No project is ever without risks, but it is the nature and complexity of the project that are likely to determine the impact of the risks on the overall success of the project. But whether the project is small or large, simple or complex, an effective risk management strategy will minimise the impact if, and when, the risks occur. In order to manage the risks it is necessary to identify and analyse them both before the project starts and throughout the lifecycle of the project.

Profit, loss and risk crossword

The main tasks involved in Risk Management are:

  • Creating a Risk Management Plan which will assist in identifying and analysing the risks, monitoring the risks and responding to them.
  • Establishing and maintaining a Risk Log listing the risks and their severity. This is a useful document not only for monitoring the risks but also for communicating the risks to all the stakeholders.
  • Analysing the probability of each risk occurring and its impact at task level and on the overall project in terms of deliverables and scheduling
  • Developing a strategy for responding to risks that occur
  • Including contingency funds and building time contingency into the Project Schedule

Risk Management is not only the responsibility of the Project Manager but also of the stakeholders as they have a vested interest in the project being successfully completed. So the stakeholders should also be aware of all the risks identified and the plan that is put in place to manage and mitigate them.

There are common causes of risk that are easily identifiable in many projects, such as:

  • Skilled members of the project team leave during the project
  • Equipment Failure
  • Business decisions and agreements not reached in good time
  • Poorly managed customer expectations
  • A lack of clarity in the business requirements document
  • Inaccurate estimates
  • Technology limitations such as performance or capacity issues
  • Poor communication between customer and provider

But the Risk Management Plan must also be flexible enough to deal with those risks that could not have been predicted and so were not identified before they occurred. It is very often the strategy that is used to deal with these unexpected risks that determines the ultimate success of a project.
For all the risks that have been identified either prior to the project starting or during the project the project manager would typically have determined a solution. These risks can potentially cause delays to the schedule and prevent the delivery of a task but are relatively easily managed by an experienced project manager with good management and communication skills.

There are various ways to respond to a risk that has occurred but the most common ways are:

Accept – the risk can be accepted, in which case the project manager will have to persuade the customer that the schedule, budget or deliverables will not be met. The customer will have to accept such deviations if the project is to be deemed a success.

Transfer – if the risk that has occurred is such that a particular task, feature or function cannot be delivered then it could be transferred to a future project thereby deferring the need to deal with it in the present. This response would require handling through a formal change management process.

Mitigate – it may be possible to provide an acceptable workaround that will minimise or eliminate the issue.

It is worth noting that risks can occasionally have a positive effect and can actually lead to improvements or enhancements to the project that had not been considered at the outset.

The Risk Management Plan will also include prioritisation of the project risks and ranking them in relation to the budget, the project schedule and the deliverables. The ranking will recognise that some project risks could be acceptable while some are unacceptable and would require a feasible solution.

Risks will never be eliminated from a project but it is possible to lessen the impact of risks by learning from the experiences of both your own projects and others. It is extremely valuable to document the lessons learned from a project to improve the process of risk management on future projects.

Managing risks for a project is a fundamental part of the project management process; it helps to control uncertainties and keep the project on track in terms of schedule and budget. The ability to identify and qunatify risks for a project and mechanisms for responding to unknown risks can be learnt on professional project management courses in recognised methodologies such as APMP, PRINCE2 and PMP. Risk Management can be learnt on various project management training courses to obtain credentials such as the APM Risk Management Certificate.