Every project carries risk, no matter how hard you try to avoid it. But risk doesn’t have to lead to failure. With some foresight and planning, you can get a handle on project risk before it upends your success.
Let’s take a look at different types of project risk to look out for and walk through simple steps you can take to identify, monitor, and manage risks in your projects.
What is risk in project management?
In project management, risk refers to an event or situation that has the potential to impact a project if it occurs.
While it’s easy to assume all risk is bad, these impacts could have either a positive or negative effect on the project. It’s less about the outcome and more about the uncertainty of factors that could cause your plan to shift, for better or worse.
Different types of project risk
There are lots of different types of risk in project management. So how do you know what to look for?
Let’s start by defining the 2 broadest categories of project risk: internal vs. external.
Internal risks exist within your organization and are easier for you and your team to mitigate and manage. External risks happen outside of your organization and are typically beyond your control as a team or project manager. What are the most common types of project risk?
Once you’ve got a few projects under your belt, you’ll start to notice that some project risks pop up more than others.
Here are 3 common types of risk you should look out for in any project you manage:
Cost risk is anything that affects your ability to stick to the project budget, whether it’s the result of scope creep or overly optimistic project estimates. Schedule risk refers to any factors that jeopardize project deadlines. These may include pop-up feature requests, a team member who’s out sick for an extended time, or unexpected delays in supply delivery. Performance risk impacts project goals and outcomes. This could result from a lack of stakeholder support, an overworked team, or misaligned project expectations. Other types of risk that may impact your projects
Of course, those aren’t the only project risks out there. Depending on the type of project you’re managing, you may also need to monitor these additional risk categories:
Operational project risk refers to anything that disrupts production or keeps a project from actually delivering. These are the project issues created by your team or stakeholders that tend to impact project budgets and timelines. Governance risk affects leadership, decision-making, or the frameworks used to run a project or business. Strategic project risk impacts your ability to achieve project or organizational goals over the short or long term. Market risk affects your ability to finance a project, compete in the market, or make a good return on investment. Legal risk involves legal, contractual, or regulatory guidelines or consequences your project or organization is subject to. External hazards include major events that are difficult to predict or prevent, such as natural disasters, global pandemics, labor strikes, or crime. 5 risk management tips for your projects
Talking about all the possible risks that can impact your projects can be scary. So let’s move on to some easy steps you can take to keep risk in check.Continue reading