In this video, Jennifer Bridges, PMP, discusses the definition of project risk and ways risk can impact a project positively or negatively.
In Review: What Is Project Risk?
Jennifer laid out a definition of risk for project management. Risk is when an uncertain event or condition can occur and have an effect on the project outcome. That effect can be positive or negative.
Risk is inherent in everything we do. Project managers, more than most, know how to mitigate risk, and use it as a core strategy in project management.
To understand where risk can come into a project, always start with the lens of the triple constraint. When you’re documenting risks, note where impacts to time, cost and quality are likely to occur. Once you’ve identified risks, you’ll want to work with your team to develop strategies for addressing them, should they arise.
You’ll also want to bring in stakeholders who can identify other risks that they may be aware of, such as market conditions or other constraints not yet communicated. Use the risks feature of your online planning tool to identify and track risks, so you’re also measuring their impact on the overall plan.
There more, of course, to learn, so take a few minutes from your busy schedule to invest in the knowledge that knowing risk is out there is one of the best ways to managing it.
Pro-Tip: If your project doesn’t have good processes or best practices within its organization that can create risk. There can be governmental mandates that you’re unaware of. Even natural disaster must be calculated into your risk management. Never be caught unaware.
One thing to note, however, is that some risk is better than others. What is good risk? ProjectManager.com CEO Jason Westland answer that question in the article What Is Positive Risk on a Project?
Thanks for watching!
Hello I’m Jennifer Bridges, Director of ProjectManager.com. Welcome to our whiteboard session today on What is a Project Risk.
So you can Google this term if you want or my reference is PMI, the Project Management Institute in the Project Management Body of Knowledge. But a lot of times people get terms mixed up, risk is one of them. Just to clarify, an issue is not a risk, and sometimes people intermingle the terms.
So clearly defining what a risk is. So a risk begins with an uncertain event or condition that could occur. So we recognize what are these events and we determine if these occur or not. If this uncertain event occurs then it could have an effect on the project objectives. It could have a negative effect or a positive effect. So if a risk event does occur, for instance a negative event could be for instance a company could put out a new product and if the market is very receptive to that product, but the company can not handle the demand, and that could actually be it sounds good because it’s increased sales, the market adapts the product. But the increased sales if the company’s not prepared for the demand then it could be a negative effect. Maybe they can’t fulfill the orders, they can’t fulfill the demand so they actually in essence lose those customers who probably may not come back. So a positive event could be that a market does adapt to that. The company can fulfill the orders and that could be a positive thing.
But to look at some of the uncertain events, where do these uncertain events or conditions come from or where do we look when we’re trying to identify these for a project? So a couple of areas that we can look at is the project plan. So looking at some of the triple constraint items. For instance looking at the scope, the cost, the time or the schedule and the quality, looking at the baseline. Because a lot of times as these things do change, and we know they do, changes in any of these items of the triple constraints can not only impact each other but they could interject risk for other areas of the project. So we can also look in the project management plan.
So the project management plan we know has a series of sub plans including, in addition to others, we have the scope management plan, the cost management plan, schedule and quality management plan. And so again these include the baselines or what we have documented for the project and we’re looking at that. We’re also looking at the process for these and how to manage them, because if we don’t have processes to manage these effectively that too can interject risk into the project.
We can also look at the stakeholder register because we want to meet with or talk with the stakeholders to see if they can identify any other risks that they may know may be occuring or could occur. And then some other areas to look are our project documents to see if there are anything there, maybe if we had estimates documented or other things documented that we can see might interject risk. Also in the environmental, the enterprise environmental factors which means some items for your company. So different business units or different things going on within the company that could have an organizational change that might interject risk. If they’re involved with union labor any kind of strikes may interject risk.
Also any organizational process assets. If there are not good processes or best practices within organizations that can interject risk. Any kind of governmental mandates, things that are interjected into the project maybe that you were unaware of that the company has to comply with could interject a risk, and also any kind of natural disasters. Things that we can’t plan for. Mother Nature: we never know when things may occur.
But these are some of the areas that we can look at when we’re trying to identify these risks. But I hope that helps to clarify risk so you’ll know now the difference between a risk and an issue.
If you need a tool that can help you manage your risk then sign up for our software now at ProjectManager.com.