Modern businesses are all about innovation and taking risks. Ambitious project managers ensure that business planning and strategizing is followed by careful balancing of resources. This way organization can take the necessary steps towards growth while ensuring positive results, fostering learning and mitigating risks in the process. Identifying project risks is more vital than knowing what successes that it can lead to. In fact, effective management of project risks helps identify the project weaknesses, strength, threats and opportunities. Having a plan for a contingency situation allows better response and fast mitigation. Many businesses have had to understand it the hard way but futuristic and experienced project managers know that the “red” in project management are more vital than the positive “green” signs.
 
The aim of risk management is to identify continuous events negatively impacting the overall project performance. These risks may come both from the internal and external sources associated with the project. Risk assessment may include multiple aspects, such as investment risk assessment, program risk assessment, operational assessment, cost uncertainty, alternative analysis and more. Risk identification, however, should match with the informed decision making process. First, project managers should come up with the project objectives and goals. A common understanding among all members of the project ensures project success.

Project Charter

One of the first steps into project risk management is designing the project charter. The project charter authorizes and identifies authorities responsible for various aspects of the project. It is helpful in identification business needs and formal project description. Simultaneously, risks hindering any of the steps in the project should also be addressed. The project description allows evaluation of the risks that may subsequently play a role in the process.

Risk Management Template

Every organization/project management team must have a risk management template in place. This template acts as a guide for the whole team for better planning and risk management and subsequently helps in accessing values that might lead to additional planning.

The organization should also allow templates to be modified based on the nature, scope and growth of the project. Historical templates for similar projects may be taken into consideration and require little modification in most cases. Risk management plans as such guide the project manager’s decision-making abilities through a certain threshold. Consequently, risks that are above the threshold should be discussed in the meetings for effective determination of their impact and final cost on the expected project success.

Examining Project Risk Management Steps

The risk management plans are responsible for determining:

• How risks are identified
• How qualitative and quantitative analysis will be completed
• What are the resources for risk monitoring
• How to go ahead with risk response planning
• How to continue risk assessment throughout the project life cycle

Risk Identification Preparation

Risk management plans are the base for the identification process, it describes how the various risks will be identified and the subsequent management of response processes. This is basically the approach to risk management along with additional inputs for identification. Risk identification process requires project managers to understand the purpose of projects. This includes the project objectives, intent and expectations.

Understanding Risk Categories

All risks identified within projects must be categorized. This categorization may begin even before the risks are actually identified and include typical risks common to the industry. Categorizing helps in organizing, ranking and isolating risks within projects. As such, there are four basic risk categories.

1. Technical/Performance/Quality Risks: These risks are associated with unproven, complex and new technologies that the project entertains. Further, changes in technology during the project can also be seen as a risk to the process. Quality risks on the other hand are risk to the expectation levels with regards to the performance and quality of the project.
2. Organizational Risks: Organizational risks may include unreasonable timing and costs, poor prioritizations, inappropriate scope expectations, inadequacy or disruption of project funding, competition with other project for company’s internal resources.
3. Project Management Risks: These risks include all faults in the project management such as unsuccessful scheduling of projects, inadequate resources and time, lousy project management methodologies and unacceptable quality of work.
4. External Risks: Several factors outside the project boundaries may affect the progress and outcome of a project. These may include legal issues, shift in priorities, labor issues, environmental factors, political barriers and others. These situations will call for a disaster recovery more than moving on with the usual flow of the project.

Project Management Techniques for Risk Assessment

• Brainstorming: Brainstorming allows listing out all expected project risks. The brainstorming team should include a set of multi-disciplinary experts who act as facilitators for the manager.
• Delphi techniques: Delphi helps reaching on a consensus. Risk assessment experts use the best of technology to solicit all ideas around the project risks. The process helps minimizing biases in data while preventing any individual to have a higher influence on the project outcome.
• Root cause identification: This process understands the main causes of the risks. It allows a better management and development of risk responses.
• Interviewing: All individuals involved in the project including project team members, project managers, stakeholders are interviewed for their opinion on risk identification and solutions.
• SWOT Analysis: SWOT (Strength, Weakness, Opportunities and Threats) examines the whole length and breadth of the project process to identify risks.
• Assumption analysis: All projects are developers and deployed based upon a set of hypothesis, assumptions and scenarios. This tool helps reduce the inconsistency, inaccuracy and incompleteness of hypothesis.
• Checklist analysis: Project Management methodologies involve referring to a historical knowledge and information for similar projects. Checklists will help accumulate all risks that have been a part of past projects. Checklists are quick and simplistic procedures that help reach a closure on the associated risks.

While understanding the prospects of a project drives the process, proper identification of risks ensure that any eventuality is addressed as soon as they come up. This is why keeping an eye on the “red” side (risks) is much more important than monitoring the “green” side (positive prospects) of the project.