RISK MANAGEMENT
The Risk Management
Process in Project
Management
by Brenna Schwartz | Feb 26, 2021
When you start the planning process for a project, one of the first things you
need to think about is: what can go wrong? It sounds negative, but pragmatic
project managers know this type of thinking is preventative. Issues will
inevitably come up, and you need a mitigation strategy in place to know how
to manage risks when project planning.
But how do you work towards resolving the unknown? It sounds like a
philosophical paradox, but don’t worry—there are practical steps you can
take. In this article, we’ll discuss strategies that let you get a glimpse at
potential risks, so you can identify and track risks on your project.
What Is Risk Management on Projects?
Project risk management is the process of identifying, analyzing and
responding to any risk that arises over the life cycle of a project to help the
project remain on track and meet its goal. Risk management isn’t reactive
only; it should be part of the planning process to figure out the risk that might
happen in the project and how to control that risk if it in fact occurs.
A risk is anything that could potentially impact your project’s timeline,
performance or budget. Risks are potentialities, and in a project management
context, if they become realities, they then become classified as “issues” that
must be addressed with a risk response plan. So risk management, then, is
the process of identifying, categorizing, prioritizing and planning for risks
before they become issues.
Risk management can mean different things on different types of projects. On
large-scale projects, risk management strategies might include extensive
detailed planning for each risk to ensure mitigation strategies are in place
if project issues arise. For smaller projects, risk management might mean a
simple, prioritized list of high, medium and low-priority risks.
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Risk Matrix
Template
Use this free Risk Matrix
Template for Excel to manage
your projects better.
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How to Manage Project Risk
To begin managing risk, it’s crucial to start with a clear and precise definition
of what your project has been tasked to deliver. In other words, write a very
detailed project charter, with your project vision, objectives, scope and
deliverables. This way risks can be identified at every stage of the
project. Then you’ll want to engage your team early in identifying any and all
risks.
Don’t be afraid to get more than just your team involved to identify and
prioritize risks, too. Many project managers simply email their project team
and ask to send them things they think might go wrong on the project. But to
better plot project risk, you should get the entire project team, your client’s
representatives, and vendors into a room together and do a risk identification
session.
With every risk you define, you’ll want to log it somewhere—using a risk
tracking template helps you prioritize the level of risk. Then, create a risk
management plan to capture the negative and positive impacts of the project
and what actions you will take to deal with them. You’ll want to set up regular
meetings to monitor risk while your project is ongoing. Transparency is critical.
Project management software can help you keep track of
risk. ProjectManager is online software that helps you identify risks, track
them and calculate their impact. With our Risk view, you can make a risk list
with your team and stay on top of all the risks within your project. Write a
description, add tags, identify a resolution, mark impact and likelihood, even
see a risk matrix—all in one place. Get started today with a free trial.
Make a risk tracker and manage risks with your team online.
What Is Positive Risk In Project Management?
Not all risk is created equally. Risk can be either positive or negative, though
most people assume risks are inherently the latter. Where negative risk
implies something unwanted that has the potential to irreparably damage a
project, positive risks are opportunities that can affect the project in beneficial
ways.
Negative risks are part of your risk management plan, just as positive risks
should be, but the difference is in approach. You manage and account for
known negative risks to neuter their impact, but positive risks can also be
managed to take full advantage of them.
There are many examples of positive risks in projects: you could complete
the project early; you could acquire more customers than you accounted for;
you could imagine how a delay in shipping might open up a potential window
for better marketing opportunities, etc. It’s important to note, though, that
these definitions are not etched in stone. Positive risk can quickly turn to
negative risk and vice versa, so you must be sure to plan for all eventualities
with your team.
Managing Risk Throughout the Organization
Can your organization also improve by adopting risk management into its daily
routine? Yes! Building a risk management protocol into your organization’s
culture by creating a consistent set of risk management tools and templates,
with training, can reduce overhead over time. That way, each time you start a
new project, it won’t be like having to reinvent the wheel.
Things such as your organization’s records and history are an archive of
knowledge that can help you learn from that experience when approaching
risk in a new project. Also, by adopting the attitudes and values of your
organization to become more aware of risk, your organization can develop
a risk culture. With improved governance comes better planning, strategy,
policy and decisions.
Free Risk Matrix Template
To manage project risks throughout your organization, it’s important to create
a risk matrix. A risk matrix is going to help you organize your risks by severity
and likelihood, so you can stay on top of potential issues that threaten the
greatest impact. Try this free risk matrix template for Excel so you and your
team can organize project risks.
6 Steps in the Risk Management Process
So, how do you handle something as seemingly elusive as project risk
management? You make a risk management plan. It’s all about the process.
Turn disadvantages into an advantage by following these six steps.
Identify the Risk
You can’t resolve a risk if you don’t know what it is. There are many ways to
identify risk. As you do go through this step, you’ll want to collect the data in
a risk register.
One way is brainstorming with your team, colleagues or stakeholders. Find
the individuals with relevant experience and set up interviews so you can
gather the information you’ll need to both identify and resolve the risks. Think
of the many things that can go wrong. Note them. Do the same with historical
data on past projects. Now your list of potential risks has grown.
Make sure the risks are rooted in the cause of a problem. Basically, drill down
to the root cause to see if the risk is one that will have the kind of impact on
your project that needs identifying. When trying to minimize risk, it’s good to
trust your intuition. This can point you to unlikely scenarios that you just
assume couldn’t happen. Use a risk breakdown structure process to weed out
risks from non-risks.
Analyze the Risk
Analyzing risk is hard. There is never enough information you can gather. Of
course, a lot of that data is complex, but most industries have best practices,
which can help you with your risk analysis. You might be surprised to discover
that your company already has a framework for this process.
When you assess project risk you can ultimately and proactively address
many impacts, such as avoiding potential litigation, addressing regulatory
issues, complying with new legislation, reducing your exposure and
minimizing impact.
So, how do you analyze risk in your project? Through qualitative and
quantitative risk analysis, you can determine how the risk is going to impact
your schedule and budget.
Project management software helps you analyze risk by monitoring your
project. ProjectManager takes that one step further with real-time dashboards
that display live data. Unlike other software tools, you don’t have to set up our
dashboard. It’s ready to give you a high-level view of your project from the
get-go. We calculate the live date and then display it for you in easy-to-read
graphs and charts. Catch issues faster as you monitor time, costs and more.
Capture issues before they become problems with real-time dashboards from
ProjectManager.Get started for free!
Prioritize Risks & Issues
Not all risks are created equally. You need to evaluate the risk to know
what resources you’re going to assemble towards resolving it when and if it
occurs.
Having a large list of risks can be daunting. But you can manage this by
simply categorizing risks as high, medium or low. Now there’s a horizon line
and you can see the risk in context. With this perspective, you can begin to
plan for how and when you’ll address these risks. Then, if risks become
issues, it’s advisable to keep an issue log so you can keep track of each of
them and implement corrective actions.
Some risks are going to require immediate attention. These are the risks that
can derail your project. Failure isn’t an option. Other risks are important, but
perhaps do not threaten the success of your project. You can act accordingly.
Then there are those risks that have little to no impact on the overall project’s
schedule and budget. Some of these low-priority risks might be important, but
not enough to waste time on.
Assign an Owner to the Risk
All your hard work identifying and evaluating risk is for naught if you don’t
assign someone to oversee the risk. In fact, this is something that you should
do when listing the risks. Who is the person who is responsible for that risk,
identifying it when and if it should occur and then leading the work toward
resolving it?
That determination is up to you. There might be a team member who is more
skilled or experienced in the risk. Then that person should lead the charge to
resolve it. Or it might just be an arbitrary choice. Of course, it’s better to
assign the task to the right person, but equally important in making sure that
every risk has a person responsible for it.
Think about it. If you don’t give each risk a person tasked with watching out for
it, and then dealing with resolving it when and if it should arise, you’re opening
yourself up to more risk. It’s one thing to identify risk, but if you don’t manage
it then you’re not protecting the project.
Respond to the Risk
Now the rubber hits the road. You’ve found a risk. All that planning you’ve
done is going to be put to use. First, you need to know if this is a positive or
negative risk. Is it something you could exploit for the betterment of the
project? If not you need to deploy a risk mitigation strategy.
A risk mitigation strategy is simply a contingency plan to minimize the impact
of a project risk. You then act on the risk by how you prioritize it. You have
communications with the risk owner and, together, decide on which of the
plans you created to implement to resolve the risk.
Monitor the Risk
You can’t just set forces against risk without tracking the progress of that
initiative. That’s where the monitoring comes in. Whoever owns the risk will be
responsible for tracking its progress towards resolution. However, you’ll need
to stay updated to have an accurate picture of the project’s overall progress to
identify and monitor new risks.
You’ll want to set up a series of project meetings to manage the risks. Make
sure you’ve already decided on the means of communication to do this. It’s
best to have various channels dedicated to communication.
Whatever you choose to do, remember to always be transparent. It’s best if
everyone in the project knows what is going on, so they know what to be on
the lookout for and help manage the process.
In the video below, Jennifer Bridges, professional project manager (PMP)
dives deeper into the steps in the risk management process.
Risk Management Templates
We’ve created dozens of free project management templates for Excel and
Word to help you manage projects. Here are some of our risk management
templates to help you as you go through the process of identifying, analyzing,
prioritizing and responding to risks.
Risk Register Template
A risk register is a risk management document that allows project managers
to identify and keep track of potential project risks. Using a risk register to list
down project risks is one of the first steps in the risk management process
and one of the most important because it sets the stage for future risk
management activities.
Risk Matrix Template
A risk matrix is a project management tool that allows project managers to
analyze the likelihood and potential impact of project risks. This helps them
prioritize project risks and build a risk mitigation plan to respond to those risks
if they were to occur.
Managing Risk With ProjectManager
Using a risk-tracking template is a start, but to gain even more control over
your project risks you’ll want to use project management
software. ProjectManager has a number of tools including risk management
that let you address risks at every phase of a project.
Make an Online Risk Register
Identify and track all the risks for your project in one place. Unlike other
project management software, you can manage risks alongside your project
rather than in a separate tool. Set due dates, mark priority, identify resolutions
and more.
Gantt Charts for Risk Management Plans
Use our award-winning Gantt charts to create detailed risk management plans
to prevent risks from becoming issues. Schedule, assign and monitor project
tasks with full visibility. Gantt charts allow team members add comments and
files to their assigned tasks, so all the communication happens on the project
level—in real time.
