What are some risks that confront projects? A natural disaster; non-delivery of supplies; a rise in raw material prices; unanticipated delays in testing; inadequate documentation; the project team’s lack of skills to bring the project to completion – the list goes on. It almost seems that if anything at all can go wrong, it most certainly will. If problems are inevitable, what then would the point of project risk management be? Troubleshooting from the outset of a project will likely point to the reasons for project failure and how to avoid them. Thus, project risk management, though a time-consuming and sometimes onerous task, is critical and supports efforts to deliver a project on time and on budget.

Project risk management identifies, analyses and deals with the issues that may arise during the project. Risks have a tendency to throw a project off-course; thus, there are many advantages to applying project risk management from the very inception of the project – mainly to troubleshoot or offset potential problems. Project risk is anything that may impact or impair the delivery of the project according to schedule or contract. The importance of project risk identification is therefore paramount; during risk identification, organisations should also look for possibilities of positive risks, which may turn into opportunities to capitalise on.

How should organisations manage project risks for maximum effectiveness? Project management teams should be established, and risk management should be integrated into the project planning process from the very beginning, to ensure that risks are always visible throughout all stages of the project. Project risk may be highest during initiation and design phases, mainly because it is not known for sure how the work will be done or the exact requirements of the project. It is therefore critical to set in place a thorough planning process that will help with project management more comprehensively so as to boost the chances of its success.

While risk planning will provide a structure for project risk management, the team that comes together to get it done should try to find as many risks, and imagine as many scenarios as possible. They should also learn from past experiences, both their own and that of others, or through documentation of previous projects, if this is available. This will widen the scope of what to look out for. Besides this, risk should be reviewed throughout the timeframe of the project. Reviews should include the environment as well, since environments are dynamic, and any changes in the environment during project implementation may affect project outcome or delivery.

Project details inevitably differ between projects, even if they are undertaken for the same reasons, or by the same team. But project risk management plans should follow the standards of the organisation, if these are available, to ensure that risks are managed in an integrated manner. The project risk management approach calls for assessing and analysing risk. This should be done for each project, with each risk being examined through structured criteria, to assess its potential impact on the project. The results of risk analysis will indicate how to manage the risk – avoid, transfer, mitigate or accept it.

The size and scale of the project matters. There is no need, for instance, to have extensive risk analysis for a small project, whereas for a large-scale, high-budget project, a detailed analysis alone may not be enough. But size and scale aside, what organisations find in the course of assessment is that they are relying more on their human resources than systems, networks, processes and controls. So clear communication is essential; it strengthens cooperation between departments, units and individuals, helps to share resources and even supports the building of competencies. In addition to delivering on the organisation’s projects, project risk management may benefit the firm in other areas too.