What is Risk Management in Project Management?

Large corporate enterprises need risk management, but so do individual projects. What if the cost of a project soars unexpectedly? What if an accident causes a delay? If the project is time-sensitive or the budget tight, your larger enterprise could suffer.

So even at the project level, managing risk should be an integral part of your project management plan.

What is project management?

Project management shepherds a project from the initial idea to final development and release, and beyond: all the way through a project’s life cycle. Management activities include starting the project, creating a timetable for execution, distributing information, managing change as necessary, compiling and analyzing data, and coordinating with marketing, distribution, and other functions after the project is finished.

What skills does a project manager need?

Since the project manager implements the strategies, he or she needs strong organizational skills, as well as an understanding of threats and risk mitigation.

Why do organizations need a project team?

Large projects need deadlines, objectives, and metrics so managers can track the project’s progress and plan for the future. To collect, monitor, and organize this information, the project manager needs a team of people. Project team members report to the project manager, who reviews the project’s overall progress.

How do project managers identify risk?

Risk identification in project management involves brainstorming everything that might go wrong (negative project risk) as well as things that could go right (positive risk). As a guide, consult your project objectives.

Positive risks can be lucrative opportunities, but only if the project team plans accordingly. For example, completing the project ahead of schedule may mean additional sales—but if sales teams aren’t ready to sell, or if production teams can’t meet increased demand, the opportunity could be lost. (Or worse: your company’s reputation and profits could suffer.)

Negative risks can bring dire consequences. For example, a delay in product development could mean that sales teams have nothing to sell; a flaw in product design could lead to litigation or costly recalls. To avoid these painful outcomes, it’s important to include risk management and risk mitigation in your project plan.

Four responses to risk

Project management risk responses typically fall into four categories.

Risk avoidance: Finding ways to avoid the risk.
Risk mitigation: Using controls, technology, or some other means to reduce the likelihood that identified risks will occur, and to reduce the negative effects that could result if they still do occur.
Risk transfer: Letting someone else handle the risks, such as purchasing an insurance policy. This approach is often used for risks that are high but quantifiable, or when avoiding the risk isn’t possible.
Risk acceptance: Doing nothing in response to a risk, often because it has a low probability of occurring or because the potential harm is small.

What does it mean to mitigate risks?

Risk mitigation requires project managers to analyze risks through a series of steps.

Identify potential risks;
Determine the probability of occurrence for each risk, as well as the harm of the risk should it occur (risk analysis);
Determine how to deal with each risk if happens (risk treatment/response); and
Prioritize risks (high impact, medium impact, low impact) so you can address the most pressing issues first.

The risk management process works pretty much the same in project risk management as it does in enterprise risk management, following the same steps: risk assessment (identification and analysis), risk response, and continuous monitoring through the project’s lifecycle.

Just as every organization needs a comprehensive risk management plan, every successful project needs one too. That includes a risk mitigation plan.

Risk mitigation strategies can range from setting aside contingency funds in case project costs go up (a common risk that project managers face) to having backup suppliers for products or services your project might need. Risk mitigation planning should be done before a crisis hits, so make sure to engage your team for ideas on how to soften the blow of all identified risks—new risks, specific risks that you know about, and even unknown risks.

How can software help with project risk management?

Managing risks and staying in compliance with industry standards and regulations can be just as great a challenge in project risk management as it is in enterprise risk management. In both cases, using a good governance, risk, and compliance (GRC) solution can make managing risk much easier.

ZenGRC monitors your systems and networks to find gaps in your controls that could make your business or project vulnerable to threats, and displays them on user-friendly, color-coded dashboards that tell you in a glance where your weaknesses are and how to fix them.

Because third-party suppliers can increase your project risk, Zen helps you survey your contractors and collects and collates their responses.

Zen tracks project risk management workflows so you can easily see who is doing what, and whether any steps have been missed.

And our unique software-as-a-service helps ensure that your project complies with applicable regulatory and industry frameworks including SOC 2, ISO, GDPR, and CCPA. It conducts in-a-click self-audits for you as often as you’d like, and collects and stores your audit-trail documentation in our “single source of truth” repository for easy retrieval at audit time.

Juggling all the concerns in project management is tough in itself. Why make it harder than it has to be? ZenGRC takes the hassle out of managing project risk, so you can focus on producing top-quality projects on time, every time.