How to Succeed at Project Risk Management

Company A had a critical project they needed to finish for their client. This project dominated their internal planning toward the end of the third quarter and was expected to be delivered by the end of the fourth quarter.

However, Company A faced a huge problem. In mid-November, three critical workers had to take family leave. The team didn’t adequately plan for these absences, and they fell a week behind schedule. This created a stressful, suboptimal environment for everyone involved.

Thankfully, risk management offers organizations the chance to plan for occurrences just like this. Anticipating potential risks can allow organizations to ensure their projects stay on track and teams move forward successfully. Here’s what all project managers need to know about project risk management.

What is project risk management?

Project risk management is the process of identifying and planning for potential risks and obstacles that might arise during a project. No project is without risk. Identifying potential problems, the likelihood of those problems occurring, and then creating a plan to navigate those challenges can keep your project on track.

A risk is anything that can potentially derail your project and its success. By definition, risks are events that could happen. If one does materialize, it becomes an actual issue. For larger projects, risk management will likely be a more involved process of detailing plans to mitigate risks. For smaller projects, you might just list risks in terms of likelihood and potential problems.

Company A should have known that having multiple workers on leave in the middle of the project was a risk, and the project manager should have planned mitigating steps, such as cross-training other team members to fill key roles.

Types of project risks

As you begin to outline your project plan and consider the types of risks you may encounter, you’ll find that potential problems can fall into a few categories. You can use these categories to begin your quantitative or qualitative risk analysis.

  • Cost: Various factors can impact project cost and how well the project sticks to the budget. Consider how realistic the budget is, cost accountability, the cost of implementing new supporting technology, and the cost of bringing on additional team members as needed.
  • Schedule: The schedule should also be a critical consideration. Remember that adding more workers will not necessarily mean the project can be completed faster. Consider factors that might affect the schedule, such as project complexity, team experience, and priorities.
  • Performance: When it comes to performance, risk factors—such as poor understanding between the stakeholders, project manager, and team members—should also be considered. Poorly defined project scopes and scope creep can also impact performance.
  • Testing and implementation: Testing is often carried out throughout a project’s life cycle to help the team identify problems that would impede the approval of the final deliverables. Risk assessment includes scheduling time for testing, having opportunities to improve the product, and gaining feedback throughout project development.

Whenever you’re tackling a big project, consider adding a project manager to your team. Learn how a freelance project manager can help.

5 essential steps for effective risk management

The key to ensuring projects stay on schedule, on budget, and produce the desired deliverable lies in project risk management. With risk management, project managers can identify the potential problems facing their organizations, make the necessary evaluations and plans, and have strategies to deal with these problems should they arise.

Below are five steps for effective risk management:

1. Identify and analyze risks

You’ll want to use various methods to gather information on the most likely risks that your project faces. Your methodology should consider strategies like:

  • Examining projects that are similar to yours. How many people at the company are typically out during critical project months? How often are projects completed ahead of or behind schedule?
  • Considering projects involving the same contributors or stakeholders. Have any problems occurred with this team before? How have projects for these stakeholders gone in the past?
  • Speaking with other team members. Do team members have any insight about past problems? Ask your stakeholders if they’ve experienced problems on previous projects that you can work with them to avoid.

As you create a list of potential risks, consider the likelihood of these problems occurring and how that influences your project. Understand potential impacts. Note where, in a project, particular problems might arise and their severity. Record information about your identified risks.

You can create a template that will help you remember what information to include.

Your template should identify important parts of risk management, including:

  • Identifying what risks might occur
  • Your analysis of the risk
  • How you will monitor the risk
  • The team members responsible for managing the risk
  • The severity of the potential outcomes
  • A risk register.

This can help you evaluate future projects even faster.

2. Prioritize risks

Once you’ve identified likely risks and considered how they can influence your project, you’ll want to focus on prioritizing your risks. You need to know your business’s risk tolerance, response plan, and project objectives. This prioritization will help you examine the likelihood of occurrence and the degree of problem it will cause if it happens. Consider also the significance if more than one problem occurs at once.

For example, you might have a risk point that details miscommunication between the project manager and team members. You might assess this risk as moderately likely to occur. Knowing that poor communication can throw a project off schedule might make this a top priority to address and mitigate.

As you build your list of risks to prioritize, you’ll want to start with three main categories of risk:

  • Risks associated with project resources and technology
  • Risks associated with project scope
  • Risks associated with scheduling and personnel

As you begin to identify your potential risks, you’ll single out the ones with the highest likelihood of occurring and the biggest impact on the project. These areas are where you’ll want to get the most specific. In the miscommunication example above, you might detail the types of miscommunication that might occur—such as a lack of understanding about responsibilities—to help you better plan for mitigation.

3. Assign ownership

As you identify your most significant risks, you’ll want to put a person or small team in charge of particular problems and risk response. Assigning ownership allows key players to be proactive instead of reactive. This helps lead to a successful project.

This also helps delegate the responsibility of problem-solving and developing a risk management plan. Ensuring that it’s not just one person putting out fires can help everything run more efficiently.

When assigning ownership of particular risks, utilize your group’s strengths and experiences. The owner of the risk will help create a plan to avoid the risk and oversee the implementation of that plan. The team member who articulates themselves well might handle communication with the project team, for example, and take ownership of potential issues in that sector. Someone who has participated in similar projects and has budgetary experience might look at the project cost, determine how reasonable it is, and take ownership for keeping the project on budget.

As the project manager delegates the largest risks to those with the strengths to help manage them, the manager will oversee the project as a whole. They’ll watch for signs of less-likely risks, watch the implementation of the risk avoidance measures taken, and regularly supervise the progress of the team to ensure the management strategies are successful.

4. Outline and implement a response

There will likely be a few risks that become actual issues during the project. When risk becomes a reality, it’s time to implement the contingency plan. The team member who has taken ownership of this particular risk will take steps to begin implementing their plan.

It’s possible for risk plans to change and adapt in the moment. Resources may need to be allocated differently if the risk ends up being more or less severe than initially planned. Risk events and risk identification don’t always go according to plan, so brainstorming solutions at the moment might become important for the risk owner.

5. Monitor risks

As the project continues to move forward, teams will need to keep a close eye on the project plan and how well the project progresses. Monitor the risks associated with different portions of the timeline so that you know about an issue at the first signs of trouble. Keep in mind metrics that helped monitor past projects and align well with current needs. This will help your team effectively use risk management processes and thrive.

How to reduce and manage risks

Although risks exist for all projects, that doesn’t mean companies are powerless. Identifying and mitigating risks can ensure project progression and help you remain on schedule and budget.

These key ideas will help you manage risks more effectively:

  • Speak with the team about the importance of project risk management.
  • Keep a monitored and regularly updated list of potential risks so that you don’t lose sight of them.
  • Have a risk management plan that will help you identify risks and reduce the threat.
  • Be proactive instead of reactive. Instead of waiting for something to go wrong, have a plan to mitigate the threat if it becomes a reality.
  • Use the methodology that suits you, but never stop looking for new risks so that your team doesn’t get caught unaware.

Get proactive about potential project risks

When it comes to protecting your projects, never overlook the importance of proper risk management. The better organizations can prepare, the easier it becomes to manage problems and any uncertain events.

If you want to improve risk management at your organization, consider working directly with a risk management specialist through Upwork. These independent professionals are experts at identifying and mitigating risk. See what they can bring to your project.

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How to Succeed at Project Risk Management
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