Stakeholder management risks are one of the biggest threats to otherwise successful projects. I’ve seen it time and time again. Yet, any of the six risks at stakeholder level can be a problem, including: Poor identification, Communication, Resource deficits, Expectation management, Follow-through or power plays.
These stakeholder level risks will kill your continuous improvement initiatives if you’re not vigilant. So, let’s go through each in more detail so you can be proactive.
Common Stakeholder Management Risks
Stakeholder management has inherent risks, and even the best projects can fail if one of these risks materializes. I’ve seen this happen many times in my years as a consultant.
These are the most common stakeholder management risks to be mindful of:
Failure to identify the right stakeholders: This occurs when you forget to involve the right people, and they later cause problems for your project. For example, a client who ran a manufacturing plant forgot to involve local environmental groups, and they ended up organizing protests and delaying the project.
Poor communication: If you don’t communicate often and clearly enough, stakeholders may become anxious and untrusting. One client I worked with failed to keep investors updated on the progress of their company, and they eventually lost trust in the team.
Insufficient resources allocated to stakeholder management: If you believe stakeholder management requires less money than it actually does, you won’t be able to manage the stakeholders effectively. This will inevitably result in project failure.
Failure to manage expectations: If stakeholders believe you promised more than you did, your project will not succeed. I’ve seen many projects fail because nobody set the right expectations in the beginning of the project.
Failure to follow through: Neglecting to take action on stakeholder feedback (or your own commitments) can result in a stakeholder’s refusal to work with you. It’s just as important to close the loop on their feedback to demonstrate that you heard them.
Ignoring the power dynamics: If you don’t factor in each stakeholder’s power dynamics and interests, the stakeholders may disagree with each other and reduce workability. Understanding this dynamic is a key component of effective stakeholder management.
You need to actively manage these stakeholder risks, and any one of these risks is not just speculation. I’ve watched each one of these risks cause a lot of pain for projects in a variety of industries.
Types of Stakeholder Management Risks
Stakeholder risks can manifest in various forms within your business. Here are the primary ways a stakeholder can pose a risk to your organization:
Reputational risks: This includes anything that can tarnish your brand’s reputation. For example, if a business ignores resident complaints about a new factory causing pollution, it will likely encounter public relations issues and possibly even a boycott organized by the local community.
Operational risks: This encompasses anything that can disrupt the day-to-day operation of the business. I’ve seen businesses virtually shut down due to a strike organized by unhappy employees.
Financial risks: Keep in mind that a stakeholder might do something financially motivated to hurt your business. For example, an investor might sell off your stock because of something you did, causing it to plummet.
Legal and regulatory risks: Failing to meet the expectations of a stakeholder can occasionally land you in hot water with lawsuits or regulatory bodies. For example, if a business builds a factory and the local community doesn’t want it, that can result in lawsuits and legal action if you don’t handle it properly.
Strategic risks: Ultimately, failing to manage a stakeholder correctly can prevent you from pursuing a strategic opportunity in your business. I’ve seen businesses unable to expand because they didn’t accurately predict stakeholder opposition to an expansion strategy.
Each of these risk categories can have devastating implications for your business. Therefore, you need to think about each of them when planning your stakeholder management strategy.
Importance of Effective Stakeholder Risk Management
Managing stakeholder risks is not just a check-the-box activity. It’s essential to the success of the project. Here’s why:
Better project results: When you manage stakeholder risks effectively, you’re more likely to achieve the project’s goals. In fact, I’ve seen stakeholder alignment help projects surpass their goals.
Higher stakeholder satisfaction: Proactively addressing stakeholder concerns will make them happy. And then they’ll support your project more. It creates a nice cycle.
Fewer risks and conflicts: If you identify and mitigate stakeholder risks early, you’ll avoid significant issues later on. It’s always easier to address issues when they’re smaller.
More support for projects: If stakeholders feel like you understand them and are supporting them, they are more likely to be your advocate. This can be the difference between a successful project and a failed one.
Better decisions: By incorporating various stakeholder perspectives, you’ll make better decisions. You’ll get insights from stakeholders that you never would have thought of on your own.
So stakeholder risk management isn’t just about avoiding problems. It’s about creating opportunities for the project to be successful. I’ve experienced this firsthand many times.
Stakeholder Risk Identification Techniques
Identifying stakeholder risks is a key first step. Here are some of the techniques I’ve found most effective:
Stakeholder mapping: This visual tool helps you capture all relevant stakeholders and how they relate to one another. It’s particularly helpful on more intricate projects with many cross-over stakeholders.
Power-interest grid: Plot stakeholders based on their influence on your project and interest in it. This is an excellent tool for ranking which stakeholders you should engage with.
Salience model: Categorize stakeholders based on their power, urgency, and legitimacy. I find this to be particularly helpful on projects with competing stakeholder claims.
PESTLE analysis: Consider the Political, Economic, Social, Technological, Legal, and Environmental factors impacting stakeholders. Taking this wider lens can reveal hidden risks.
Root cause analysis: Go deeper to uncover the real reasons stakeholders are concerned. This enables you to solve problems at their core, rather than just addressing surface-level issues.
Each of these techniques has its own strengths. Depending on the project and stakeholders, I combine any of the above. The most important thing to remember is to be comprehensive in your identification process.
Stakeholder Risk Assessment Strategies
Once you’ve identified risks, you need to evaluate them. Here are the most common risk assessment strategies:
Risk probability & impact matrix: This classic tool helps you rank risks by the likelihood of the risk occurring and the potential impact. It’s simple and universally effective.
Stakeholder engagement assessment matrix: Assess where each stakeholder is currently engaged and where you need them to be. This will show you where you have
To Sum It Up
Stakeholder risk management is key to ensuring your project is successful. I’ve personally experienced how overlooking stakeholder risks can unravel projects that otherwise had a lot of potential. Identifying, assessing, and mitigating stakeholder risks will help you achieve better results in any of your projects.
You’ll encounter fewer conflicts, you’ll make better decisions, and you’ll receive more support for your projects. Just keep in mind that you need to be proactive, communicate openly, and be adaptable in how you manage them. Effective stakeholder risk management isn’t a one-time task to complete. It’s an ongoing process that requires constant monitoring and improvement.
