Project Management

4 Risk Management Strategies for Successful Project Execution

By | 9 min read | Published

With a risk management strategy, you’re better equipped to handle unexpected project risks.

Imagine a new project opportunity coming your way. You gather your team and prepare a well-thought plan to complete the project within the set deadline. You do everything to fulfill your client’s project vision—from allocating resources to assigning specific goals to project team members.

But after a few weeks, one of your most dependable resources goes on extended leave owing to unavoidable circumstances, causing your project to halt for a while. This is something no one could have anticipated. Does this risk seem daunting to you? Well, you’re not alone!

Many project managers like you try to avoid unexpected risks but still run into them. The fact is that every project has a certain risk of failure—no matter how hard you try to avoid it. Project risk management is not an easy task and unanticipated risks can strike at any moment, so don’t blame yourself. Instead, plan for them beforehand so your project plans don’t fail.

In this article, we explore four risk management strategies to help increase your project’s chances of success. But first, let’s understand the basics of risk management strategies and why it’s important to have them in place.

What is a risk management strategy?

A risk management strategy is the process of proactively identifying, assessing, and responding to project risks before they cause any serious issues or impact the project completion timeline. This process also involves regularly updating and revisiting the risk assessment based on new information or actions taken.

As a project manager, you must know how to manage project risks effectively, and for that, you need an enterprise risk management plan to identify, evaluate, and control risks. By monitoring risks closely, you can develop mitigation plans to lessen the potential impact of risks.

Since implementing strategic risk management techniques ensures a project stays on track and succeeds, many businesses look for the “ability to manage project risks” when recruiting project managers. According to Capterra’s 2021 Project Management User survey, 52% of project managers say managing project risks is a critical part of their job performance and included in their annual review. (See the survey methodology here.)

When should you include risk management strategies?

The project management process involves project planning, execution, monitoring and control, and closure. When it comes to risk management methods, experts advise including them during the initial stages (i.e., planning) because there’s still time to make adjustments and fine-tune things. This allows for a more proactive and efficient response to any risks that may emerge.

However, you must also understand that it may not always be possible to incorporate all risk management strategies during the early stages, as many moving components are involved.

For each risk management strategy discussed below, we’ve included a few factors to help you decide the right time to employ the strategy.

Risk management strategies
1

Risk avoidance

It’s a plan employed to prevent any possible risks from occurring in the first place. A risk avoidance plan typically includes changing the project timeline or scope or hiring more staff to manage issues. This strategy reduces the likelihood of any significant risks arising during the project tenure.

Why include risk avoidance?

Prevention is always better than cure. With risk avoidance, you can reduce the possibility of potential project risks by planning for them in advance and developing contingency plans to mitigate them.

It’s less expensive and less time-consuming to address risks before they become full-blown problems that have already caused damage. By anticipating risks and devising plans to deal with them, you minimize the odds of those risks disrupting the project schedule.

When to include risk avoidance?

It depends on your specific project and its unique risks. However, in general, try including a risk avoidance strategy as soon as possible. This will help minimize the possibility of risks right from the beginning of the project.

Factors to consider when deciding whether or not to include a risk avoidance strategy in your project:

  • The likelihood of risk occurring.
  • The potential severity of consequences if risk occurs.
  • The cost and feasibility of implementing a risk avoidance strategy.
  • The impact of the risk avoidance strategy on the project schedule and budget.
2

Risk reduction

It’s a strategy used to minimize the negative effects of risk on a project. A risk reduction plan includes establishing clear procedures and protocols, developing a backup plan for unforeseen risks, and identifying and mitigating potential risks early on in the project planning stage.

Why include risk reduction?

A risk reduction strategy ensures potential risks are identified and dealt with before they cause serious issues. Incorporating this strategy in your project plan means minimizing the chances of something going wrong and damaging your project’s success.

By reducing the severity of risks, you minimize negative impact, thus keeping your project on schedule. You stay ahead of issues and keep the project under control by planning for various risks and their appropriate responses.

When to include risk reduction?

There is no one-size-fits-all answer to this question; it depends on the specific project and the risks associated with it. However, experts suggest that project managers should include this strategy specifically during the risk analysis process for optimal outcomes.

Questions to ask when deciding whether or not to include a risk reduction strategy in your project:

  • What are the potential risks, and how likely are they to occur?
  • What are the consequences of a risk event happening?
  • How much money and time can be invested in reducing the risk?
  • Are there any existing risk reduction strategies that can be used?
3

Risk transferring

As the name implies, it’s the process of transferring risk from one entity to another. This is usually done through contract negotiations, insurance policies, or other means. By transferring risk, organizations hope to protect themselves from potential related losses.

Why include risk transferring?

Managing risk well is one of the most important aspects of a successful project. By transferring risk to another party, you can mitigate the impact on the project if something goes wrong, protecting the project from potential losses or setbacks.

Transferring risk also helps reduce risk exposure and financial liability for your business. It speeds up the overall project by getting rid of uncertainty or ambiguity.

When to include risk transferring?

Again, there is no definite answer to this question; it varies per the project and the risks involved. However, it’s advised to include a risk transferring strategy as early as possible—preferably during the planning stage. This will help you take all the necessary steps to reduce or eliminate any potential risk.

Factors to consider when deciding whether or not to include a risk transferring strategy in your project:

  • The probability of risk occurring.
  • Any applicable legal requirements or restrictions.
  • The available options for transferring risk.
  • The risks and benefits of not transferring risk.
4

Risk acceptance

This strategy refers to the decision made by the project manager to either accept or reject risk. The choice is made for various reasons, including (but not limited to) the risk isn’t worth taking action on, it’s low probability and big impact, and there’s no known way to reduce it.

Why include risk acceptance?

By accepting risks, you acknowledge that they exist and can potentially impact the project. This allows you to put in place mitigation measures and contingency plans to deal with them if they occur. Risk acceptance also allows you to focus more on the positive aspects of your project while still being prepared for potential problems.

When to include risk acceptance?

A common time to use risk acceptance in project management is during the planning phase. This is when you decide which risks to take on and how to address them down the line. Another time is during the monitoring and controlling phase. This is when you ensure that all accepted risks are being managed properly.

Factors to consider when deciding whether or not to include a risk acceptance strategy in your project:

  • The potential impact of risk if it does occur.
  • The availability of any other risk mitigation strategy.
  • The money and time budgeted for managing risks in the project.

Use risk management software for successful outcomes

Every project is different and will carry its own unique set of risks. Therefore, you must tailor your risk management plan to fit the specific needs of your project. While there is no one-size-fits-all solution, these four strategies provide a good starting point. By understanding these strategies and knowing when to use them, you can ensure a successful outcome for your project.

You can use risk management software to implement these risk management strategies. The software helps identify and address all project threats in a timely manner. Here’s how it works for each strategy:

  • Risk avoidance: Risk management software analyzes your project data and provides insights to help you identify potential risks. Once you identify the risks, you can take steps to avoid them.
  • Risk reduction: By analyzing your project data, risk management software helps you devise ways to reduce the impact of risks. For example, if you know that a certain supplier is unreliable, you can source your supplies from another vendor.
  • Risk transferring: Risk management software helps identify risks that can be transferred to another party. For example, you can purchase insurance to transfer the risk of asset loss to an insurance company.
  • Risk acceptance: In some cases, you may have to accept certain risks and take steps to mitigate their impact. For example, if there is a risk of theft, you can install security cameras and hire security guards. Risk management software helps identify such risks, assess their impact, and develop mitigation plans.

This video explores the pros and cons of using risk management software to help you decide if the tool is right for your project needs.

 

Check out Capterra’s list of the best integrated risk management software solutions for your projects.


Survey methodology

Capterra’s Project Management User Survey was conducted in March 2021 among 422 US-based project managers, 367 of which are project management software users, to find out who is using project management software, the features they use or don’t, which ones they wish they had used, and what results they’ve seen from their investment. The qualified respondents are decision-makers or have significant involvement with 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.


Looking for Project Management software? Check out Capterra's list of the best Project Management software solutions.

About the Author

Shubham Gupta

Shubham Gupta

Writer @Capterra, emphasizing small business market trends, software needs, and all things tech. E-volunteering for Breakthrough India (a human rights organization) as a social change actor. Love the aroma of coffee, deep conversations, and jotting down the fortuitous feelings on my blog site/social media. When I am not working, you can find me with my dog - walking, talking, and having fun.

Related Reading

Comments

No comments yet. Be the first!

Comment on this article:

Comment Guidelines:
All comments are moderated before publication and must meet our guidelines. Comments must be substantive, professional, and avoid self promotion. Moderators use discretion when approving comments.

For example, comments may not:
• Contain personal information like phone numbers or email addresses
• Be self-promotional or link to other websites
• Contain hateful or disparaging language
• Use fake names or spam content
Your privacy is important to us. Check out our Privacy Policy.