The key to completing a successful project lies in thoughtful planning and expert management. However, no amount of planning can fully protect you from all possible risks silently hiding in the shadows.
The most effective and efficient way to combat these hidden threats is by implementing enterprise risk management software and a continuous project risk management strategy to ensure you are well prepared for the unexpected.
What is Project Risk Management?
Project risk management is any potential event that can affect your project, often negatively, and the subsequent process of identifying and dealing with these events before they have the opportunity to materialize or as they first develop. Risk can present itself in many different forms, such as inclement weather, unexpected costs, timeline delays, and employee sickness.
Projects of all kinds carry inherent risk, the most common being scope creep. Changing project objectives mid-course, adding unexpected tasks, or incorporating new requests from stakeholders can cause projects to extend well beyond their planned timelines. However, possessing the ability to guide a project through risk is one of the most crucial skills a project manager should have.
Risk Categories
Project risks can dramatically impact the time and resources needed to complete the project. These risks can be classified as internal, meaning they are within the control of the project team, or external, meaning they are outside the team’s control. Common types of project risks include strategic, performance, financial, external, and positive risks.
Strategic risk develops as a result of errors in strategy, like choosing the incorrect management methodology to suit the project or the team, experiencing high employee turnover, or investing precious resources into technology that is too expensive or difficult to use.
Performance risks stem from missing deadlines, unforeseen delays, using outdated or insufficient market research, undefined goals, and scope creep.
Financial risks include creating unrealistic or inaccurate budget forecasts, rising costs for labor and materials, encountering low sales, and experiencing difficulties in securing crucial funding.
External risks, or those outside the control of the project team, often revolve around regulatory issues, changing weather conditions, market volatility, vendor issues, labor strikes, supply chain disruptions, and civil unrest.
Finally, positive risks, or opportunities, are traditionally unexpected but result in positive changes to your project, including outperforming your original goals, completing tasks earlier than expected or under budget, or benefiting from a policy change.
Managing Project Risks
In order to correctly address and mitigate risks that arise during your project work, it is crucial to understand project risk management processes and mitigation strategies to strive for and ultimately achieve a positive and successful project outcome.
Identify
The first step to combating potential risks is to understand what they might be. You can identify each risk that may affect your project by brainstorming ideas with your project team, utilizing individual expertise to identify all possible threats.
Consult similar past projects to identify potential challenges you might face, and engage with stakeholders, team members, and subject matter experts to gather additional insights and fresh ideas.
Assess
In the assessment phase, you need to explore the probability of each risk occurring and the potential impact it may have on your project. A popular way of documenting these possible threats is via a risk register. This chart lays out each risk, alongside crucial information like priority level, likelihood of development, and mitigation plans.
Additionally, you can record quantitative and qualitative information, the person in charge of monitoring said risk, and possible consequences should they inevitably occur.
Prioritize & Assign
Not all risks are created equal. Once you have properly assessed each threat, it is vital to prioritize them in terms of their severity and likelihood of development, as this will highlight what resources you will need to assemble to address the matter.
Having a long list of risks to attend to can feel daunting. But you can easily manage this by categorizing them as low, medium, or high risk, putting them into context, and giving yourself some flexibility to properly plan for when and how you will address each one.
Should a risk materialize, it is advised to keep an issue log to track each issue, including each strategy implemented to resolve them, and any subsequent consequences that may arise from their development.
Furthermore, you need to assign a person or a group of people to oversee the risk and the subsequent handling of it. The person you select should understand the risk itself, how and why it has developed, and possess the personal skillset and expertise to handle it. It is best to assign the task of risk management to the right person, but it is equally important that each individual threat has a person responsible for it.
Mitigate & Monitor
When developing a management plan to tackle risk, there are four common ways to mitigate it: avoiding, accepting, reducing, and transferring. Deciding on the most effective game plan is mainly dependent on your judgment and expertise to determine what is best.
Finally, you need to set up a reliable process to monitor each risk as your project begins. Each team member who has been assigned to oversee specific risks and mitigating strategies should be well-educated on this process and how to contribute to it to ensure that your project leader has a constant sense of where risk lies and how they are being managed.
