Potential risks frequently crop up in a project’s lifecycle. Project risk management is a critical skill of an efficient project manager. A competent project manager should have a keen eye for details to access the risks and point out his team members’ challenges.

A project risk management plan will help a project manager deal with the uncertainties faced during the project, thereby saving time, effort, assets, and resources.

What Is Project Risk Management?

A project risk is an uncertainty that occurs in the lifecycle of a project that hinders the project from achieving its goal. Numerous risks are commonly observed in various projects like scope creep, budget creep, communication problems, scheduling issues, and more.

A risk management plan determines every aspect of a project to evaluate a potential threat to the seamless functioning of its objectives. Project risk management is necessary to identify, avoid or rectify the issue that creeps up in a project from time to time. If the issues aren’t identified over time, your project may exceed the budget, get delayed, or even result in failure.

How to Effectively Manage Project Risks

Project Risk Management Concept Diagram

Integrate Risk Management within the Project

Many projects still do not have a risk management plan integrated into the system. They are either confident that no risks would occur in the project or unaware of such a process. Established professional organizations have a risk management plan that they regularly follow in project meetings and train the staff accordingly.

To identify risks, one must possess the expertise needed to be able to focus on future scenarios. PMI’s Pulse of the Profession ® report found that 83% of organizations that regularly practice project risk management prove to be high performers on critical projects. In addition to this, efficient risk managers earn a significant payoff and meet their goals 2.5 times more often than the low performers.

Frequent team meetings and several brainstorming sessions could help you discover various risks in your project, as a project manager. Taking up a PMP Certification course will also help you learn advanced project risk management skills and help you handle projects in large projects and complex environments.

Integrate Risk Management within the Project

Identify Your Project’s Risks

You cannot solve a risk without identifying it first. Being confident about your project will result in overlooking the risks. It is rather good to follow a standard process and jot down the project risks beforehand. A 2018 PMI survey states that 29% of organizations do not indicate opportunities and risks as one of the primary causes of project failure.

If you want to be an efficient risk manager, here are a few methods that you can incorporate into your project to identify risks:

  • Collect the data in an organized way.
  • Brainstorm with your team members as they add value with their experience and expertise.
  • Talk to individuals with relevant experience and get to know the hurdles they faced in a similar scenario.
  • Think out of the box about what could go wrong.
  • Interview your stakeholders and clients to get a deep insight.
  • Learn from similar failed/ successful projects. Both will have an insight into risks.
  • Understand the type of risk, and typically, several scenarios conclude that project managers tend to identify risk outcomes as the risk rather than the risk in actuality.

To sum it up, combine several different identification methods into your project, and you are likely to discover most of the perils involved. Drill down to the root cause of each risk identified and verify if the risk will impact your project adversely. Trust your intuition, as it is always right. If you deal with the risks at the earliest, you will have enough time left for the unexpected threats that are bound to occur. Project management courses online will give you real-time guidance to foresee hazards effectually and handle them with ease.

Assess, Analyze and Communicate Project Risks to the Team

Communication is the key to solving many problems. Communicate with the team frequently. There are many instances that the team foresees the risk way before the project manager but didn’t communicate it to them.

Paying attention to risk communication within the team will help you sail through many challenges. Have project risk management as an essential part of your team meeting to stay on track with the risks from time to time. These meetings will help your team report the existing and new roadblocks to you on time.

Assign Owners to Each Risk for Effective Control

After going through the arduous process of identifying risks, planning them, and evaluating them, it is necessary to hold someone accountable for each risk and solve it. List out the risks to the people responsible for handling them and have them work towards the solution.

There might be a team member who is an expert or experienced in the risk type. Making that person responsible for resolving issues will help you handle the risk resourcefully. If there isn’t anyone watching out for it, then all the hard work will go in vain, opening the project to more risks. When the project deviates from the plan, the team should be able to put it back on track with the project manager’s help.

Risk Monitoring

Monitoring is an important step of project risk management. It is the process of deciding on the risk response plans, tracking identified risks, monitoring residual risks, and evaluating the risk processes’ effectiveness. Risk monitoring involves the filling processes to keep track of them.

Conduct Risk Audits to Monitor Risks from Time to Time

Risk audits ensure that the whole project team follows the organization’s risk processes, including identifying potential threats that are of high priority and creating mitigation plans to tackle them. It also involves examining the risks and documenting them for successful risk responses. It helps to develop best practices for the organization too.

Project risk management is an iterative process; hence the team should review the risk documents from time to time.

A manager should set a budget aside to handle specific risks in the project in case of a surprise. Reserve analysis goes hand in hand in this process as it is required to understand if there are risks to the project funds too.

Implementing Risk Responses

Once the risks are at hand, risk responses can be implemented in four steps:

  1. Risk Acceptance

Risk acceptance allows you to admit the risk if there isn’t much that can be done about it or the risk isn’t worth changing the project management plan. The team decides to deal with the risk or keeps aside an allocated plan B when it occurs.

  1. Risk Avoidance

Risk avoidance eliminates the risk as it may be of the type that can affect the organization’s assets. It aims at controlling the damages and financial consequences of threatening events, which can be achieved by developing an alternative strategy that is more likely to succeed at a higher cost.

Another project risk management technique involves using existing technologies rather than adopting new ones. The existing and identified technology provides better performance at reduced costs. This method involves choosing a familiar vendor than a new one as the former’s approach is more reliable.

  1. Risk Minimization

Risk minimization or mitigation represents an investment to nullify the impact of a particular risk. It may involve hiring a third-party expert to review technical plans or cost estimates to increase that plan’s confidence. Another risk reduction technique is to assign high risk management activities to highly qualified project personnel. It is mainly adapted for highly complex projects.

  1. Risk Transfer

Risk transfer is a risk reduction method to shift the risk from the project to a third party. It is like paying someone else to accept the risk. The third-party can be an insurance company where risk transfer is the purchase of insurance or contractual agreements. In that case, the risk is transferred from the project to the insurance company.

Project risk management: Mitigation strategies

Respond to Problems with Reactive Approach

Project managers can sometimes commit mistakes. The solution to this is to take up a reactive approach to project risk management rather than a proactive approach. Reacting to surprise risks with agility and approaching the problem from a third-person perspective will help you handle many risks with clarity.

Invest a reasonable amount of time in the initial stages of the project in risk management and analyze each risk thoroughly to prepare yourself with the necessary defense to shield the project from risks.

Taking up a project management course online from a Premier Authorized Training Provider(ATP) will help you gain valuable insights into handling different projects in an organized manner. As it is not industry-specific, the PMP certification will expand your knowledge in a broader perspective, allowing you to identify and manage risks effectively.

Project Management Training Institute (PMTI) offers customized training on PMI’S Risk Management Professional (PMI-RMP®) by the certified REP’s trainers with two decades of project management experience.

The trainers at PMTI are successful and certified project managers with more than two decades of real-time project management experience. They can guide you with the right resources and training. PMTI provides you with proper guidance through the project management courses online. The training is one of a kind to provide you with exam materials and effective tips to ace the Project Management Professional (PMP) exam with flying colors. Enhance your skills with our project management courses online to accomplish milestones in your successful project management

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