The term “risk” in project management means a probable event that prevents the project manager and their team from achieving the goals of the project or its individual parameters. Risk is associated with specific causes and sources and always has its consequences – in other words, risk affects project outcomes. Project risks are always associated with uncertainty, and based on this, it is necessary to have an idea of the degree of uncertainty and its causes. Uncertainty should be understood as a state of objective conditions in which the project begins to be implemented, but which does not allow foreseeing the results of decisions made due to incompleteness and inaccuracy of information. The degree of uncertainty plays a big role, because the project manager can only manage those risks about which at least a bit of significant information is known.
The identification process establishes and demonstrates project risks that might affect the outcomes. The result of this process is a list of risks sorted according to their severity. Klastorin and Mitchell (2020) emphasize that in project management, risks must be assessed and mitigated at every stage of the project. As with risk planning, risk identification should involve all members of the project team and project stakeholders. Larsson and Larsson (2020) add that “the most common management approach involves competitive procurement practices and subsequent control and surveillance during implementation” (p. 585). Various classifications of risks in project management exists; however, there are several most common and relevant categories that need to be mentioned.
First category is the time-related risks which refer to the probability that the tasks in the project will take longer than planned to complete. It is crucial to remain mindful of deadlines because time is an important resource. If the team spends a lot of time on tasks, the budget expenses also grow. In addition, project stakeholders may become frustrated by constant delays. Next are the budget risks – poor planning can result in a project costing more than budgeted. Usually, the budget is laid before the launch of the project, and the spending is planned by item. If the team does not meet the plan, additional funds will be required, and if they are not available, the project will stop.
Risks of changes in the volume of work may appear if the project team did not understand the requirements of the client or stakeholder or the client/stakeholder themselves made changes to the project. This may lead to a revision of the budget, timeline, and to-do list in the process of project implementation. External risks are potential events that are outside the company and project team and that they cannot control. For example, the project may be affected by new laws, policies, changes in international relations or any other incident.
One of the most important types of risks to consider is the single point of failure. This is the name of the only event that can stop all work on the project. No member of the team will be able to continue to perform their tasks until the problem is resolved. By understanding and determining when and where this point of failure might occur, project manager can take preventive action against it. Finally, there are the dependencies which can be considered a significant risk to a project completion. Dependencies are links between two tasks in a project: when the start of one task depends on the completion of the other. They can be internal – existing within the project – or external – dependencies over which the team has no control. In conclusion, the ultimate goal of the project manager’s activity is to obtain the maximum possible profit at the optimal ratio of profitability and risk that is most acceptable to the project participants.
References
Klastorin, T., & Mitchell, G. (2020). Project management: A risk management approach. SAGE.
Larsson, J., & Larsson, L. (2020). Integration, application and importance of collaboration in Sustainable Project Management. Sustainability, 12(2), 585. Web.