Managers can avoid significant threats and capitalize on opportunities by understanding and planning for risks. Anticipating risks in project management is crucial for a project’s accomplishment. Understanding potential pitfalls ensures that teams are well-prepared and set up for success.
Being proactive with risk analysis helps set realistic objectives and safeguards against time-consuming and costly oversights. Here are various project risk management examples that can emerge during the course of a project.
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Scope risk, or “scope creep”, refers to the unexpected and uncontrolled expansion of a project’s objectives beyond its original intentions. This typically happens when project goals aren’t precisely outlined from the start or when requirements change partway through the project.
Imagine a mobile app development project where the initial requirement was to build a simple weather app. Midway through, stakeholders decide they want a feature that provides weather-based outfit recommendations. This addition, if not initially accounted for, can stretch resources, time, and budget.
Performance risk pertains to a project’s potential not meeting its predefined success criteria or expectations. It simply means the project does not deliver the anticipated benefits or results despite meeting budgetary and time constraints.
Consider a software company that develops an application, adhering to its budget and time constraints. The application functions perfectly upon launch but fails to attract users or generate the expected revenue. Though the project was completed as planned, it didn’t achieve the desired impact in the market.
External hazard risks
External hazard risks refers to unpredictable events stemming from external factors beyond project management’s control. These risks can be natural, such as climatic events, or man-made, like vandalism, terrorism, or societal disruptions. These factors can significantly affect the project’s timeline, cost, and quality.
Imagine a construction company building a high-rise in a coastal city. While they’ve accounted for standard weather conditions, an unexpected severe storm surge floods the construction site, causing damage and halting work. This natural disaster was beyond the company’s control but has now affected the project’s budget and timeline.
Technology risks cover the potential challenges and threats posed by the integration and dependency on technology within a project. These project risks range from technical failures, cyber-attacks, and system breaches to the fast-paced evolution of technology itself.
Consider a company implementing a new Customer Relationship Management (CRM) system. If the software isn’t properly vetted for compatibility, it might not integrate well with existing systems. Moreover, without proper security measures, the company’s customer data could be exposed to cyber threats.
Operational risk pertains to potential disruptions arising from internal processes, people, systems, or external events that impact the day-to-day functioning of a project. Such risks might manifest from changes in team roles, shifts in management, procedural changes, or system failures. These events can interrupt the smooth execution of a project and hinder its success.
Consider a software development company that adopts a new project management tool. If the migration is smooth, the team might need help with the transition, leading to miscommunication, delays in task assignments, or even data losses.
Lack of clarity in a project is a significant risk that arises from miscommunication, ambiguous project scopes, and unclear timelines. This uncertainty can lead to isolated tasks, exceeding budgetary constraints, missing deadlines, shifting project requirements, altering project directions, or ultimately resulting in unsatisfactory outcomes. It’s essentially a byproduct of not having well-defined parameters or transparent communication throughout the project’s lifespan.
Imagine a mobile app development team beginning work based on a basic overview without detailed specifications. As they progressed, they realized the stakeholders had different functionalities and design aesthetics in mind. This lack of clarity means the team has to redo certain sections, leading to delays and increased costs.
Cost risk refers to the potential for a project to exceed its allocated budget. This can occur for various reasons, such as poor initial budgeting, scope changes mid-project, unforeseen complications, or inaccuracies in cost estimation. Overruns can hinder the project’s progress and may stall its completion if the budget cannot be adjusted or supplemented.
For example, a company plans to upgrade its IT infrastructure. While budgeting, they overlooked the costs associated with training staff on the new systems. Midway through the project, they realize their oversight. Now, they’re faced with additional costs outside the initial budget, putting the project at risk of going over budget or needing to be completed to its full potential.
Skills resource risks
Skills resource risk pertains to the potential shortfalls in the necessary skills, expertise, or knowledge among the project team members. This can mean the team needs to be more adequately prepared to meet project requirements or handle unexpected challenges. Such risks can emerge from various factors, from team member turnover to unexpected complexities or even changes in project scope.
This project risk manifests in a software development project where team members lack expertise in a newly required programming language. The unexpected shift in technical requirements can lead to delays in the project timeline, require additional training, and increase costs, impacting the overall quality and stakeholder satisfaction.
What are the benefits of project risk management?
Project risk management isn’t just about averting pitfalls; it’s a strategic approach that paves the way for smoother project execution. Let’s explore these benefits in detail:
What project risk management tool can you use?
Selecting the right tool is crucial for effective project risk management. With myriad options available, it’s essential to find one that aligns with your project’s needs and complexity. Here are some options:
Wrike offers advanced risk management software to protect businesses during crucial times. It aids teams in staying on track, providing instant alerts, and offering detailed insights through its robust risk management tools.
Wrike project risk management features:
Smartsheet offers a dynamic platform tailored to match the evolving needs of project teams. By providing real-time visibility and reporting, Smartsheet ensures that teams are always informed and can proactively address potential risks.
Smartsheet project risk management features:
ClickUp is a comprehensive platform for productivity, allowing teams to monitor project updates, manage risks, and collaborate seamlessly. It offers a feature-rich experience that aids in work management and is designed to benefit teams across various industries.
ClickUp project risk management features:
Choosing the right project management software for your business
If you’re ready to take the plunge into a new project management solution, TechnologyAdvice has you covered. For a comprehensive list of options and a comparison tool, check out our Project Management Software Guide.
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.
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.