the probability and severity scales you’ve defined for your risk assessment. Here are a few tips to help you get started: After you’ve created your table, add your labels to the rows and columns. Use the columns for severity and rows for the likelihood of occurrence. Once you’ve labeled all of your column and row headers, add the definitions for each probability and severity level you’ve outlined with your team beneath the header title. This helps ensure the team is on the same page when ranking risks within the matrix. Use formatting options to color coordinate the matrix for the best visual representation. You can use the stoplight system (red, yellow, green) for high, medium, and low risks, respectively. Using different colors allows any viewer to easily distinguish the risks based on the likelihood that they will occur and the amount of damage or interruption they’ll cause. How do you create a risk matrix in Wrike? If an Excel sheet isn’t your jam when it comes to tracking and monitoring risks, you can use Wrike to create a risk matrix. Some of the key features Wrike has that you can use to assess project risk include: Custom fields that allow you to build out the severity and probability any way you want to. You could turn these into drop-down rankings on a one-to-five scale or use the text option to label your categories. Table view to provide greater visibility into the risks and a similar table to the one you can create in Excel. Reports and calculated fields to automate the data associated with your assessed risks. Interactive Gantt charts that allow you to create task dependencies and streamlined automation of changing project dates and deadlines. Project progress can be monitored in real-time, which allows your team to keep risks top of mind, so the important stuff doesn’t get overlooked. The best part about using a platform like Wrike is that it can automatically update and adjust as your project progresses, saving you from the manual work required in Excel. What do you do with risk matrix results? So, what does a risk matrix accomplish for you? The short answer is that your matrix results help you create a risk response plan. To start with, it’s crucial to address the risks that are ranked high or extreme. Depending on the project and your team’s resources, you may only need to monitor the medium and low-risk categories rather than taking immediate action. Finally, reference your risk matrix throughout the project until it’s marked complete and successful. Don’t make the mistake of not committing to risk management as an ongoing process. Using this tool is a powerful way to support your project team and mitigate any bottlenecks that stand in the way between them and a winning project. Are you ready to get ahead of the game and stop losing sleep over project risks? Sign up for a free trial of Wrike to start building risk matrices with your team today.
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