What is project risk management? 6 steps to boost success

Summary

A risk management plan details how your project team analyzes and mitigates potential project risks. Learn the six steps of the project risk management process to boost project success.

A project is most successful when you plan and manage it effectively. Developing your project management skills and implementing tried-and-true project management mitigation strategies can help. But even the most well-developed projects will have risks.

The best way to prevent project risks is to face them head-on. Proactively planning for these uncertain events with the help of a risk management plan can help you steer your project team into calm waters—instead of getting caught in the middle of an unexpected storm.

If you’ve never developed a risk management plan before, you may have suffered the consequences of unexpected risks on past projects. Learn more about project risk management and try these six easy steps to build your own risk management plan.

What is a project risk management plan?

A project risk management plan is a document that details how your team identifies, analyzes, and responds to potential project risks that haven’t occurred yet.

Project risk vs. issue in project management

A is anything that could impact a project’s success by either delaying the project timeline , overloading the budget, or leading to reduced project performance in some other way.

A is anything that already has impacted a project’s success. Solving issues is a reactive approach rather than a proactive one.

With an effective risk management plan, you can address any potential risks that might crop up during the lifecycle of a project and mitigate them so your project stays on track, on budget, and on target.

When to use project risk management

A good project risk management plan isn’t reactive—it’s proactive. Ideally, you should create your risk management plan during the project planning phase. That way, you can best identify any risks and their potential impact and monitor those risks during the project. Instead of being caught unaware, you’ll have your eye on those risks in case they do become troublesome.

Alternatively, if you want to address project risks for a process that's already been kicked off , consider using the theory of constraints , which is a framework to help you identify the weakest link in a project or process and address the impact of the risk.

The 6 steps of project risk management

Managing project risk is all about identifying, planning for, and monitoring potential risk. Not everything will go wrong, and it’s even possible that nothing will go wrong. But proactive risk assessment and incident management can help you be prepared and course correct quickly. This ensures you hit all of your project objectives on time and within your budget.

If you’re getting started with risk management, here are six steps to help you write a project risk management plan. For each step, use UDN Task Manager ’s project risk plan to show you what a risk management plan could look like for your next project.

1. Identify

To identify risks, create a project risk management plan by putting together a list of all potential project risk events. A risk event is anything that could impact your project’s schedule, budget, or success.

There are a variety of ways to begin the risk identification process, including:

Interview project stakeholders . The best way to identify project risks is to ask stakeholders, leadership, and experts in the topic. If they’ve run similar projects, ask them what risks they ran into and how you can prevent them. Even if they haven’t run similar projects, make sure to check in with key project stakeholders to ensure you’re not missing any important project risks.

Brainstorm potential risks with your project team . Your project team is who you will be working with on this project day in and day out. Before you get started on your project, ask them what they see as potential risks and consider hosting a brainstorming session to identify serious risks to your project.

Document and ratify your assumptions . According to the Guide to Project Management Body of Knowledge (PMBOK®) , are anything about the project you think will be true—without being a guaranteed fact. You may base project decisions on your assumptions without even realizing you’re doing so. But by doing so—without documenting and verifying your assumptions—you open yourself up for project risk. If the assumptions you have aren’t actually true, then the foundations of your project may become unstable, which may jeopardize your project success.

Check your checklists . See if your team or department has built a checklist of common risks. If they haven’t, start documenting one to set yourself up for success on future projects.

Perform a risk assessment matrix. A risk assessment matrix categorizes severity into four buckets: catastrophic, critical, marginal, and minor. This helps to prioritize which potential risks to tackle first.

As you identify important risk events, put them into a risk register . As the name suggests, a risk register is a dedicated list of all of your project risks. Your risk register should answer several questions about the known risks you’ve identified, including:

What is the likelihood of this risk event?

What is the probability of occurrence?

What is the impact and severity if the risk occurs?

What is our risk response plan?

Given the likelihood and impact, what is the priority level?

Who owns this risk?

Don’t worry if you can’t figure all of this out now—some of these will come in the later steps.

2. Analyze

For each risk you’ve identified, analyze the likelihood, severity, and response plan. Depending on the complexity of your project risks, consider doing your risk analysis with your project team or with key stakeholders. To decide severity, think of how the risk will impact your project objectives. Will it delay your timeline, undermine your budget, or reduce the impact of your project deliverables? Then, for each risk, come up with a response plan. Your response plan isn’t necessarily an action item for right now—rather, it’s what your team will do to quickly pivot and address the risk.

3. Prioritize

To prioritize your risks, ask yourself: based on your risk register and analysis, which risks are most likely to happen and be most potentially damaging to your project’s success? The most important risks to address are those that have a high probability of happening and also a high severity. You’ll want to monitor and respond to all potential risks, but these are the ones you want to pay most attention to and check in on most frequently.

4. Assign

This step is optional—but recommended. Even though your risks haven’t happened yet, it’s helpful to assign a risk owner early, so your team members are prepared. This person should not only monitor the risk but they’ll also be the point person for developing a risk mitigation plan.

5. Monitor

At this point, your project has begun. Hopefully, you’re tracking well towards your ultimate project objectives . But make sure you continue actively monitoring your risks in order to avoid any nasty surprises. To do this:

Send regular status updates so your project team and project stakeholders are all on the same page. Remember: risk management should be proactive—not reactive.

Check in asynchronously with your individual risk managers. Each risk “owner” should be monitoring their risk event for red flags. As the project manager or team lead, check in with them regularly to make sure everything is going well.

Keep an eye on your risk register for any updates. If the likelihood of a risk changes or the risk plan is updated, that change should be reflected in your risk register. Like most elements of project management, your risk management plan should be a living document that your team uses to stay on track.

Collaboration is also really important for risk monitoring. Too often, potential problems or new risks crop up that a team member noticed, but maybe didn’t feel empowered to flag right away. Make sure you’re building a culture of team collaboration , openness, and honesty.

6. Respond

If at any point a risk becomes reality, it’s time to respond. With your risk register and risk management plan in place, you should have a great contingency plan to deal with risks.

Remember: risk management isn’t about preventing risks—though it does help. . Rather, project risk management is the practice of preparing for risks and having a great plan in place so you aren’t caught flatfooted.

The goal of project risk management

Implementing a risk management plan can help prepare your team for unexpected events. But truthfully, not every project needs an in-depth risk management plan. If your project is relatively straightforward, you might just need a quick chat with your team members to brainstorm and address any potential risks.

These projects are small in scope, don’t take up a lot of team member time or outside resources (like budget or bandwidth), and may be processes you’ve successfully completed before.

If you’re working on a complex initiative that involves a lot of cross-functional project stakeholders and important resources, you’d benefit from a project risk management plan. These are projects where you may be investing a significant amount of team member time and bandwidth or preparing a large financial investment. With a risk management plan, you can ensure the project stays within the project scope and, ultimately, succeeds.

Incorporate project risk management into your next project planning session

Successful projects have great plans—and risk management is a key to that early-stage planning process. Make sure to incorporate your project risk management strategy into any early-stage planning documents, like your project brief . That way, everyone has access to your risk management plan and they can proactively react to any high risks that do occur.

For more project planning guidance, find out how UDN Task Manager can help you track goals, define milestones, and communicate all in one place.