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Top Risks in Project Management You Should Know

Project Management Risks

According to Murphy’s Law, anything that can go wrong will go wrong. This law applies to all areas of life, including the workplace and, in this specific case, running a project. Teams create projects so that work can be done in an organized, timely, and cost-effective manner. However, despite all good intentions, plans, and team experience, things can still go sideways.

This article describes the six most significant project management risks and how to reduce them. Then, we will offer specific ways to mitigate the listed risks and advice on reducing project management risks.

We will also explore tools used for project risk management, an ideal resource for creating an effective risk mitigation plan.

Let’s dive in.

The 6 Biggest Project Management Risks (and How to Mitigate Them)

This collection of the six most significant risks can help managers and team leaders to perform risk management in project management. When you identify the most significant risks, you can better prepare for them, reducing their impact on the project. This list shows project managers what they’re possibly up against and forewarned is forearmed.

Budget Creep

“Budget creep” sounds like something you would call a sketchy person obsessed with finances, but it describes how expenses gradually increase beyond the established budget. Budget creep stems from poor planning, overly optimistic cost estimates, project scope changes, and unplanned labor and material costs.

  • How Do You Deal with It? For starters, don’t be tempted to underestimate the budget to make the project more palatable for management. This attempt will backfire when the costs go over budget. Also, wait to release your budget plan until the project’s schedule and program have been finalized. Finally, maintain transparency for all parties, so anyone can monitor the project’s progress and be on the alert for possible cost overruns.

Also Read: What Is Problem Solving in Project Management?

Scope Creep

Like budget creep, scope creep is a gradual shift from the original ideas into something unexpected and unplanned. Scope creep occurs when the project team is pressured into taking on tasks that weren’t part of the original project plan or the project parameters weren’t well-defined from the get-go. Unfortunately, both causes often occur, feeding off each other and causing the project to veer wildly off-course.

  • How Do You Deal with It? First, establish the client’s needs and get them in writing. On a related note, save all correspondence relating to the project’s scope. Once you know exactly what the client wants, create a project charter document that details what your team will do and when they’ll do it. Also, include a section detailing what happens if anyone adds to the established parameters.

Lack of Clarity

A lack of clarity stems from stakeholder miscommunication, vague and non-specific project scopes, and unclear deadlines. This project management risk results in budget overruns, missed deadlines, arbitrarily changing project deadlines, a lack of visibility because of siloed work, abrupt pivots of project direction, and disappointing project results.

  • How Do You Deal with It? Communication is key. The project leader must focus their attention on what the client and project stakeholders want and ensure that these are made clear. When planning the project, check and recheck the requirements to ensure everything is in the right place. And as is the case with budget creep, transparency is paramount. All relevant information should be centralized and easily accessible to all involved parties. This easily shared information ensures that everyone will stay updated on the project’s progress. But talking with clients and stakeholders is one of many forms of communication the project leader needs, as we’re about to see.

Team Communication Problems

Stakeholders and clients aren’t the only parties vulnerable to miscommunication. Sometimes, misunderstandings arise within the project team. Team members may need clarification on their roles or need to be adequately informed of what’s expected of them and when. As a result, team members can sometimes work at cross-purposes or accidentally infringe on another member’s tasks. This project management risk causes wasteful redundancy, poor morale, and chronic underperformance.

  • How Do You Deal with It? Develop efficient communication streams and reduce them to the smallest amount, making them easier to manage and follow. Many teams typically use a mix of e-mails, texts, or communication apps (e.g., Microsoft Teams, Skype, Zoom), so it’s essential to keep things simple. Shop around for an ideal collaboration or communication platform to make life easier for the team.

Also Read: What Is Quality Assurance in Project Management?

Overextended Resources

Like budget creep, the risk of overextended resources can happen when project managers underestimate how much time, money, tools, or personnel the project requires. And, like a budget creep, project planners can be tempted to understate the project’s needs to increase its appeal. Project managers are responsible for procuring the team’s resources well in advance and keeping the team informed about the status of the project’s resources.

  • How Do You Deal with It? Once again, planning and organization come to the rescue. Creating a resource allocation plan quantifies available resources and establishes their allocation. The procedure helps the team use their resources to the best effect and use them to meet the project’s goals.

Scheduling Issues

Time is money, as they say. Delayed timelines, typically created from unrealistic expectations, result in missed deadlines, unexpected costs, and even overall performance. The problems increase exponentially when there are more moving pieces, and the project’s many tasks rely on each other. If one group fails to accomplish their task on time, it can create a chain reaction of delays.

  • How Do You Deal with It? People don’t get in trouble for completing a project ahead of schedule. So, generously overestimate the time needed to complete each task and factor in some time contingencies. Create a project schedule with one of the many project roadmap tools available, such as a Gantt chart, Kanban boards, or Timeline. Lastly, the project schedule should be understandable, comprehensive, and accessible to all team members.

Generic Ways of Reducing Project Management Risks

Although we have just addressed specific project management risks, the list is incomplete. With that in mind, here are some generic ways project managers can anticipate and mitigate risks, regardless of what they are.

Identify the Risks.

For starters, the team needs to have a good understanding of what they’re potentially up against. That’s why it’s essential to identify the risks associated with the project. Ask these questions:

  • What’s the likelihood of this risk happening?
  • If this risk happens, how will it impact the project, and how severe will that impact be?
  • What’s the plan for responding to this risk?
  • Considering the risk’s likelihood and impact, what is its priority level?
  • Who will own this risk?

Decide the Impact and Likelihood of Each Risk.

Specifically, which risks are most likely to occur? Place them in order of likelihood and assess how each risk will impact the organization.

Create Contingencies and Solutions for Each Risk.

Develop a plan for how to handle each risk. Meet with the relevant project stakeholders and decide on solutions for the risks that matter most to them. Finally, look back at previous projects and see how the team managed their risks.

Perform Regularly Scheduled Risk Assessments.

The only constant is change. Therefore, regularly monitor the project’s risks, noting changes in circumstances, goals, and resource availability.

Also Read: Program Manager vs. Project Manager: Here Are the Differences You Should Know

Explaining Project Risk Management Tools

When a project manager puts together a risk mitigation plan, it’s helpful to have resources, techniques, and tools to turn to to make the job easier. Here is a sample of practical tools you can use to facilitate risk management in project managements.

  • Risk Register. This document lists the risks associated with the project and includes their description, likelihood, effect on the project, and suggested mitigation strategies.
  • Risk Assessment Matrix. This grid helps prioritize risks based on likelihood and impact, broken down on a scale of Low, Medium, and High.
  • Probability and Impact Matrix. This tool helps gauge the likelihood of a risk occurring and how it may potentially impact the project.
  • SWOT Analysis. SWOT is an acronym, and is short for Strengths, Weaknesses, Opportunities, and Threats. It is a framework for assessing the project’s potential risks and opportunities. Ask questions like the ones below:
    • Strengths. What do we excel in?
    • Weaknesses. Where do we need improvement?
    • Opportunities. What goals do we have in the short and long term?
    • Threats. In what areas are our competitors doing better?
  • Brainstorming. This technique brings the team together for open discussion and creative, out-of-the-box thinking to generate ideas and identify potential risks.
  • Delphi Technique. This structured interaction technique employs experts who generate opinions and forecasts on potential project risks. This information is ultimately used to build a systematic consensus method to solve future problems.
  • Monte Carlo Simulation. This statistical method is a mathematical technique that predicts the probabilities and outcomes of uncertain events. Computer programs use Monte Carlo simulations to analyze past data and predict the results of different action choices.

Do You Want to Become a Project Manager?

Project management risks are only a small part of the project management process. Today’s businesses want trained, professional managers who can shepherd vital projects that will ultimately strengthen and benefit the organization.

In collaboration with the University of Massachusetts, Simplilearn offers a certification in project management that provides a valuable part of becoming a well-equipped digital-age project leader. This project management certification course is aligned with PMI-PMP® and IASSC-Lean Six Sigma. Students will attend live online interactive classes and participate in real-world capstone projects.

Students earn certificates, alumni membership in the UMass Amherst Alumni Association, and 146 PDUs to maintain their CCR for PMI-related certifications.

Glassdoor.com says project managers in the United States earn $85,189 annually. Sign up for this Post Graduate Program in Project Management and gain the critical skills to handle project challenges in the 21st-century business world.

You might also like to read:

Best Project Management Apps You Should Consider

What are PDUs in PMI? An Explainer

Understanding Scope in Project Management: Definition and Importance

10 Tips on How to Increase Productivity in the Workplace

5 Project Management Steps You Need to Know

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