February 2, 2023

8 Project Risks Examples & How to Manage Them

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Success as a project manager is a thrill, but not every operation runs smoothly. Project managers can get slammed with disasters instantly. That’s why it’s crucial to study project risk management, which is the prudent practice of careful planning to avoid mishaps.

So, what should you look out for on your next project? Let’s see some examples across four types of risks.

Financial risks examples

Running over budget

Let’s say you’re overseeing the development of a new software title. You initially budgeted $10 million for hiring costs, but a strong job market has sent compensation expectations soaring. Now, you need $13 million to nab top talent and avoid understaffing. This excess makes you over budget, a common risk for project managers.

The solution: Luckily, there are several ways to avoid this dilemma. First, you’ll want to factor in some wiggle room to allow for increased expenses. Budgeting an additional 10% on top of your best estimate is a good starting point.

Once you’ve added some financial cushioning, you’ll want to find every edge to keep costs low. If you’re using project management software, such as Trello or Liquidplanner, set up fields to track your project’s budget, progress, and strategy in real time with helpful alerts—it’ll make it easier to shift gears when you need to. For example, if labor costs are higher than expected, you can immediately shift toward contractors instead of recruiting pricey in-house employees.

Not receiving timely payments

A business’s accounts receivable—bills your clients owe you—are a crucial revenue source. Without timely payment, it can be difficult to offset day-to-day expenses.

For example, say you’re managing sales projects. Reviewing numbers and project progress, you and a sales manager agree to spend $10,000 on a weekend retreat for top-performing sales employees. Then multiple high-value customers fail to pay on time. Since those payments help pay for most of the department expenses, the sales department is now stuck with unpaid accounts receivable. Now, that $10,000 weekend requires borrowing from other departments until you can get customers to pay up.

The solution: To avoid this scenario, avoid relying on funds you haven’t yet received. But if your industry can’t avoid this practice, create an emergency fund. This way, you’ll still have the cash to keep operations flowing while you chase down payment.

And to recoup those funds, you’ll need a durable debt collection strategy. This plan could involve using a third-party recovery service, or perhaps even legal action (which may then pass out of your hands as a project manager).

Physical safety risks examples

Worker injuries or death

Indeed, the death of a worker is the worst thing imaginable to anyone, including a project manager. But even minor injuries can spawn a nightmare. Every incident could mean insurance headaches, legal issues, and damage to company reputation, among other troubles.

Plus, regulatory agencies, like the Occupational Safety and Health Administration (OSHA), can deal a fatal blow to a business if safety violations are unearthed.

The solution: It’s essential to enforce safety regulations and keep people well-trained. The safer way of doing things is a wiser route. So planning meticulously with timeline and budgeting cushions can give you the space you need to perform safety checks and trainings. Spending extra time to prevent accidents is an investment worth making.

Trespassing and physical security

If your industry centers around physical resources, such as production parts or expensive tools, you’ll need adequate security to protect your assets. Say there’s a theft on a project site—it could cut into the project budget and cause delays as you and other stakeholders work to replace what’s missing.

The solution: If security belongs with another department or person, be sure to include them on project planning when it makes sense. They can give you estimates and details to further flesh out the plan. Sometimes, the mere presence of security measures could suffice. For example, bright exterior lights are an effective deterrent against opportunistic thieves during the night.

Deterrence isn’t always enough, however. Some large projects require highly sophisticated defenses. For example, a construction site may require fencing around the perimeter and a team of armed guards patrolling 24/7.

Even if your projects are primarily digital, such as software development, you’ll still need to implement security measures or rope in other specialists or departments to ensure everything is secure. You may need both cybersecurity measures and physical security to protect your computer-based resources.

Technical risks examples

Poor quality control

You’ve completed your app build, put it through a quick testing phase, and released it to the public. But now users are reporting bugs left and right, and it’s causing a lot more problems than originally anticipated, slowing down other projects and skyrocketing project maintenance costs.

The solution: To avoid this scenario, ensure proper quality control checks are in place throughout the entire project management cycle. This can mean conducting regular check-ins with workers to detect issues early on or estimating longer timeframes and higher costs to give the project room.

Furthermore, you’ll want to encourage uniformity and simplicity throughout the project. For example, use one trusted supplier instead of multiple vendors sporting varying track records, timeframes, and costs.

You’ll also want to ensure all workers are on the same page. For example, if one team of employees has a supervisor sign off on all work, then every other team should also have their supervisor review and verify finished work. This approach ensures an even pattern of quality control.

Not having properly skilled workers

The team you’re on has struggled to hire talent and desperately needs the staff. As a result, hasty decisions were made to fill seats and get production on track. It quickly becomes apparent that there are knowledge gaps across the newer staff, and the team ends up spending far too much time on training and quality assurance to make up for the deficit—resulting in massive project delays.

The solution: To get things done right the first time, you’ll need to vet a person’s credentials properly and relay your team’s needs accurately to the recruiter or recruiting team. 

For example, if you need a website, a purist C++ programmer won’t cut it. You’ll need someone with deep Javascript and CSS knowledge at a minimum. A similarly close look at someone’s specific credentials is also necessary for most other industries.

And if you’ve had issues hiring under-qualified staff in the past, talk with hiring managers to better outline skill requirements and experience. You may even have to discuss possible workarounds if hiring is delayed or slower than expected.

Also, people with highly technical qualifications tend to command higher salaries. So to avoid going over budget, as detailed above, you’ll need to factor in a potentially above-average market rate for such a talented individual. This increased expense might increase a project’s total price, but it’s a sound investment to ensure the job gets completed flawlessly.

Contractual risks examples

Violation of confidentiality agreements

As the old phrase goes, “Loose lips sink ships.” As a project manager, “ships” could mean your project or even the company’s success.

Usually, contracts include confidentiality agreements that mandate everyone involved keeps project information secret. But suppose someone posts sensitive details on social media. The client is unhappy, and as a result, the project and team suffers.

The solution: While this sounds intimidating, the reality is secrets might leak unintentionally. Legal action is often the only remedy once the damage has occurred—so as soon as you’re aware, make sure the legal team has been informed so they can handle the situation delicately.

On your end, you’ll want to focus on preventing information leaks as much as possible. A sound strategy can involve:

  • Limiting how many people learn confidential details
  • Having every worker sign durable confidentiality agreements
  • Actively monitoring social media for unauthorized disclosures

These are just a few ways to protect confidential details. Ultimately, it’s best to consult with an attorney to understand your project’s best information defense plan.

Not accounting for union or employee-specific requirements

Sometimes, workers require more unique accommodations. For example, an employee covered under a union might have restrictions on how many hours they can work per day or week. Or a contractor might require an accommodation under the Americans with Disabilities Act (ADA).

Say a hiring manager fails to consider these details and relay them properly to stakeholders who need to know. Accommodations aren’t met, issues ensue, and projects are derailed as processes are reworked.

The solution: As a project manager, you need to be ready to make adjustments at any given moment. In some cases, you may not get these details until processes and plans have already been made. Once you are aware, involve HR if they aren’t already included, and gather any details you’re permitted to know. You may want to talk to the employee directly to get the full picture without crossing boundaries. Then you can use these details to offer alternatives and solutions.

No matter what a union or a reasonable ADA accommodation requires, you must ensure your project’s timeline, budget, and labor practices account for these special considerations.

Bottom line for managing project risk

Overall, project managers must prepare for the unexpected. Going over budget, losing equipment to theft, and failing to adhere to employee union policies are only three potential issues that can sprout. But with proper planning, such as adding an extra 10% to your initial budget forecast, you can avoid disaster.

1 monday.com

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monday.com Work OS is the project management software that helps you and your team plan, execute, and track projects and workflows in one collaborative space. Manage everything from simple to complex projects more efficiently with the help of visual boards, 200+ ready-made templates, clever no-code automations, and easy integrations. In addition, custom dashboards simplify reporting, so you can evaluate your progress and make data-driven decisions.

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2 Wrike

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Tackle complex projects with Wrike’s award-winning project management software. Break projects into simple steps, assign tasks to team members, and visualize progress with Gantt charts, Kanban boards, and calendars. Manage resource allocation and forecasting with software that’s easy to launch. Automation and AI features strip away time-consuming admin tasks so you can do the best work of your life. Streamline your practices, align your team, and ensure you hit deadlines and stay on budget.

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3 ClickUp

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ClickUp is one of the highest-rated project management tools today. Use Docs, Reminders, Goals, Calendars, Chat, scheduling, assigned comments, custom views, & more with this all-in-one project management tool.

Used by 800,000+ teams in companies like Airbnb, Google, and Uber, it brings all of your projects into a single app! Built for teams of all sizes and industries, Our fully customizable & proprietary features make it a must-have for anyone wanting to keep project management in one place.

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