• There are eight main project risk categories: scope creep, performance risk, external hazard risk, technology risk, operational risk, communication risk, cost risk, and skill resource resource.
  • Some risk management and mitigation strategies include setting a clear project scope, establishing regular check-ins, and training all team members on necessary technology.
  • Anticipating project management risk is crucial for a project’s accomplishment.

Being proactive with risk analysis helps set realistic objectives, while creating a complete risk management plan create safeguards against time-consuming and costly oversights. Read on to discover various project risks examples that can emerge during the course of a project, and what to do about them.

  • 04/24/2024, Kara Sherrer: Revised the copy for clarity and conciseness, reformatted the article to make it easier to read, and added additional software examples to better illustrate the different types of common project risk.
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    Cost risks

    Cost risk refers to the possibility of a project exceeding its allocated budget, a common risk management issue. This financial risk can occur for various reasons such as poor initial budgeting, mid-project scope changes, unforeseen complications, or incorrect cost estimations. Cost overruns can hinder the project’s progress and may stall its completion if the budget cannot be adjusted or supplemented.

    An example of project budget in Wrike.
    Figure F: An example of project budget in Wrike. Image: Wrike

    How to manage cost risks

    • Use budgeting tools such as those offered by Wrike (Figure F) to set an initial budget and monitor spend throughout the project to prevent overages. Budget management tools are an integral part of risk management processes in several industries. One good example is construction risk management, an industry that often deals with cost issues.
    • If possible, set aside a contingency plan or fund so that you have some extra resources on hand in case extra costs arise.
    • Revisit vendor contracts and negotiate them or comparison shops to see if you can realize any additional cost savings.
    • Conduct regular project risk assessments to identify potential cost overages and create strategies to address them.

    Scope creep

    Scope risk, or scope creep, refers to the unexpected and uncontrolled expansion of a project’s objectives beyond its original intentions. This risk category typically occurs when project goals aren’t precisely outlined from the start or when requirements change partway through the project.

    Smartsheet project scope template
    Figure A: Smartsheet project scope template. Image: Smartsheet

    How to manage scope creep

    • Before kicking off a project, take advantage of project scope templates like the ones offered by Smartsheet project management software (Figure A) to create clear expectations and deadlines up front.
    • Engage with stakeholders from the very beginning so that all necessary decision makers can help with the creation and the approval of the project scope.
    • Schedule regular progress reviews and risk assessments so you can ensure that the initial project scope is being followed and deal with scope creep as it occurs.

    Performance risks

    Performance risk occurs when a project does not fulfill the expectations and requirements set forth during project planning. Even though a product may have been delivered on time and on budget, that doesn’t guarantee project success, which is the definition of performance risk.

    An example of a project performance dashboard in monday work management.
    Figure B: An example of a project performance dashboard in monday work management. Image: monday.com

    How to manage performance risks

    • Identify potential performance hazards from the start of a project by assessing the current market landscape, investigating users’ needs, and staying ahead of technological shifts.
    • Use project management software analytics, like this dashboard from monday.com (Figure B), to track project performance and maintain real-time oversight of processes and milestones.
    • Foster transparent communication among your project team and conduct regular risk assessments so that performance-related issues can be identified early and often.

    External hazard risks

    External hazard risk refers to unpredictable events stemming from external factors beyond project management mistakes. These project risks can be natural, such as climate events, or man-made, like vandalism, terrorism, or societal disruptions. These factors can significantly affect the project’s timeline, cost, and quality.

    How to manage external hazard risks

    • Use historical and political data to regularly asses external risks bases on a project’s locale and nature; enterprise risk management software can be very beneficial for creating these kinds of forecasts.
    • Have contingency plans ready, such as alternate work sites or emergency resources, as well as insurance policies to cover potential damages and delays.
    • Incorporate practices like safety drills or supply stocking so that your personnel will be safe and prepared in the event of an emergency.

    Technology risks

    Technology risk covers the potential challenges and threats posed by the hardware and software used to complete the project. These project risks range from technical failures, cyberattacks, and system breaches to the fast-paced evolution of technology itself, including project management software.

    Workspace permissions in Trello.
    Figure C: Workspace permissions in Trello. Image: Trello

    How to manage technology risks

    • Institute robust cybersecurity measures, including firewalls, encryption, and routine security audits, to fend off cyber threats and technical risk.
    • Carefully set roles and permission for your project management software, like the above example in Trello (Figure C).
    • Create backup systems and data storage to counteract technical risks, preventing data loss or unplanned downtime, and have a contingency plan in place in case of technological disruptions.
    • Conduct regular training sessions to keep personnel updated on new technologies and how to navigate them and on how to prevent cyber attacks.

    Operational risks

    Operational risk refers to potential disruptions arising from internal processes, people, systems, and project management methodologies. It also encompasses external risk events that impact the day-to-day functioning of a project, such as changes made by vendors or suppliers.

    The workload management view in ClickUp.
    Figure D: The workload management view in ClickUp. Image: ClickUp

    How to manage operational risks

    • Use workload management software, such as ClickUp (Figure D), to review workflow and capacity planning and spot operational risks before they arise.
    • Ease the transition by ensuring your project team is well-prepared and has time to adjust to major operational changes.
    • Consider scheduling regular team meetings to discuss upcoming changes and provide additional training if new processes or systems are introduced.

    Communication risks

    Miscommunication underlies many project issues, leading to missed deadlines, excess project spend, shifting requirements, uncompleted tasks, and other project management issues. The communication needs to be clear and thorough as well as frequent; if conversations are vague or contradictory, that can cause just as many problems as communicating irregularly or not at all.

    Messaging your entire project team directly in Asana.
    Figure E: Messaging your entire project team directly in Asana. Image: Asana

    How to manage communication risks

    • Utilize a central tool or platform to keep everyone on the same page, like Asana project management software that offers in-app messaging (Figure E), which will help to prevent siloed work.
    • Encourage open communication channels so team members can ask questions, seek clarification, and provide feedback.
    • Schedule regular meetings with stakeholders and team members to foster collaboration and engage in risk identification.
    • Implement strategies to bridge cultural and linguistic differences if the team is diverse.

    Skills resource risks

    Skills resource risk refers to the potential shortfalls in the necessary skills, expertise, or knowledge among the project team members. Such risks can emerge from a range of factors, from team member turnover to lack of training. This can mean the project management team needs to be more adequately prepared to meet project requirements or handle unexpected challenges.

    How to manage skill resource risks

    • Assess required skills and compare them with existing team members to pinpoint areas for improvement.
    • Invest in training programs that equip team members for specific project demands; a learning management system can help you create custom courses if you can’t find an out-of-the-box one that works.
    • Embrace a flexible staffing approach and alternate between permanent and contract roles as needed, especially when niche skills are required.

    FAQs

    Project risk analysis is the process of identifying, assessing, and prioritizing uncertainties in a project. It aims to minimize potential negative outcomes by developing strategies to address and mitigate risks, ensuring the project stays on track to meet its objectives.

    A risk register is a centralized document or tool that lists identified risks, their severity, and actions to manage them. A risk register helps teams to track and prioritize strategic risks, ensure systematic risk response, and promote proactive project 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:

    Better decision making

    Risk management provides quality data that helps make informed decisions. It allows project stakeholders and project managers to understand project risks and their potential impact, leading to more effective decision-making processes.

    Fewer surprises

    Effective risk management can help identify potential risks early, allowing teams to address them before they become significant problems. This leads to fewer surprises during the project lifecycle.

    Increased return on investment

    If project managers can manage an unforeseen risk due to careful project planning, everyone wins and the resulting return on investment should be high for all stakeholders involved.

    Reduced money, time, and resources needed

    Project risk management helps to identify potential risks that could impact the project’s budget and timeline. By managing risk early, project managers can save resources, money, and time that would otherwise be spent addressing these issues after they occur.