Risk Management

What is risk management in project management?

A risk is any possible outcome or event that can occur over the course of a project or during a process. It can be related to timeline, budget, or performance, although there is no limit to its flavours. Risk management happens when we make educated guesses and plan strategies related to these perceived risks.

Risks are not always negative, although the negative risks are usually what keeps a project manager up at night. An example of positive risks in projects would be the possibility of ending up with a surplus of money or time.

The four stages of project risk management

There are four basic steps to think about when building a risk management plan for a large project. For easy reference, the project risk management process can be broken down into four stages:

• Identify: Where any theoretical risk on the horizon is pinpointed
• Assess: Determine how likely or serious these risks are
• Mitigate: React with a response plan so you can deal with the most pressing or most serious risks
• Plan: Create a contingency plan for preventing risks in the future

Red flags are not interchangeable with risks. They are observable clues that may point to problems within a project. Risks are the many possible pathways again, both good and bad that a project can take.

How does risk management affect project planning?

The role of risk management in the project planning process cannot be understated. Understanding how risk impacts our projects allows us to plan more accurately, learn from our mistakes, and create smoother processes for future projects. It also helps us estimate time, money, and people resources better, which is good news for your team and your clients.

It can be tempting to skimp on risk management and push these little risks under the rug, or to ignore them altogether. But ignoring them doesn’t make them disappear. Those sneaky risks will come back and bite, and when you’re not prepared, they can kill an entire project. Nothing’s more important to the success of a project than a project manager’s ability to identify and manage risk. All projects have risks—if you don’t see them, look harder (psst: look under the rug! They’re under the rug.)

Pointing out risks can feel like you’re shining a spotlight on something that might not even happen, but think about the pain if you ignore them. They grow and fester. We know that great project leaders are brave enough to fearlessly and unapologetically tackle risk management and stop the pain before it starts. Your future self will thank you for it.