Project Risk

With a draft plan in place you’re ready to start work – or are you? That draft plan is assuming that things will go to plan, and does not, for example, allow for

• tasks taking longer than anticipated
• new, necessary tasks being discovered,
• problems being encountered which need to be resolved
• supplies not being available on time
• or anything else that might go wrong.

If there is one golden rule of project management, it is that things will go wrong. We do not live in a perfect world – and our projects are run in that imperfect world. Tasks will take longer than anticipated, people will get sick, vendors will deliver late, and things will break. There is always a risk that things will go wrong, and you need to consider these risks.

Identifying risks allows you to think about ways to prevent those risks from happening, or reducing the impact of those risks. In other words, mitigating the risk, which means to reduce the likelihood or severity of the risk.

What does that mean? Let’s think about the first dimension of risk: likelihood. It might be feasible that your new manufacturing machinery might fail, but if you know it is new, it has warranty, and comes from a reliable vendor, then the risk might be identified as low in likelihood. But if you have experience of an unreliable vendor who provides supplies for your new project, you could rightly identify a likely risk of them again failing to deliver on time. Late delivery might mean you fail to meet your schedule.

The second dimension of risk is impact. Using the above example, if your machinery failed that could be a high impact risk – it would bring the whole production line to a halt, while you have workers standing idle, and deadlines not being met. Another example of one of those workers calling in sick one morning will not stop the whole production line, so might be a low impact risk.

Some risks you identify might not be relevant – you need to be realistic. A low-flying aircraft could crash into your factory, destroying it, and preventing you from manufacturing your new product. Although impact would be extremely high, the likelihood of this happening is very low indeed. So low you should not even consider it – it is not relevant to your project.

So, for each risk you identify you need to assign an impact and a likelihood, and you can create a risk matrix where you identify likelihood and impact as being either High, Medium or Low.

For projects that have many risks or where you need help working out which risks to worry about the most you might weight likelihood and impact with a score. For example assigning a value of 3 to High, 2 to Medium and 1 to Low, and multiplying out to get a total score for risk.

The risks with the highest scores are those you need to worry about – they are more likely to happen, and if they do happen they have a higher impact.

Next steps will be to work out how to mitigate the project risk.