Project management is an important tool for ensuring business success. Investment in IT project management can save you time and money by efficiently allocating resources where they are most needed, creating clear accountability for necessary tasks and setting hard deadlines to ensure projects are completed on time. However, an often-overlooked benefit to project management is the assessment of and preparation for potential risks a project creates. Used effectively, this can help your team mitigate possible issues before they begin, allowing you to focus attention and resources toward prevention rather than damage control. Read on to learn more about the importance of project risk management for your business.
What Is Risk Management in Project Management?
Project risk management is simply anticipating possible risks to the project, assessing their impact and creating anticipatory solutions. Risks are identified as any unforeseen event that could impact the progression and completion of the project, including events that affect your proposed timeline, budget or final performance overall. It’s important to note that risks are not the same as issues, which are foreseen as certain and planned for separately. Therefore, proper risk management processes focus on impacts that have the potential to come into play, ensuring project success. This may be why some companies choose not to focus on managing their project risks, believing the planning wastes time and effort. However, successful businesses know these extra steps are important in ensuring a favorable project outcome. Also, despite the negative connotations of the term “risk,” project risks can have either a positive or negative result.
Examples of Possible Risks
Keeping in mind that risks are unexpected elements, the risks you identify between projects can vary greatly. However, there are some risks that can almost be considered universally applicable.
Positive Risks
- Completing your project ahead of schedule
- Attracting more clients than expected
- Ending with a surplus of resources that can be allocated to another project
Positive risks could improve the performance of your project, but remember that they have the potential to turn into negative risks if not handled appropriately. For example, if you attract a greater number of customers than you anticipate, this could become a liability if you are unable to keep up with the demand, creating a negative experience for new clients.
Negative Risks
- Data loss
- A team member leaving before a project is complete
- Unexpected time delays
Risk Assessment
Risk assessment is the first step to narrowing down what risks need to be managed. Risk assessment requires three basic elements to cover your bases.
1. Identify Risks
Begin with a master list of every possible risk you can imagine for your project. Take advantage of insight from other team members to help identify risks you might miss. Remember to also include positive risks so you won’t miss the chance to capitalize on possible opportunities.
2. Assign Probability
Some risks are going to be more likely than others. Determine the odds of each, labeling them as low, medium or high, so you can focus on those that have the greatest chance of impacting your project.
3. Measure Impact
Assess how identified risks could affect your project and determine how big the impact would be. Risks that could jeopardize the project’s success would be considered high impact, while those that create mild inconvenience would be categorized as low impact.
Managing Risk
Once you’ve identified the risks you need to focus on, there are effective risk management strategies project managers can use in managing risks. The ones you choose will depend on the resources you have available and the nature and size of the project you’re planning. Depending on the project’s complexity, you may simply list possible risks in order of priority, basing it on the level of impact potential to let your project team know which risks need the most attention for their risk management efforts. Risk management may include a detailed analysis of any reasonably anticipated issue with contingency plans for larger projects for each, should they become relevant.
Begin risk management by determining the tolerance level of your project. This is the level at which your project is deemed too risky and may need to be abandoned. Once you have this baseline, use your risk assessment to determine which risks need your focus. Identify possible signs to alert you when a risk is imminent. Develop action plans to prevent or exploit risks and a plan to mitigate damage if the risk can’t be avoided. Finally, do another assessment at the end of the project to determine how effective your risk management plan was. This can help you improve risk management for future projects by identifying weak points.
Remember that investing in the importance of project risk management now can alleviate future stress and damage control efforts, regardless of your chosen tools and tactics. EIRE Systems is a leading IT services company that specializes in helping businesses like yours navigate complex projects and implement effective risk management strategies. Contact us today to explore how we can support your project’s success.
