The project risk management process in 6 clear steps

Julia Martins contributor headshotJulia MartinsJanuary 29th, 20215 min read
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You may have noticed your projects are most successful when you plan and manage them effectively. Developing your project management skills and implementing tried-and-true project management strategies can help. But even the most well-developed projects will have risks.

The best way to prevent project risks is to face them, head-on. Proactively planning for these uncertain events can help you steer your project team into calm waters—instead of getting caught in the middle of an unexpected storm. If you’ve never developed a risk management plan before, you may have suffered the consequences of unexpected risks on past projects. That’s where this article comes in. Learn more about project risk management and try these six easy steps to build your own risk management plan.

What is project risk management?

Project risk management is the practice of proactively identifying, analyzing, and responding to any potential project risks. A project risk is anything that might impact a project’s success by either delaying the project timeline, overloading the budget, or leading to reduced project performance in some other way.

With effective risk management, you can address any potential risks that might crop up during the lifecycle of a project and mitigate those risks so your project stays on track, on budget, and on target.

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When should I think about project risk management?

Good project risk management isn’t reactive—it’s proactive. Ideally, you should come up with your risk management plan during the project planning phase. That way, you can best identify any potential risks and their impact, and monitor those risks during the project. Instead of being caught unaware, you’ll have your eye on those risks in case they do become troublesome.

Alternatively, if you want to address project risks for a process that's already been kicked off, consider using the theory of constraints. The theory of constraints is a framework to help you identify the weakest link in a project or process, and address it to reduce risk.

Read: The beginner’s guide to the theory of constraints

Common risk scenarios

Is risk management really important for my project?

Truthfully, not every project needs a risk management plan. If your project is a relatively straightforward process, you might just need a quick chat with your team members to brainstorm and address any potential risks. These projects are small in scope, don’t take up a lot of team member time or outside resources (like budget or bandwidth), and may be processes you’ve successfully completed before.

But if you’re working on a complex initiative that involves a lot of cross-functional project stakeholders and important resources, you’d likely benefit from a project risk management plan. These are projects where you may be investing a significant amount of team member time and bandwidth, or preparing a large financial investment. With a risk management plan, you can ensure the project stays within the project scope and, ultimately, succeeds.

Read: What is a project stakeholder analysis and why is it important?

6 steps to manage project risk

Managing project risk is all about identifying, planning for, and monitoring potential risk. Not everything will go wrong. It’s possible that nothing goes wrong. But proactive risk assessment and incident management can help you be prepared and course correct quickly, so you still hit all of your project objectives on time and within budget.

If you’re getting started with project risk management, here are six steps to help you do it. For each step, we’ve built out a project risk plan in Asana to show you what a potential risk management plan could look like for your next project.

1. Identify

The first step to creating a project risk management process is to put together a list of all potential project risk events. A risk event is anything that could impact your project schedule, budget, or your ultimate project success.

There are a variety of ways to identify project risks:

  • Interview project stakeholders. The best way to identify project risks is to ask stakeholders, leadership, and experts in the topic. If they’ve run similar projects, ask them what risks they ran into and how you can prevent them. Even if they haven’t run similar projects, make sure to check in with key project stakeholders to ensure you’re not missing any important project risks.

  • Brainstorm potential risks with your project team. Your project team are the people who will be working on this project with you day in and day out. Before you get started on your project, ask them what they see as potential risks. Consider hosting a brainstorming session to identify serious risks to your project.

  • Document and ratify your assumptions. According to the Guide to Project Management Body of Knowledge (PMBOK®)assumptions are anything about the project you think will be true—without being a guaranteed fact. You may base project decisions on your assumptions without even realizing you’re doing so. But by doing so—without documenting and verifying your assumptions—you open yourself up for project risk. If the assumptions you have aren’t actually true, the foundations of your project may become unstable, which may jeopardize your project success.

  • Check your checklists. See if your team or department has built a checklist of common risks. If they haven’t, start documenting one to set yourself up for success on future projects.

As you identify important risk events, put them into a risk register. As the name suggests, a risk register is a dedicated list of all of your project risks. Your risk register should answer several questions about the risks you’ve identified, including:

  • What is the likelihood of this risk event?

  • What is the impact and severity if the risk occurs?

  • What is our risk response plan?

  • Given the likelihood and impact, what is the priority level?

  • Who owns this risk?

Don’t worry if you can’t figure all of this out now—some of these will come in the later steps.

Project risk management blank risk register

2. Analyze

For each risk you’ve identified, analyze the likelihood, severity, and response plan. Depending on the complexity of your project risks, consider doing your analysis with your project team or with key stakeholders. To decide severity, think of how the risk will impact your project objectives. Will it delay your timeline, undermine your budget, or reduce the impact of your project deliverables?

Then, for each risk, come up with a response plan. Your response plan isn’t necessarily an action item for right now—rather, it’s what your team will do to quickly pivot and address the risk, if it comes to life.

Project risk management risk register with severityTry project planning in Asana

3. Prioritize

To prioritize your risks, ask yourself: based on your risk register and analysis, which risks are most likely to happen and most potentially damaging to your project’s success? The most important risks to address are those that have a high probability of happening and a high severity. You’ll want to monitor and respond to all potential risks, but these are the ones you want to pay most attention to, and check in on most frequently.

Project risk management prioritized risk register

4. Assign

This step is optional—but recommended. Even though your risks haven’t happened yet, it’s helpful to assign a risk owner early, so your team members are prepared. This person should not only monitor the risk, but they’ll also be the point person for developing a risk mitigation plan, should it seem like the risk is, for lack of better words, at risk of happening.

Project risk management risk register

5. Monitor

At this point, your project has begun. Hopefully, you’re on track and tracking well towards your ultimate project objectives. But make sure you continue actively monitoring your risks in order to avoid any nasty surprises. To do this:

  • Send regular status updates so your project team and project stakeholders are all on the same page. Remember: risk management should be proactive, not reactive.

  • Check in asynchronously with your individual risk managers. Each risk “owner” should be monitoring their risk event for red flags. As the project manager or team lead, check in with them regularly to make sure everything is going well.

  • Keep an eye on your risk register for any updates. If the likelihood of a risk changes, or the risk plan is updated, that change should be reflected in your risk register. Like most elements of project management, your risk management plan should be a living document that your team uses to stay on track.

Collaboration is also really important at this stage. Too often, potential problems or new risks crop up that a team member noticed, but maybe didn’t feel empowered to flag right away. Make sure you’re building a culture of team collaboration, openness, and honesty.

Read: 10 easy steps to boost team collaboration

6. Respond

If at any point a risk becomes reality, it’s time to respond. Hopefully, with your risk register and project risk management plan in place, you have a great contingency plan to deal with risks.

Remember: risk management isn’t about preventing risks—though it does help with that. Rather, project risk management is the practice of preparing for risks and having a great plan in place, so you’re never caught flatfooted.

Incorporate project risk management into your next project planning session

Great projects are projects that have great plans—and risk management is a key part of that early-stage planning process. Make sure to incorporate your project risk management plan into any early-stage planning documents, like your project brief. That way, everyone has access to your risk management plan and they can proactively react to any risks that do occur.

For more project planning guidance, learn how to create a project management plan.

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