Categories and sources of risk in your project

Categories and Sources of Risk in Your Project

Pradip PMP

Published on June 13, 2012


A lot of project managers plan effectively for the risks that may be associated with a project. Before that, a project manager needs to know what is involved in a project risk. What are the sources of the project risk?
Without much knowledge in risk management, a project manager cannot plan accordingly. 

There are two types of risk available:
1. Business risk (Risk of profit and loss) and
2. Pure risk (Insurable risk like fire, injury due to accident etc.)

Sources of Risk:

Below are few sources of risk that can be available in your project as well. They are:

Schedule: Whether you get the hardware or software out on time, just like planned.

Scope: It is always a risk; whether you have covered all the work required. It will cost you if you have missed any important requirement.

Resource: This is also an aspect that is unpredictable; you can’t expect availability of  resources as planned. The planned resources can be used for some other projects as well, in that case you need to get someone new thus creating a problem in both schedule and cost. Sometimes in quality also, in case of inexperience.

Quality: The deliverable can be of poor quality due to some other imposed factors, making it a huge risk.

Cost: Estimation of cost can be a risk in your project; if there is something you have planned to purchase and if it is not available, it can prove costly, as you have to wait for this particular item for a longer period.

Apart from above, sources of risk can be organized into categories such as customer risk, technical (product) risk, and delivery risk.  Within each category, specific sources of risk can be identified and risk reduction techniques applied. 

Material and equipment risks:

• Required hardware will not be delivered on time.

• Access to the development environment will be restricted.

• Equipment will fail.

Customer risks:

Customer risk is related to the customer's key success factors for the project.  A project is not successful if the customer is not successful with the process. It can be sub-divided as follows:

• Customer resources will not be made available as required.

• Customer staff will not reach decisions in a timely manner.

• Deliverables will not be reviewed according to the schedule.

• Knowledgeable customer staff will be replaced with those less qualified.

• Conflict within the customer organization about the desirability or feasibility of the

project will threaten it.

Scope risks:

• A lack of clarity in the scope definition will result in numerous scope creep.

• A lack of clarity in the scope definition will result in conflict in the customer about the scope.

• A lack of clearly defined acceptance criteria will cause delays in acceptance and sign-off.

Technological risks:

Technical risk arises from the capability of the technical solution to support the requirements of the customer. It can be categorized as follows as well:

• The technology will have technical or performance limitations that endanger the project.

• Technology components will not be easily integrated.

• The technology is unproved and will fail to meet customer and project requirements.

• The technology is new and poorly understood by the project team and will introduce delays.

Delivery Risks: 

Delivery risk is related to the ability of the complete team to deliver against the plan at the cost and schedules estimated, like;

• System response time will not be adequate.

• System capacity requirements will exceed available capacity.

• The system will fail to meet functional requirements.

Unpredictable risks: 

• The office will be damaged by fire, flood, or other methods.

• A computer virus will infect the development environment or operational system.

Project management risks:

• The inexperience of the project manager will result in budget or schedule slippages.

• Management will deem this project to have a lower priority for resources and attention.

Resource risks: 

• Main staff may not be available.

• Key skill sets will not be available when needed.

• Key staff will be lost during the project.

• Subcontractors or vendors will below-perform and fail to meet the milestones.

About the Author

Pradip Dwevedi, PMP is currently the Lead PMP Trainer / Corporate Trainer at Reputed Global R.E.P.s, India and also the Head – Project Management at Invida Trans IT Solutions PVT LTD. Prior to this, he was Divisional Manager at Stylo Graphic Imaging and before this he was working as Facilitator/Team Leader at Aptara.


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