What is Project Risk? (Risk 1)
What is Project Risk? (Risk 1). This is to be the first in a trilogy of blogs on Project Risk Assessment.
The series will include three blogs:
- What is a Project Risk
- The Theory of Project Risk Assessment
- Where does Project Risk Assessment go Wrong?
Starting off from identifying what a risk actually is, we will look at the theory of project risk management. Then finally the difficulties of putting the theory into practice.
Risks are Negative
The way we use the word risk in the English language tends to point to negative outcomes:
- A risk of being late
- A risk of over-spending
- A risk of a supplier letting us down
We jokingly say that “There is a risk I’ll win the lottery”.
All of these negative impacts need to be considered (Minimising Threats):
- How do we prevented the risk from happening? and/or
- How do we mitigated the risk if it does happen?
Whilst it is important to note the negative impacts on your project, it is also important to look at the positive things that could happen.
Chances are Opportunities
Flipping around the above statements, the following can also be said to be true for a project:
- A risk of being early
- A risk of under-spending
- A risk of a supplier delivering more or earlier than was expected
These also need to be considered as risks, and treated in a similar manner (Maximising Opportunities).
- How can we encourage them to happen?
- How can we take advantage if they do happen?
Whilst it is common to brainstorm “What can go wrong” it is not so common to consider the potential positive outcomes.
Being ‘Off-Plan’ is the Risk
So, What is a Project Risk? (Risk 1). A good project manager delivers to the plan (both schedule and budget). Being early is as much of a crime as being late.
It does not matter if you are early, or late. Once you are “off-plan” (in either direction) then your whole project is at risk.
Risky projects need to be closely monitored and progress regularly reported to senior managers. Businesses may choose to have a few risky projects in their portfolio of projects in order to grow, diversify, and because they often have high returns.
A good idea is to split the risk assessment into two parts, firstly looking for the ‘Negatives’ and then looking for the ‘Positives’.
A risk on your project is being away from the scheduled plan or forecasted budget spend. That could be under-spending, or delivery early. If you are off-plan – then there is a risk to the project.