Risk is inherent in all endeavors of project management. Determining the degree to which risk is present, and the extent to which it can be minimized, is the cornerstone of Risk Management. This post will cover some of the factors that contribute to projects deemed “high-risk” and techniques Project Managers and their teams can use to establish budgetary contingencies against said risks.
Types of Risk
A risk is defined as anything that impacts the goals of a project. They are interferences that may extend the timetable, inflate the cost, or undercut the desired performance of a project. An adept project manager understands that risks are fated throughout the course of a project. However, they are also largely predictable—they can be avoided or controlled. Just as an ocean liner should equip its lifeboats before leaving port, a project should prepare for risks as a precaution even before beginning.
These are common risks:
- Poorly defined requirements
- Lack of qualified resources
- Lack of management support
- Poor estimating
- Inexperienced project manager
All of these risks seem to share a theme of haziness. A vague requirement is unable to be clarified due to a lack of managerial support; an inexperienced project manager provides a shot-in-the-dark estimate for a project that ends up with many more moving parts than anticipated. Too little time is scheduled, too few resources provided. I think these risks underscore the importance of well-defined elements in a project.
Risk Management Process
Six steps of risk management:
- Identifying the risk
- Quantifying the risk
- Prioritizing the risk
- Developing a strategy for managing the risk
- Project sponsor/executive review
- Taking action
The figure below shows the process at work:
Following this flowchart can help a project team flat-out eliminate risks, reduce their seriousness, or at least set aside enough resources to tackle them when/if the time comes. Once all risk contingencies have been defined, and adjustments made to accommodate them, the project can begin.
6 Comments
Autumn Coulton · March 8, 2021 at 11:25 pm
Nice! I like your analogy of a project to an ocean liner leaving port. It’s important to have backup measures for risk. Without them could lead to more serious problems down the road, such as needing more time/money for the project or sacrificing the overall performance. I also like the flowchart, it does a good job explaining the steps taken for risk management.
Brandon Kresge · March 9, 2021 at 10:46 am
Good post. The flow chart is really helpful. It seems risks are unavoidable, which is why it is important to stress prevention of them as much as possible. Something that stuck with me from a book I read was that the client should be informed that there are always risks, and while they are a bad thing, acknowledging them and having them planned out shows that the team cares..
Sean Kinneer · March 9, 2021 at 1:24 pm
This is a good post, Brandon. I really liked how you provided a summary at the top stating what the specifics of the post would be. Risk Management is important for project managers. It helps to identify all possible risks before the project is even started. I liked how you provided the most common types of risk. In a nutshell, the common risks come from inexperience and lack of either effort or support. When taking on a project, it is important to take every aspect seriously from the beginning to minimize all possible risks. The six steps you included were good in breaking down how to deal with a risk. I really like your flow chart as well. It speaks for itself and is a good visual representation of the risk management process.
Trisha Badlu · March 9, 2021 at 3:22 pm
Great explanation of the types of risks and the management process! The chart does a really good job showing the overall decision flow. Like it says in the chart, risks can either be avoided by changing project requirements/functionality, transferred by insurance, or accepted and controlled. It’s also important to take into consideration which risks to prioritize first. So, what is the most common way to prioritize risks in the real-world? I know that Pareto’s principle (80-20 rule) can be applied where you identify all risks and prioritize the top 20%, but is this method commonly used or is there a better method?
Connor Ellis · March 9, 2021 at 4:36 pm
“All of these risks seem to share a theme of haziness.” I like this quote a lot. If you think about it, if everything in the projects it crystal clear, so are the possible risks. Those risks that are discovered can then be planned around accordingly. I believe the Apollo 11 was the only large project to date to have 100% code error testing. They had time and money to address every single possible thing that could go wrong. I’m sure it took a lot of effort to do it, but at the end of the day, they got men on the moon and back in one piece. Great post Brandon, glad to have you on my team!
Griffin Nye · March 9, 2021 at 5:37 pm
This post was excellent, Brandon! I like how this ties into Vivian and Henok’s post about scheduling. Like I commented on Henok’s post, scheduling is very important to a project’s success and scheduling too much or too little time can have an undesirable effect on the project and its organization. This is where risk management comes into play. When these scheduling conflicts happen (and they most likely will), it is extremely important that the project manager is able to recover from them. I really liked the inclusion of the risk management flowchart. I feel it did a really good job of explaining how to properly manage risks that appear in the project and will definitely use this knowledge in my future endeavors!