Projects are unique. The parts and steps may be generic, but the factors that impact your project and the the end result will be different every time. That is why projects will also always include various doubts, uncertainties, and, unfortunately, risks.
What Is a Risk?
A risk is one of several possibilities for the future. Generally, you want to avoid risks because they can hurt your project (i.e., not meeting cost, quality, or time objectives).
The difference between the amount of time/resources you forecast vs. the actual time/resources is called a gap.
Gaps between an estimate at the start of the project and what happens can put the entire project at risk. Therefore, a wise project manager will try to identify the risks to limit their potential impact.
Let’s use an example to help explain the risk management vocabulary.
I love to explore California beaches that have beautiful cliffs, but cliffs can be dangerous. If I walk too close to the edge, I risk hurting myself if I fall. Likewise, if I decide to go for a walk after dark, which I like to do, it’s harder to see the path, and there’s a greater risk of getting injured:
The unstable cliff is dangerous.
The possibility of falling from the cliff is a risk.
This risk could have negative consequences.
I am the object of this risk (or the target).
Walking at night is a risk factor.
On the other hand, the warning signs are a safety factor.
Stakeholders usually create standards. They provide guidelines or technical/qualitative descriptions of products, services, and practices. There are standards for project management that vary throughout the world, such as PRINCE2 (PRojects IN Controlled Environments), which is a structured project management method and practitioner certification program. PRINCE2 emphasizes dividing projects into manageable and controllable stages. It is used in many countries worldwide, including the UK, Western European countries, and Australia.
There are other standards as well, like NFX50-117, that are worth applying in your project management and risk analysis. It distinguishes between unforeseen events, hazards, risks and problems. Let's explore each element a bit more.
1. Unexpected Events
An unexpected event refers to a possible, non-identifiable future event.
You cannot plan for unexpected events. By definition, they will come as a complete surprise. You will have to rely on your skill to deal with these challenges.
We were unlucky with this project (as you will see as we continue with this course). Still, an unexpected event can also be a good thing when it involves something like a new technical solution that makes tasks easier and faster.
During this risk management course, we will focus on bad surprises.
2. Unknown Factors
An unknown factor is a future event that is both possible and identifiable, but you cannot measure now. You cannot be sure of its impact because you don't know the damage these unknown factors could have on the project. However, they can be quite similar to unexpected events.
A risk is a possible and identifiable future event that you can also measure, which we’ll focus on in this course. It is best to measure risks using specific values wherever possible, but you can also use a more arbitrary scale. Don’t worry; we’ll look at this in more detail later on.
A problem is more than just a risk. It's an event that can cause damage and has already occurred. Therefore, you must solve the problem to ensure the future of the project.
You may face problems in the early stages. If you do, you will have to solve them immediately (unless you enjoy the challenge). As mentioned, a problem occurs when a risk becomes a reality.
This diagram gives a summary of these four notions:
Identify Risks Beyond Project Management
When leading a project, focus on the risks that could impact your operational objectives. Those could include ones that prevent you from delivering the project on time (delivery), going over budget (cost), and not doing what you planned (quality).
A project manager is in charge of the operational objectives that allow the team to meet the client’s needs.
The client is primarily interested in results, so make sure that you are only sharing the necessary information. Don’t mix the following risks up:
Operational risks are those that impact your operational objectives (costs – quality – delivery). These affect the project’s completion, and you should take them into account.
Strategic risks are linked to the nature of the project: the creative choices, the social media strategy, the target communications, etc. These risks relate to a communication strategy. The client has accepted them, and you don’t need to put them in your risk analysis.
Identify Risks Within the Workplace
Sometimes personal conflicts among people can keep projects from moving forward or meeting deadlines.
Managing team relationships is part of a project manager’s job and one of the basic skills required for the role. Dealing with team members is one reason why a project manager is part of a project team.
In addition to managing team relationships, you will also have to work with time management. You will build your schedule based on your estimates at the start of the project. If you don’t have this skill, you’ll rely on the various departments’ managers. Whenever you estimate, you must accept that you can make mistakes. The more experience you have, the more accurate you will be.
You'll modify your schedule many times during the project to consider the impact of unexpected events or problems.
A risk is the possibility of a future event that could harm the project.
Risk can become a problem or vanish.
An unexpected event is a possible future unidentified event.
An unknown factor is a possible future event that is identifiable but unmeasurable.
You can measure the impact of a risk on a project.
Risk analysis should only focus on operational risks and not strategic ones linked to the end result of the project.
You now know what a risk is in project management and the vocabulary necessary for analysis. So let’s move to the next chapter and put your knowledge into practice!