A risk is an uncertain event or condition that, if it occurs, has a positive or negative effect on a project’s objectives. Managing those events is what project risk management is all about. Sometimes, you want to avoid the risk happening; sometimes it’s worth encouraging it.
If that sounds strange – why would we want to encourage something risky to happen? – then let’s look again at what risk really is.
Risk can be thought of as ‘uncertainty that matters’. Risks that matter include those with positive effects as well as those with negative effects (which you’ll see referred to as opportunities and threats). They can also affect any project objective, not just time or cost.
We have many podcasts to help you build your project management skills, and risk management is definitely a topic worth learning more about! The resources on this page will help you.
Listen now to this featured podcast on risk management.
Project Risk Management includes the processes of conducting risk management planning, identification, analysis, response planning, response implementation, and monitoring risk on a project. The objectives of project risk management are to increase the probability and/or impact of positive risks and to decrease the probability and/or impact of negative risks, in order to optimize the chances of project success.
Risk management on projects is important because it helps us plan for the future.
When most people talk about risk on a project, they are thinking about the things that might go wrong. There’s always something that could happen which would have a negative effect on the project’s performance. Maybe it would delay the project, or increase the cost. Generally, people think about risk in terms of things that would affect the project schedule and budget, but risk can impact any of the project’s objectives.
It’s important to think broadly and deeply about what kind of risk could affect the project, so you can make adequate plans to manage the risk appropriately. And risk isn’t only limited to the project’s objectives. You will also see risk in your project as a result of variability, ambiguity and emergence. Risk management is a huge area!
There are many tools available that tell you how to identify your risks, how to quantify them, how to define their impact on the project and what you can do in order to avoid or mitigate them.
Project risk identification typically happens at the start of the project, but it is not a one-off exercise. Risk identification should also happen throughout the project as the work evolves and people get a clearer idea about what could potentially impact the work.
As a project manager, you might have access to lessons learned from previous projects which will help you identify appropriate risks for your risk log on this project. You'll also draw on the expertise of your team and talk with them about the kinds of things that could cause problems on the project. Then together, you can plan for those possible situations so you are ready.
One exercise you can do to help the team come up with risks is to think about how certain things could affect the project. Come up with a list of categories and see what you can think of that would cause your project a problem from those categories. Here are some categories to get you started.
Let project team members know that they can come to you at any time if they have identified a project risk. They should be able to raise concerns and have the risk added to the log at any point during the project.
Risk management in business is a detailed subject, and we’ve only touched on it here. Why not pick a couple of podcasts with our risk management expert interview guests and listen to them discuss the theory and practice of risk on projects in more detail?
Risk management has to be something supported at the top level and driven down. The program manager can identify risk and attempt to mitigate and manage them. That really wasn’t something that was done formally 30 years ago and we can do it today because of technology. Does it add a little bit of time and burden to the organization? Yes, but that’s essential if you’re going to keep risks from impacting a program.
Whether you are new to project risk management, or whether you can fluently use terms like ‘stochastic’ and ‘aleatoric’ in your risk conversations, there is always more to find out about the emerging professional discipline of project risk management.
We’ve had the pleasure of speaking to some of the world’s foremost experts in project risk management, and sharing their wisdom and knowledge with you in our range of free and premium expert interviews. Enjoy the episodes!