What is Project Risk Management?

The word project management itself consists of its successes and failures. Business growth entirely depends on launching products or services or onboarding new clients or customers. This is exciting but risky, so you have to evaluate all the parameters for growth. Growth involves expanding into higher workloads and going to new territories where you can't eliminate the risk but take steps to manage it efficiently to help your business become successful.

Project risk management involves adequately planning and mitigating risks that may take place in new proposals, which contributes to the businesses' long-term success. If you are a project manager, the best way to mitigate risks is to prepare for them before they arise and implement project risk management strategies. Employers look for project managers who can manage risks in the changing environment.

What is Project Risk Management?

Project management identifies, assesses, and responds to unforeseen risks that can affect project goals and progress. Project risk management is a process aiming to reduce the project risks that have occurred or have the tendency to occur in the future. The strategies focus on minimising the risks by identifying the root causes of risks and minimizing their impact if they fail to eliminate them at the same point. 

The project manager manages risk by identifying and assessing it as part of their job, which helps them prioritize the project management efforts. Managers should consider many risks, such as project schedule, cost, quality, technology, and resources. 

Also, Check: Best Ways for Project Risk Management

Common Types of Project Risks

There are many common project management risks that project manager may encounter in their operations. Let's know these risks in detail and make better decisions for success.

1. Individual Project Risks

These individual risk events can affect the project's quality, cost, time, or scope. For example, you may lack resources due to not finding the right job or dealing with employees taking sick leave or frequent time off during the peak season.

2. Variability Risks

These risks are associated with fluctuations or when you are not ready to fulfill the demand, supply, quality, price, and more, can easily impact the project outcome.

For example- The raw material prices are not in your hands, and changing the supplier might affect the product component and its quality, affecting sales. 

3. Ambiguity Risks

These risks arise when project requirements are unclear, leading to misinterpretations or mistakes. 

For example- When you receive inaccurate requirements from clients and different interpretations of the project scope management among the team members.

4. Overall project risks

These risks refer to the impact of uncertainty in the overall project. The overall project risks are comprised of an aggregate of individuals alongside all the other sources, which can create project uncertainty.

For Example- The uncertainties can be of any kind: natural calamities, wars, and changes in government policies, which hold the power to affect the projects.

6 Key Steps in the Risk Management Process

Project risk management involves identifying, planning, and monitoring potential risks. It requires proactively assessing the risk and managing the incident by preparing strategies and correcting them by implementing them accordingly. It allows you to complete the project objectives within the stated time and budget. 

Here are six steps involved in the project management. Let's understand these steps in detail for your next project. 

1. Identify

Identifying risks in project management requires creating a plan by listing all the project risk events. The risk event is anything that can impact the project's schedule, budget, or success. 

There are a series of ways to start the risk identification process, such as 

• Interviewing project stakeholders

The best way to identify project risk is to ask the stakeholders, leadership, and other experts involved in this topic. They will help you better understand the risks and what steps you can take to prevent them. You can also ask if they are running similar projects to see what they have encountered and ensure you're not missing out on important project risks.

• Brainstorming potential risks with the core project team

The team is the core of the project and will be working day in or day out. Before you begin working on the project, ask them if they can see any foreseen risks, and host a brainstorming session to identify serious risks to your project.

• Work on your assumptions.

Assumptions are things that you think will be true without a guaranteed fact. The document allows you to make decisions about the project based on the assumptions alongside it and verify these assumptions, which opens the space for project risks. 

• Work on your checklists.

Check if the team has built a list of common risks; if they haven't made one, start documenting one so that you won't hinder your success in future projects.

• Perform risk assessment matrix.

The risk assessment matrix consists of four buckets: catastrophic, critical, marginal, and minor. It allows you to prioritize which risks you should tackle first to achieve success.

2. Analyze

For each risk you have identified, focus on analyzing its likelihood and severity and creating a response plan. Considering the complexity of your project's risks, consider analyzing them with your project team or other key stakeholders. 

To decide the severity, consider how risks can impact the project objectives and how they can affect or delay the timeline, affect your budget, or reduce the project deliverables.

The response plan will be an action item that allows your team to quickly address the risk.

3. Prioritize

Start prioritizing the risks based on the risk register, analyzing them, and accordingly identifying which risks can happen early and have the power to damage the project's success. Start by addressing the risks that are highly probable and severe. 

Then, monitor and respond to all the potential risks in the initial phases, paying attention to those with high severity and starting by frequently checking them.

4. Assign

This step in project risk management is optional and entirely depends on the project manager. If risks haven't happened yet, assign a risk owner early so your team is prepared. The person should monitor the risk and become the direct contact for developing a risk mitigation plan.

5. Monitor

It shows the project in full motion, meaning you have to track the project objectives and actively monitor the risks to avoid surprises. Risk monitoring should be done actively to avoid surprises that might hinder all your progress so far.

• To begin the monitoring, you can roll out regular status updates to your project team management and other stakeholders so that they remain on the same page. Remember, risk management should be proactive, not reactive.

• Ensure timely check-ins with individual risk managers. Each risk owner should monitor their risk events or look for red flags. As a project manager or team leader, you must look for them regularly to ensure everything is going well.

• Lastly, keep an eye on the risk register in project management for regular updates. If you see the likelihood of risk changing or getting it updated, it should be reflected in the risk register. The major element of project management is creating a risk management plan in the document, which the entire team has access to stay on track.

6. Respond

In project risk management, risk becomes the reality, and you must be very cautious when responding. The risk registers are useful in this situation as you have a risk management plan in place. also, you require a solid, well-structured contingency plan to deal with the risks.

A timely response can affect the project's success rate and give you an edge over the competition to shine bright.

Learn more about: Project Risk Management and Its Steps

Conclusion

Project risk management, when managed properly, can lead to huge success. It helps you identify and mitigate potential risks before they become actual issues or the talk of the town. At Simpliaxis, we have many courses or certifications designed to help you assess project risks and how managers can use these learnings to ensure better risk handling. 
Project managers can upskill themselves by choosing from a series of project management courses designed to give them in-depth industry knowledge. These courses or certifications open up many opportunities or roles for them to excel in their professional careers.