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The Diligent team
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Risk management for stakeholders: Best practices for setting a strategy and maintaining it

August 12, 2021
0 min read
Man conducting risk management for stakeholders

Working on a project typically involves working with people who may have different ideas around what constitutes success. That mix often includes stakeholders looking to influence different aspects of the project. For project managers, stakeholders can be an asset or an obstacle to overcome, especially when it comes to risk.

Risk management strategies tend to focus primarily on preparation for and prevention of crises. In today's business environment, such strategies should be adopted in all interactions, including those with stakeholders. Input from stakeholders may bring new and unaccounted for risks, which can undermine a project. Diligent's intuitive, future-facing software helps organizations to adopt more innovative approaches to risk and compliance.

Stakeholders and Risk Management

At its core, risk management is about identifying potential threats and opportunities associated with a project. Someone like a project manager is usually charged with overseeing any risks involved in a project, whether getting a new software product off the ground or investing in a new startup.

With risk management, you're working to minimize the negative impacts of any potential problems that could arise during the project. Unfortunately, even the most detailed analysis can end up missing obstacles that could impede the success of your venture.

There are many different risk model approaches you could take, depending on the nature of your project. How much stakeholders get involved with each phase depends on the types of risks revealed and the impacts that proposed solutions and business decisions will have on their interests.

If you were a hospital administrator, you'd want to know the risk involved in staffing the hospital with a certain number of nurses during different shifts. For a software project, you'd have to consider the risks of getting budget estimates incorrect or of ongoing scope creep. Stakeholders would have different concerns in both scenarios.

At Diligent, we understand that industries like manufacturing and health care need tailored solutions, which is why we have made our software platforms flexible enough to adapt to different business interests.

Personal Bias

As you know, stakeholders represent people, groups or even organizations with an interest in the outcome of a venture. They may try to exert influence over the process to achieve their preferred outcome. One disadvantage is that you may not know a lot about who the stakeholders are at the start of your project.

That means you have no idea how their thoughts and behaviors might affect your project. That's one reason why your risk management strategies must account for situations where the stakeholder may be at turns belligerent, positive, obstructive, helpful or destructive in ways that either move your project forward or put it in danger of derailment.

3 Steps to Pull Together a Stakeholder Risk Management Strategy

To effectively manage the uncertainties around working with stakeholders, project managers should develop a framework for learning more about who stakeholders are, the kind of risk they represent and how they may be satisfied without harming your project. There are a lot of similarities in the skills necessary to manage risk and manage stakeholders. Diligent's software platforms can ensure you stay on track when dealing with risk and compliance issues from different quarters.

The following sections go over the three significant steps involved in developing a risk management strategy for stakeholders.

1) Identifying Stakeholders

Unfortunately, many of us have experienced the exasperation of getting deep into a project development cycle only to be hit with new requirements from an unknown stakeholder. Even worse, these requirements may crop up at the moment of implementation or in the release phase. The stakeholders are often groups directly affected by the changes your project represents.

Ideally, you would have been informed of their concerns from the start so that you could account for them during the planning stages. Unfortunately, it's often too late to address their issues once you're ready to roll out a finished project. At that point, your team may discover the new stakeholder has the power and will to bring your venture to a halt. That's why stakeholder management should include a systematic approach to identifying potential stakeholders using the following techniques.

Brainstorming: Bring the team together to flesh out thoughts and ideas, including the project sponsor. You can use techniques like silent brainstorming before moving on to verbal communication within the group. Focus on those directly affected by any changes that your project entails. For example, who would end up benefiting from or losing something after you roll out the venture?

Give everyone paper to write down as many stakeholders as possible within 10 minutes. Then, pull everyone's lists together, eliminating duplicates, and use that as the basis of a more traditional brainstorming session where everyone makes suggestions on who they would consider a stakeholder.

2) Profiling Stakeholders

Once you've agreed on a stakeholder list, start creating profiles that outline their roles in the project. In addition, the profiles should include answers to questions that give you a better understanding of the risk a stakeholder poses to your venture. Examples of questions you might want to see answered with a specific stakeholder profile include the following:

    • Who approves project funding?
    • Who approves requirement changes?
    • Who uses the products or services from the project?
    • Who makes personnel decisions?
    • Who will face work disruptions because of the project?
    • Who will have to update or eliminate specific workflows because of the project?
    • Who will decide when it's time to move to the next project phase?

The responses to your questions help the team achieve a 360-degree view of the project. That way, you increase the chance of identifying essential stakeholders at the start, which lowers the risk of an unknown yet vital stakeholder popping up near the end.

Following the Decision Trail: There's a lot of decision-making involved with every phase of a project. Who's in charge of making decisions for your project? Go over your current project plan, and make a list of all decisions and authorization points. Make a note of who would be responsible for the final call, and account for any stakeholder with veto authority you previously missed.

Searching for Secondary Stakeholders: As you work on identifying your primary stakeholders, keep an eye out for groups who might typically get overlooked because they're not involved in the project execution. They would include the following groups:

    • Regulators who wouldn't show concern unless a rule violation occurred
    • The clients of customers responsible for driving the demand that prompted the project
    • Those opposed to the project because they could end up suffering a loss

If you don't account for secondary stakeholders from your project's outset, they could emerge as an adversarial force at the end just as easily as a primary stakeholder could.

Personalizing Stakeholders: Try to add a personal touch to the profiles you develop for stakeholders. Understanding who they are as people gives you more insight into their stake in a project and the stakeholder's potential influence. For example, '''John Smith, Regional Operations''' gives you something more specific to work with than simply '''Operations.'''

3) Developing Responses to Stakeholders

Once you know more about your stakeholders, the next step is figuring out effective ways of communicating back and forth with them. Start by organizing your stakeholders in order of importance and the potential risk they represent to your project.

As part of a risk management strategy, you can identify high-priority stakeholders by asking questions like the following ones:

    • What is it they care about?
    • How do their interests align or contrast with your project?
    • Will the stakeholder require a lot of monitoring?
    • What would it take to keep the stakeholder satisfied?

In addition, you can drill down to the specifics around high-priority stakeholders by asking the following questions:

    • What title do they hold?
    • What will they contribute to the project?
    • What level of authority do they hold over the project?
    • What outcome is the stakeholder looking for from the project?
    • Does the stakeholder represent a threat or an opportunity?

To mitigate project risk by getting stakeholder decisions to go your way, you can try understanding the effects of stakeholders' choices. You can do this as follows:

    1. Rank the position of the stakeholder according to whether they are for or against a proposal. You should also make a note of the strength of their position on the matter.
    2. Rank the stakeholder's ability to influence a decision. You would rank those with the ability to make a final call higher on your list.
    3. Use the rankings from the stakeholder's position and ability to influence, and build an illustration showing where each person stands on a decision.
    4. Form a map representing the relationships between all the people in your graph. Ignore neutral relationships while showcasing positive and negative relationships with solid or dashed lines.

The above process will help you better understand your stakeholders' positions and develop more robust risk management strategies.

Continuous Risk Management of Stakeholders

How you communicate with stakeholders will differ depending on whether they are high-priority stakeholders, the amount of influence they carry, and how much information they require at different project stages. Develop a communication plan for delivering the correct information to the right people in the proper format as often as needed.

Use the information collected when identifying your main stakeholders to decide on communication strategies for different groups. By planning out your responses and communication strategies, you shift from a reactive mode to a proactive one for managing risk around stakeholders.

A solid communication strategy is essential in risk management. It gets everyone on the same page in identifying problems and the potential threats they represent to a project. In addition, you ensure that any solutions are developed to account for the concerns of every group affected.

The larger a project, the more confusion might arise on who has the final decision. This can lead to a lot of conflict between the project team and stakeholders and among different sets of stakeholders.

Your communication strategy can go a long way in getting stakeholders to move past any conflicting interests for the overall good of the project. Otherwise, you run the real risk of failure if you don't effectively communicate essential information to stakeholder groups. Diligent software improves communication by making it easier to share information about specific issues with relevant parties.

Persuasive Risk Communication with Stakeholders

Persuasive risk communication involves getting stakeholders to change their attitudes, opinions and behaviors around an objective that represents a risk to a project. Forms of persuasive risk communication include the following:

Rational persuasion: This relies on messages containing rational arguments subject to the premise that the stakeholder understands your logic and applies the same rules when making judgments about the source of your information. Both of you must also feel equally motivated to deal with the risk that an issue represents. However, you may run into trouble with this approach if the stakeholder operates from a different ruleset, relies on conflicting information sources or doesn't view the risk with the same sense of urgency.

Emotional persuasion: Stakeholders who may remain unmoved by rational persuasion may be more open to emotional persuasion, where you're appealing to their subconscious mind instead of their conscious mind. Many marketers and salespeople rely on emotional persuasion to appeal to consumers. Emotional persuasion can involve the arousal of feelings like fear or excitement to influence a stakeholder to adopt a more favorable position.

Dialoguing with Stakeholders

Many project managers run into issues trying to engage with stakeholders and motivate or influence them in risk-related matters. As a result, you may have to rely on a mix of rational and emotional persuasion at various stages of a project. In the beginning, when everyone's locked into their idea of how something should be done, you may find yourself needing to lean more into one technique or the other, depending on the position and mindset of the stakeholder.

As the project progresses, you may find it easier to get stakeholders to understand the importance of risk mitigation. Constant dialog, especially with high-priority stakeholders, allows you to continually go over your shared interests when dealing with challenges and potential threats that tend to arise throughout a project.

Facilitate Better Risk Management Strategies

Diligent software platforms make it possible for organizations to enact risk management strategies that account for the needs of stakeholders within any industry. Contact Diligent to set up a personalized demo of our platforms. Then, see for yourself how our software solutions can transform your risk management, governance and compliance workflows.


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