Every project manager needs to understand how to minimize risks that can hinder the successful completion of the project. After obtaining a clear understanding of these risks, the project manager should be able to control them so they don't affect the budget and schedule of the project.
The four types of risks that can have a major impact on the completion of a project are scope, schedule, resources, and technology.
1. Scope Risk
All scope risks must be identified at the planning stage, whether they are quantifiable or not. To minimize the effect of scope risks, the scope of the project should be clearly defined from the onset. While defining the scope, objectives must be clearly stated, all deliverables should be listed, and the work involved in each phase should be properly delineated using work breakdown structures.
The major risks that are usually classified under scope include poorly defined scope, scope creep (caused by continuous addition of new requirements by the client), defects in equipment and machinery, unforeseen changes in the regulatory framework (especially in construction projects), and errors in system integration.
These risks can be substantially reduced by thorough planning, making use of risk registers to monitor risks and prompt response when any risky situations are observed.
2. Schedule Risk
Project risks that can affect the duration or delay the overall completion time of the project are classified as schedule risks. The main categories of schedule risks are estimation errors, external project dependencies, delayed decisions, and equipment delays. To cut down on these risks, estimates that have wide variations should be carefully analyzed.
All high-risk dependencies and sources of non-empirical estimates should also be properly identified. Project managers should give adequate allowance for holidays and all tasks with durations that are more than two weeks should be divided into smaller tasks. To produce more accurate estimates, use previous experience, historical data, and the program evaluation and review technique (PERT).
3. Resource Risk
Resource risks usually manifest in the form of a shortage of essential resources such as skills, finance, and materials. Major causes of resource risks include scarcity of essential skills, late inclusion of team members, lack of funds, and delays caused by outsourcing. To minimize resource risks, all skills needed to complete the project should have at least one named resource. Avoid placing very high expectations on any of the team members in order to prevent burn-out before the project is completed.
In addition, all costs associated with the project must be estimated as accurately as possible during project planning. To obtain more realistic budgets, employ techniques such as cost aggregation, reserve analysis, use of historic data, and funding limit reconciliation.
As the project progresses, you may need to notify the client and amend the original budget estimates if you notice a wide variation between the budgeted estimates and the actual cost of each task or resource. To mitigate against delays caused by outsourcing, make detailed resource plans, have a clear and concise contract, and closely monitor each subcontractor's progress.
4. Technology Risk
Technology risks are caused by defects in any of the equipment, systems, or devices used, or by the sudden failure of a service. It may also be caused by a sudden change in a regulatory framework, before the completion of the project which makes the use of a particular method, machine or technology illegal.
For instance, you may suddenly discover that after the project is halfway through, the web server chosen for the project does not have adequate capacity to provide a fast response to all the requests from various end-user devices including mobile phones, tablets, laptops and desktops.
Another related example is the failure of a security solution that was originally chosen to protect all project data and servers for the project. If a defect is discovered in the solution or it can not effectively discover a security threat, it may lead to delays in the completion of the project. When dealing with technological risks, it is usually better to provide additional resources to serve as buffers or backup equipment, as long as the overall project budget can accommodate them.
Effective planning, diligent estimation of duration and resource requirements for each task, and accurate project monitoring and reporting are some of the vital steps every project manager must take to mitigate all the project risks. Every project has its own peculiar high-risk factors within each of the four main types of project management risks highlighted above. So before any project commences, these areas should be identified and strategies should be put in place to ensure that they do not hinder the successful completion of the project.
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