This post discusses project risk and project risk management. In this post, you will understand the meaning of project risk and the management of project risks.

WHAT IS A RISK?

A risk is an uncertain event or condition that positively or negatively affects a project’s objectives. Risk is any unexpected event that can affect a project for better or worse. Risk can affect anything: people, processes, technology, and resources. A risk is an uncertainty that cannot be avoided but can be managed. Managing risk is significant, especially in project management, as the risk can positively or negatively impact a project.

Nevertheless, the outcome may deviate from the projected objective. Hence, project risk management becomes a vital skill that every project manager must possess to ensure the success of their projects. It is worthwhile to emphasise that risks are not the same as issues. Issues are things or situations which should be addressed. You may even have an idea of when they will arise. For instance, think of scheduled vacations or a spike in product demand just before the holidays.

Conversely, risks are events that might happen, and you may be unable to tell when. An essential product component is on backorder and will arrive a week late. They are slippery, and it takes some serious preparation to manage them.

Project risk management consists of five elements, including:

1. Risk event: What might happen to affect a project?

2. Risk timeframe: When is it likely to happen?

3. Probability: What are the chances of it happening?

4. Impact: What is the expected outcome?

5. Factors: What events might forewarn or trigger the risk event?

PROJECT FAILURE AND HOW TO AVERT DISASTER

Here are five reasons why projects fail and are unsuccessful:

1. Poor communication

2. Underestimated timelines

3. Failure to identify and understand essential details

4. Unhelpful teams and technology

5. Management not paying enough attention

PROJECT MANAGEMENT PROCESS

Project management focuses on the management of all aspects of a project. The project management body of knowledge developed by the Project Management Institute (PMI) describes project management as applying knowledge, skills, tools, and techniques to project activities to meet requirements. Thus project management brings together all the needed resources for a project and optimises them for completion. The resources include humans, tools and equipment, techniques, money and information.

Regardless of what kind of project, every project goes through the same stages, more or less. Although each project will require unique processes and tasks, they all follow a similar framework. There is always a beginning, a middle, and an end. This is called the project lifecycle or project management process. The project lifecycle helps provide some predictability and gives the project manager a way to tackle tasks in distinct phases. Let us discuss the stages of a project lifecycle.

There are five primary phases in a project management process. The five phases are (1) project initiation, (2) planning, (3) execution, (4) control and monitoring, and (5) closure.

ASSESSMENT OF PROJECT RISKS

The team should first prepare a risk assessment to understand the risks exposure and their possible consequences. Here is a step-by-step guide on how to assess project risk:

Step 1: Identify potential risks

Step 2: Determine the probability

Step 3: Determine the impact

PROJECT RISK MANAGEMENT

Project management focuses on the management of all aspects of a project. The project management body of knowledge developed by the Project Management Institute defines project management as applying knowledge, skills, tools and techniques to project activities to meet requirements (PMI, 2008). Thus project management brings together all the needed resources for a project and optimises them for completing the project successfully. The resources include humans, tools and equipment, techniques, money and information.

Project risk management entails identifying potential risks, analysing the risk, and taking proper precautions to reduce or curb the risk. The occurrence of threats in any project can positively or negatively affect its objectives. A risk is a deviation of uncertainty that may result in undesirable outcomes. In a project management context, if these risks become realities, they are classified as “issues” that must be addressed.

To prevent any loss or disturbance, it becomes an integral part of every project manager’s job to have a proper risk management plan. Risks may arise at any point in the project lifecycle. Hence, the team should ensure that the project remains on track and meets its goal by undertaking appropriate risk management throughout the project lifecycle.

A different project might require unique project risk management. For example, the risk management strategies of large-scale projects differ from those of smaller ones. They might have a detailed plan for each risk to ensure that the mitigation strategies are always up and aligned if the issues arise. Whereas, for smaller projects, the risk management plan is more on the simpler side. They will have a simple procedure with the tasks organised to reduce their priority in the project.

THE IMPORTANCE OF PROJECT RISK MANAGEMENT

Project risk management helps predict and mitigate the risks that can prevent achieving the project objectives. Here are some factors impacting a project’s risk management:

1. Evaluation of problematic aspects of a project

2. Fewer surprises

3. Inadequate information to make an informed project decision

4. Ineffective communication

5. Inaccurate budget estimation

6. Overestimated project success rate

7. Focused teams

8. Clear risk escalation

HOW TO MANAGE PROJECT RISKS

Here are five steps for managing projects risks:

Step 1: Determine the “risk tolerance” level

Step 2: Decide which risks to manage

Step 3: Identify project risk triggers

Step 4: Create an action plan

Step 5: Evaluate the project cycle and strategies

PROJECT RISK MANAGEMENT FRAMEWORK

The project risk management framework consists of five processes with different jargon varying from organisation to organisation. A project risk management framework consists of the following five processes: 

1) Risk Identification.

2) Quantitative Analysis.

3) Qualitative Analysis.

4) Plan Risk Responses. and

5) Monitoring and Controlling Projects Risk.

PROJECT ENVIRONMENTAL AND CONTEXTUAL FACTORS

Environmental factors are significant determinants of the success and failure of a project. When evaluating a project’s environmental and contextual factors, it is essential to consider the following:

Where is the geographical location of the project? This will help identify potential project execution constraints and risk sources, such as:

1. Local weather and climate extremes,

2. Geotechnical and topographical issues,

3. Site access constraints,

4. Utilities and local service availability,

5. Environmental sensitivities, and

6. Human and material resource availability.

PROJECTS ENVIRONMENTAL AND CONTEXTUAL FACTORS

Understanding the project environment and its contextual factors is paramount to ensure effective project risk management. Here are significant projects’ environmental and contextual factors:

1. Projects political environment,

2. Projects cultural and religious environment,

3. Tools, skills and experience available for the project, and

4. Project market conditions.

PROJECT MANAGEMENT SOFTWARE

Project software can enhance the success of a project because its knowledge base functionality enables project team members to collaborate and communicate with each other and other project stakeholders. Project management software can use for all aspects of managing, monitoring, and controlling a project, including project planning, scheduling, resource allocation, and change management. Project management software also provides a central knowledge base for documentation and information. 

Project management software is a solution that helps project managers and team members plan, coordinate and monitor projects’ performance and success. The software supports project planning, managing, and oversight within one centralised virtual location. Plus, it allows teams to stay on top of real-time project statuses, workflows, and tasks. Project management software also allows everyone to optimise processes and work together in the most efficient manner possible.

BENEFITS OF PROJECT MANAGEMENT SOFTWARE

Here are some benefits of implementing project management software:

1. CENTRALISATION: Project management software creates a central workspace and knowledge base for communication, tracking, and the storage of documents. 

2. COORDINATION: Project management software can help project teams coordinate tasks and automate the workflow so that team members will be notified when the job stages are completed to ensure continuity and save time. 

3. COMMUNICATION: Streamlined communication is one of the most significant benefits of project management software. Project management software makes communication and collaboration much more accessible.

HOW MUCH DOES PROJECT MANAGEMENT SOFTWARE COST?

The price of project management software varies depending on several factors, including:

1. THE SOFTWARE VENDOR: Vendors set their prices so that costs can vary widely across companies.

2. SOFTWARE FUNCTIONALITY: Project software solutions have different functionality. For example, a vendor may offer a basic model package and a more advanced solution.

3. SIZE OF A BUSINESS: Project management software costs typically vary depending on the number of users and the volume of storage space required.

4. SOFTWARE PACKAGE: Most project management software vendors offer packaging options separated by business size or add-on features. 

5. COST OF PURCHASING THE SOFTWARE: Cost is essential in selecting project management software. There are, however, several free project management software options in the market, but they come with hidden costs. 

6. COST OF NOT HAVING PROJECT MANAGEMENT SOFTWARE: Not having project management software is also costly. Without project management software, the company will spend more time completing tasks and increasing errors. 

See my video on Project Risk and Project Risk Management: https://youtu.be/TjYIEPk1yvQ