Effective project risk management and identification

Project risk management is a very often neglected aspect of running projects. Observation of many organizations that carry out dozens and, in extreme situations, even hundreds of projects each year allows us to conclude that no project risk register is kept on many projects. In practice, this means that risks need to be identified on such projects. In addition, risks are not managed in a formal, orderly, and regular manner.

What is project risk identification?

Identifying risks on a project is essentially predicting events that may or may not happen. Suppose a project team is doing another project that is similar to previous projects to a certain extent. In that case, it undoubtedly has experience and historical data to identify risks in the current project. However, it should be noted that the risks managed by the team on previous projects may sometimes be repeated. Therefore, they are worth considering, but the project team should analyze the current project for risks with an open mind. A practical approach to identifying project risks is to rely on a report of risks from previous projects. To generate such a report, however, a risk register should be maintained on each project.

Why don't organizations manage risk?

The most common reasons for this situation are:

1. The company’s internal project management rules do not require a record of risks on projects.
2. Even as the company’s existing project management policies require risk management, no one enforces this requirement.
3. Project managers, sponsors, and project team members do not have the practical skills to identify and manage risks in a project
4. The company perceives risk management as another administrative task. So it has to be done, and we already “don’t have time to work” anyway.

The list of risks in the project - the practical consequences of its absence

If we do not manage risks and maintain a list of project risks, we may suffer severe consequences of events that could have been foreseen and prevented but were not. As a result, there is often an atmosphere of panic and firefighting rather than orderly and systematic work on such a project.

Description of risks in a project

Typical project management standards define how to describe risks on a project. The following illustration from FlexiProject shows the so-called “risk card,” which comprehensively describes the identified risks.

The project risk sheet contains the following elements:

• Risk status
• Risk owner
• Category
• Probability of occurrence
• Impact on the project
• Description of impact on project schedule
• Description of impact on project budget
• Description of impact on final project product
• Description and action plan

At this point, it’s worth understanding what risk status means. In the FlexiProject system, risks have three statuses: identified, active, and closed. Risks have an identified status most often at the beginning of a project. Later, when the project gets underway, and the project team finds, for example, that the probability of a given risk that was previously “unlikely” increases to “very likely,” it can decide to change the risk status to “active.” This, of course, indicates to the project owner that he should take risk mitigation measures. In the FlexiProject system, there are so-called warning icons. Thanks to them, the project manager and team have transparent information about where risks may occur in the schedule. A triangle sign with an exclamation mark appears in the task line with which any active risk is associated. In addition, the risk is indicated by a glowing red circle.

An example of a project risk register

We said earlier that every project should have a register of project risks. Of course, such a register should be kept up-to-date and regularly discussed by the project team. Therefore, the status of risks, probability of occurrence, and impact on the project should be adjusted continuously according to the current project situation.

Monitoring and managing project risks at the project portfolio level

Risk management at the project portfolio level is an important issue. This is because project managers may think they deal with risks that only affect their projects individually. However, if you look at the report of all risks in the project portfolio, you can quickly identify recurring ones involving more than one project. Then, a given risk can be resolved once, and each project manager will not have to do it individually. Such a report of risks in the “Technology Projects” project portfolio from FlexiProject is shown in the following illustration.

Identify risks in your project and manage them effectively

In conclusion, proper risk management in projects significantly affects their efficiency and faster and cheaper delivery of required products. Risk management is neither complex nor requires much administrative work, provided the project team does it regularly.