Project management goal: Manage risk in your project

Media image

Risk in a project is determined by two things:

  1. The negative outcome of a project activity.
  2. The likelihood that the outcome will occur.

Or Risk=Impact x probability

For example, a project manager might think that printing a final project report contains the risk that the power will go out prior to printing. But because a power failure is unlikely, the risk can be safely ignored. A more reasonable risk to plan for might be the unavailability of a print shop for a more complex, high-quality shareholder report. For this risk, the project manager should schedule more time for report printing.

For more articles in this series of project management instructional guides, see The project management road map.

ShowProject management tips before you start . . .

Examples of activities with high risk

Here are some typical activities and events that can increase risk in a project.

Risky Activity Description

Critical tasks

   
Pay close attention to tasks that are on the critical path. They have more risk because they have the greatest impact on the end date of the project.

Vendor tasks

   

When you contract with a vendor, request more frequent or detailed progress reports than you would with your own team members.

Vendor tasks that occur at the end of a project have more risk than vendor tasks at other times. Vendors include both contracted people outside your company as well as employees from other areas of your company. Because both are further out of your control than people on your own team, both should be treated the same in terms of risk to a project outcome.

Inexperienced team members

   
Assigning inexperienced workers assigned to work at the end of the project endangers the end date of the project because they might need more ramp-up time. Minimize this risk by scheduling sufficient ramp-up time for new workers.

Projects that are longer than a year’s duration

   
Projects that take longer than a year have more unknowns and thus contain more risk resulting from resource availability, technology changes, market changes, and so on.

Too many tasks occurring at the same time

   
Check for an excessive number of tasks scheduled at the same time. Even if these tasks are being performed by different people, too many of them occurring at the same time creates risk in your project--especially toward the end of the project.

Designing a schedule in the right order

   
Beginning project managers make the mistake of linking task before outlining them. This can lead to a confusion and lot of backtracking. When you start a new project, list and group tasks first so that you see the entire scope of the project and its deliverables. Then, you can start linking tasks to arrive at the ideal schedule.

Ignoring the past

   
If you don’t make a record of project mistakes, you’re bound to repeat them in future projects. Projects often end with closing documents for the purpose of minimizing repeated risks to future projects.

How to manage risks

Here are tricks-of-the-trade project managers use to handle project risks.

Avoid the risk    If a project activity results in serious consequences, avoidance is a good policy. For example, using a manufacturing processes at the same time for two deliverables can put project timing at. Instead, a project manager can avoid the risk by using the manufacturing process sequentially.
Mitigate the risk    Find ways to reduce the likelihood of a risk. For example, you might decide to use a simplified and well-understood manufacturing process if a more innovative and costly one will take too long to install.
Transfer the risk    Control risk by transferring it to an external vendor. For example, if the documentation of a computer sub-system is too large in scope for internal resources to complete on time, contract portions of it to an external vendor.
Learn from the risk Not all risk is bad. Risk can also open the door to opportunity. For example, if after exploring risks in your project, you realize that a software sub-system being developed as part of a larger manufacturing process is itself marketable, you might decide to reassign your best engineers onto further developing the sub-system. Taking experienced engineers off a project creates additional risk in your project, but in this case it might be offset by the opportunity gained.

    Manage risks

    Track the progress of your schedule View task updates from team members to learn where risks lie. You can track progress quickly using the Gantt chart, or you can use a sophisticated earned-value analysis.
    Show the critical path of your project Show tasks that have the greatest impact on the project end date. Look at these tasks first to spot risks in your schedule.
    Choose the right view of your project schedule The risks in a project can’t be seen by using just one view. Be comfortable exploring project risks by using a variety of views.
    Find problems using earned-value analysis Earned-value analysis helps you spot progress risks by asking questions like, “Looking at the amount of work done so far in this project, how much money were we supposed to have spent?” or "Will we finish on time?"
    Understand the tradeoffs when managing a project When you manage a project for risk, you’re going to move around tasks in the schedule. Any change in a project comes at the expense of time, money, or scope.
    Learn how Project schedules tasks When you plan for risk and adjust your schedule, Project might move tasks around unexpectedly. Understand the big “Why?” behind Project’s powerful scheduling engine.
    Create a risk management plan Use this template to keep track of and communicate changes to a project as you manage risks.
    Find risks associated with costs After you enter project costs, examine them to be sure you haven’t created risks to your budget.

    Return to The project management road map

     
     
    Applies to:
    Project Professional 2013, Project Standard 2013