MANAGING RISK
What is risk?
- the possibility of something bad happening at some time in the future;
a situation that could be dangerous or have a bad result (Oxford
Dictionary)
In the context of project….
Project risk
- is the potential that a circumstance could arise that alters the outcome
of a project, for better or for worse.
- affect deliverables, timelines, and budgets.
- if not managed properly can lead to project failure.
- can be caused by political, environmental, economic, social,
technological, or legal factors beyond the scope of the project.
4 Types of Project Risk
1. Technical Risks
- risks connected to technology but not limited to software, hardware,
digital network, digital assets, system security, and new and changing
technology and changing regulatory requirements.
Ex. Data breach, data corruption, hardware breakdown, connectivity, and
access
2. External Risks
- risks that exist outside of the project’s organization
- most likely beyond the control of the project manager or teams
- cannot easily predict its occurrence or impact
Ex. Regulatory compliance, weather, global health crisis, political, and
environmental changes
3. Organizational Risk
- derived from breakdowns in internal procedures, people, and
systems.
Ex. Leadership changes, work culture, processes within organization, project
dependencies, etc.
4. Project Management Risks
- risks included in project management work and tasks within
communication, estimating, planning, contract development, and scoping.
Ex. planning, executing, estimating, communicating.
7 COMMON PROJECT RISKS
1. Scope Creep
- this risk occurs when deliverables are changed after the project has started,
leading to increased costs, or missed deadlines
2. Communication issues
- this risk occurs when there’s a breakdown in communication between the
project team and stakeholders causes miscommunication,
misunderstandings, and conflict.
3. Technology issues
- new or unproven technology is always a source of risk, leading to potential
delays in the project timeline.
4. Scheduling issues
- this type of risk causes a project to fall behind its schedule, resulting in
increased costs and potential project failure.
5. Budget overruns
- a risk that emerges when the actual project expenses exceed the estimated
project budget.
6. Market uncertainty
- unpredictable market conditions can put significant pressure on a project,
increasing the risk of delays or budget run over.
7. External Hazards
- are those risks that come from outside your company and are out of the
project team’s control.
(With all these emergent risks, it must be ensured and taken into
consideration how to mitigate and manage risks in a project)
Project Risk Management
- is the process of identifying, analyzing, and responding to any risk that
arises over the life 7cycle of a project to help the project remain on
track and meet its goal.
- it is not reactive but should be part of the planning process to figure
out the probability of the risk.
Risk management can mean on two different types of projects.
On large-scale projects: On small-scale projects:
- risk management - risk management
strategies might include might mean a simple,
extensive detailed prioritized list of
planning for each risk high, medium, and
to ensure mitigation low-priority risks.
strategies are in place if
project issues arise.
6 STEPS IN RISK MANAGEMENT
1. Identify the risk
- you cannot resolve a risk if you don’t know what it is.
- to identify risks, create a project risk management plan by putting together
a list of all potential project risk events.
- can incorporate risk register, risk matrix, PESTLE, and SWOT analysis
in identifying the risks.
2. Analyze the risk
- for each risk you’ve identified, analyze the likelihood, severity, and
response plan.
- depending on the complexity of your project risks, consider doing your risk
analysis with your project team or with key stakeholders.
- through qualitative and quantitative risk analysis, you can determine how
the risk is going to impact your schedule and budget.
3. Prioritize Risks and Issues
- not all risks are created equally. You to evaluate the risk to know what
resources you’re going to assemble towards resolving it when and if it
occurs.
- manage the risks by categorizing them as high, medium, or low.
Risks VS Issues
4. Assign an Owner to the Risk
- though risks haven’t happened yet, it’s helpful to assign a risk owner early,
to ensure preparedness when issues arise.
- 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.
5. Respond to the Risk
- If at any point a risk becomes reality, it’s time to respond. All that planning
being done is going to be put to use. .
4 Different ways to respond the risk.
- Share the risk: a.k.a risk transfer.
o Sharing the risk involves moving some or all the impact of a risk
to a third party, such as an insurer.
- Control the risk:
o Although this is not always possible, risk mitigation is an
effective way to respond. This is where the risk values come into
play, by either adding additional budgets or scheduled time to a
project to account for potential issues.
- Avoid the risk:
o If the project or task isn’t worth the cost of the risk, sometimes
it’s best to eliminate the threat or further protect the project
(through scope adjustments, changing objectives, or clarifying
project requirements and removing vagaries.)
- Accept the risk:
o Every project will come with some unavoidable risks, and it’s
important to accept that, however, only accept risks if all other
response methods are not possible, and their occurrence
wouldn’t sink the project altogether.
6. Monitor the Risk
- make sure you continue actively monitoring your risks to avoid any nasty
surprises. To do this:
- Send regular status updates to ensure project team and project
stakeholders are all on the same page.
- Check in asynchronously with the individual risk managers/team.
- Keep an eye on your risk register for any updates.
Project Risk Event Flowchart
Strategies for Managing Project Risk
Risk identification (related to Step 1)
- identify potential risks by brainstorming and listing out all the possible
risks that could affect the project.
Risk assessment and analysis (related to Step 2)
- assess and analyze them to understand their potential impact and
likelihood. Then prioritize risks based on a combination of their
probability and effect on the project.
Risk allocation (related to
- Allocate the responsibility of managing specific risks to team members
based on their expertise and roles.
Communication and documentation
- be sure to maintain clear and continuous communication about risks
with the team and stakeholders. Be sure to document all identified
risks, assessments, and mitigation plans in a risk register or similar
tool.
Contingency planning
- develop contingency plans for any risk that is high-impact or has a
high probability of occurring. These are backup plans that you can
quickly implement if the risk materializes.
Examples of tools in identifying risks:
Risk Register
- a.k.a. risk log
- is a risk management tool that’s used to identify potential risks
that could affect the execution of a project plan.
- it’s a spreadsheet, not a graphical representation of those risks.
Risk Matrix
- a project management tool that allows project managers to analyze
the likelihood and potential impact of project risks.
- Helps in prioritizing project risks and build a risk mitigation plan to
respond to those risks if they were to occur.
Risk Breakdown Structure
- a tool for managing risks, which are any events that you have not
planned for or expected.
Ex.
