Five effective tips for project managers to reduce risks and have a higher success rate.
As a project manager, what’s the first thing that comes to your mind when you read “project management risks”?
If you’re aiming to make your projects error-free, the phrase “project management risks” may seem alarming. Risks come in all shapes and sizes, but that doesn’t mean you can’t do anything about them. A risk can be an opportunity to pursue or a threat to avoid—it all depends on how you take it.
Managing risks is essential to your project’s success. But how do you manage risks properly? Where do you begin? How do you ensure your projects don’t go haywire?
To help you, we answer all of these questions in this blog. We also share practical tips to properly and efficiently manage risks so your projects don’t go off the rails.
The term “risk” is commonly used in many aspects of life. When it comes to project management, risk is defined as any obstacle or undesirable event that affects the project objective. It could be anything, from a delay in completing a task to increased costs.
Risks impact the overall project success in many ways:
- They increase the chances of something going wrong and adversely affecting the project outcome.
- They lead to delays in project completion or, worse yet, complete cancellation.
- They cause an increase in costs, which harms the project bottom line.
In short, risks have the potential to negatively impact project success; therefore, they must be treated as such. For that reason, the ability to manage project risks is considered an essential skill when hiring project managers.
Risks majorly affect the following aspects of a project:
- Scope: Risks lead to changes to the project scope, impacting the time required to complete the project.
- Schedule: Risks delay the project schedule, impacting the completion date and overall cost of the project.
- Cost: Risks increase the costs associated with the project, hampering the overall project budget.
- Quality: Risks impact the quality of project deliverables, hindering the project’s reputation.
When it comes to project risk management, one of the most consequential things you can do is make risk identification a team activity. By involving your entire team, you’ll be more likely to identify the potential risk associated with your project.
Also, by involving your team in the risk identification process, you’ll get buy-in from them for implementing risk management strategies. Here’s how you can make project risk identification a team activity:
- Have everyone contribute their ideas during meetings: This will allow your team to brainstorm different risk scenarios and propose possible solutions. During these brainstorming sessions, ask team members to also report risks they encounter outside of the team meetings, during daily business operations.
- Make sure everyone understands the risk management process: This will help ensure all your team members are on the same page regarding how to manage risks.
Once you’ve identified the risks, work with your team to develop strategies to mitigate or avoid them. This may involve developing contingency plans, modifying the project schedule, or even making changes to the project budget.Since
Risk tolerance is the amount of risk project managers are willing to accept to achieve the project goal. It refers to the level of uncertainty that is acceptable and the amount of potential loss that is tolerable.
One way to determine risk tolerance is by using the risk management feature of your project management software. This will allow you to input all the risks associated with your project and then identify the probability of each. You can use the outcome to create a risk response plan.
For example, if a risk is unlikely to occur but would have a severe impact on a project, you may want to take action to avoid it. On the other hand, if a risk is more likely to occur but would only have a minor impact, you may decide to accept it.
Capterra’s 2021 Project Management User survey finds that 43% of project managers have risk management features in their project management software, and they proactively use it. (See the survey methodology here.)
Not all project risks can or should be managed. You need to weigh the potential benefits and costs of managing risks against the potential benefits and costs of not managing them. Once you’ve identified and assessed the risks, decide which ones to take action on based on your risk tolerance and the resources available with you.
You may decide to manage all identified risks or just a few of them. For example, if you have low tolerance, you can choose to address only the most serious risks—i.e., risks that pose a significant threat to your project’s goal. No matter which risks you choose to manage, make sure you have a proper risk mitigation plan for addressing them.
After you’ve decided which risks to manage, you’ll need to develop a risk management plan for either avoiding or addressing those risks as well as establish who is responsible for each task in the plan. The plan should be tailored to the specific risks you’re facing and the resources available to you.
In addition, your plan will likely involve a combination of strategies—developing contingency plans, modifying the project schedule, and making changes to the project budget. You’ll also need to establish a process for monitoring and updating the plan as your project progresses.
The key to creating a solid risk management plan is leveraging the right project management software with project planning functionality. The software helps identify potential risks early on, develop required strategies, and mitigate threats to prevent project failures.
Once you’ve developed a risk mitigation plan, you’ll need to track it throughout the project lifecycle. This will help you identify new risks as they arise as well as determine whether existing risks are getting worse or better.
Tracking risks includes monitoring them for changes in severity or likelihood as well as tracking the progress of your mitigation and avoidance efforts. You can do this using various tools and techniques such as creating a risk register or conducting regular risk meetings.
Consider these factors when tracking risks across the project lifecycle:
- What needs to be tracked? Ensure you’re tracking the correct information to identify any new or potential risks.
- Who will track it? Assign someone to track risks so they are monitored and addressed on time.
- When should you track it? Track risks throughout the project lifecycle so you can identify new or potential risks as they arise.
- How should you track it? Define the tracking process so everyone knows what needs to be done.
Create a system for reporting new risks as they arise, and communicate them to all project stakeholders regularly. Conduct regular risk reviews, update the risk register accordingly, and set mitigating actions wherever necessary. Also, carry out a post-project review to learn from any risks that materialized during the project.
Some risks, if they’re managed properly, can actually benefit your project. These are known as “opportunities.” An opportunity is a positive risk that, if managed correctly, can lead to a better outcome for the project.
For example, a new product launch might present multiple risks, but it also offers an opportunity to gain market share. If you manage the launch well, your company can leverage the opportunity and improve its position in the marketplace.
Use risk management to ensure project success
All projects have some inherent risks, but using the aforementioned tips will help you develop a sound strategy for managing those risks.
You can improve the chances of project success by identifying risks early on, determining your risk tolerance, deciding which risks need to be managed, devising plans for preventing and addressing them, and monitoring them throughout the project lifecycle.
Once the project is complete, don’t forget to evaluate the effectiveness of your risk management efforts. This will help you learn from your experiences and make improvements for future projects.
Looking for risk management software? Check out Capterra’s list of the best risk management software solutions. Also, watch this video to understand the pros and cons of using risk management software so you select the right tool.
Capterra conducted the Project Management User Survey in March 2021 among 422 U.S.-based project managers, 367 of which are project management software users. The qualified respondents are decision-makers or have significant involvement with the day-to-day project management at their organization. We worded the questions to ensure that each respondent fully understood the meaning and the topic at hand.
Capterra conducted the Emotional Intelligence in the Workplace Survey in December 2021 among 528 U.S.-based professionals who manage projects at their small to midsize businesses. Respondents were screened for employment status (full-time), size of business (2 to 500 employees), and involvement in project management (extremely involved).