Our first step toward a successful project is to develop a plan to produce the desired results on time and within budget. If your project lasts a relatively short time and you’re thorough and realistic in your planning, then most likely your project will

Our first step toward a successful project is to develop a plan to produce the desired results on time and within budget. If your project lasts a relatively short time and you’re thorough and realistic in your planning, then most likely your project will be a success. However, the larger, more complex, and longer your project is, the more likely some aspects won’t work out as you envisioned. Remember, “The best laid plans” You have the greatest chance for success if you confront the possibility of changes head-on and if you plan how to minimize the consequences of those changes from the outset.

Risk is the possibility that you may not achieve your product, schedule, or resource targets because something unexpected occurs or something planned doesn’t occur. All projects have some degree of risk because predicting the future with certainty is impossible. However, project risk is greater:

■ The longer your project lasts.
■ The longer the time between preparing your project plan and starting the work.
■ The less experience you, your team members, or your organization may have with similar projects.
■ The newer your project’s technology.

Managing project risks is the ultimate in proactive project management. It is the project manager’s radar system. The goal of project management is to achieve the project’s critical success factors, including meeting the targeted business objectives and client expectations. The goal of managing project risks is to identify and prepare for any potential threat to the project’s critical success factors before it actually occurs. As a result, risk management is the essence of managing projects. Nothing impacts the decisions we make regarding general project approach, level of planning rigor, staffing, project control procedures, and overall contingencies more than the risks facing the project. Yet, there may be no aspect of project management that has a wider array of “real-world” implementations.

Let’s review the essential steps for managing project risks:

■ Identify—This is the critical step of identifying the risks to the project. The best way to start this process is also the best way to leverage the lessons from the past—use a risk profile. A risk profile, also referred to as a risk checklist or risk assessment form, lists the common sources of project risk that you need to consider. While most risk profiles help you evaluate the majority of risk factors that are common to all projects, including the listing we have later in this chapter, the best risk profiles are ones that are specific to your industry, organization, and project type. In addition, the less experience that you have in project management or in the project domain, the more you will want to facilitate this process with the key stakeholders and subject matter experts on your project team.

■ Determine probability—For each risk factor that has been identified, determine the likelihood that the risk event will occur. The goal is to quantify the uncertainty as much as possible, although in reality, this is still a judgment call. Common methods include numeric scales (1–5, 1–10), and subjective scales (High, Medium, Low)

■ Assess impact—For each risk factor, determine the potential impact the risk event would have on the project critical success factors if it occurred. Like the probability element, the goal is to quantify the potential impact as much as possible. Generally, the same type of scale is used here too. It is a good idea to document the specific impact (which critical success factor) and the magnitude of the impact.

■ Prioritize—Now that we have a probability and an impact level, tabulate a final ranking for each risk factor by combining the two values. If you have used numeric scales, this is straightforward; just multiply the two values together to get a final score. If you have used qualitative scales (L, M, H), you should be able to easily translate these to numeric values (1, 2, 3) to figure your final score. This step shows you the highest priority, most important risks, and the ones that we need to focus your initial efforts.

■ Develop responses—Document a response plan for each risk using one of the five risk response options detailed later in this chapter. Since risk response strategies may entail the allocation of additional resources, tasks, time, and costs to the project plan, this is why the planning efforts are iterative in nature.