Project Risk Management

Where there is uncertainty there’s risk. It is the lack of knowledge about a possible future event that can create a positive or negative effect on the project. Risk must be managed early and often. Risk is always associated with the future. It often has a cascading effect on other aspects of a project. It is best to conduct risk management as a team. Thorough planning is of critical importance when managing risk because it comes in many different flavors and most of the time can leave a very bad taste in your mouth by costing you the project. The good news is you can minimize risks by following a few simple processes and guidelines provided by the PMI.

When was the last time you sat down with your project team and talked about risk? We get so obsessed with specific events and activities on a project that we rarely just talk about risk in general. But unfortunately, we are always surrounded by risk; it is lurking in every corner and can raise its head at any time. Still, proactive risk management is often not formally practiced in projects; it is talked about only after a risk event has already taken place.

When you get up in the morning and take your first step on the stairs to grab that first cup of coffee, you probably have no idea about whether the kids forgot to put their toys away or if the dog is fast asleep on the top step as you stumble and fall. We are surrounded by threats. The good news is, our senses and our brain are constantly scanning our environment like a radar and will pick up any potential danger without us even realizing it. A large number of incidents are avoided because of this internal threat detection mechanism and our quick reactions during times of danger.

The same holds true for projects. A good PM is always on the lookout for risk events, probability, impact, timing, gaps or potential threats in managing risk.

Project Risk Management Processes

According to PMI, Project Risk Management includes six processes, and includes conducting risk planning, identification, analysis (qualitative and quantitative), response strategy, and monitoring and controlling the project risks.

    Plan risk management: Define how the project team will go about conducting risk management.
    Identify risks: Determine which risks could possibly occur and may affect the project.
    Perform qualitative risk analysis: It involves analyzing the risks identified and prioritizing them to see which risks need further review or action based on probability and impact on the project.
    Perform quantitative risk analysis: Analyzing the risks in numerical terms to check which ones potentially have the highest impact on the project objectives.
    Plan risk responses: Looking at options and actions to reduce threats and increase opportunities when the risk event occurs.
    Monitor and control risks: Make sure you have a risk strategy plan in place that can be effectively measured and tracked to ensure there are no surprises (always be looking for new risks or the ripple effects from existing risks should/when they occur).

These processes are interactive with other processes in the different knowledge areas of PMBOK. Risk management crosses all boundaries and can have an impact on scope, schedule, cost, quality and so on.

Risk management is considered one of the hardest parts of the PMP exam. This is true due to a couple of reasons. Firstly,the PMI assumes that you and the project team are managing risk (it is a given). But in reality, only a small percentage of real world projects actually have a risk management plan. The second reason is lack of experience. We all wish to never encounter any serious risks so we tend to ignore or avoid them. Therefore, there aren’t a lot of experts in this area. Paying close attention to the facts mentioned in this article will help you manage risk more effectively and get a higher score on the PMP exam.