Whether we like it or not, risk is a part of life. This is especially true for project management professionals who are tasked with identifying risks and taking steps to limit their impact on work activity. One way to simplify this process is by conducting a project risk assessment, which you can then use to shape your risk response procedures accordingly.
What is a Project Risk Assessment?
A project risk assessment is a focused process that aims to identify, analyze, and prioritize potential risks that a project may face. The ultimate goal is to give project management offices (PMOs) a simple way to determine the best ways to eliminate issues before they arise.
The first part of the assessment process is analyzing potential project risks, both positive and negative.
When you think of the word “risk,” you likely think of negative risks, which are events or problems that can limit a project’s chances of success. However, it’s also important for PMOs to consider positive risks, which can include factors that might benefit the project if handled properly.
The best time to perform a project risk assessment is before project work actually begins. PMOs should not only conduct an initial assessment for each project but also regularly monitor for new risks and update assessments as work continues.
Assessing Risk in Project Management: A Quick Guide
You may also see the concept of a project risk assessment lumped in with the term “project risk analysis.” Analyzing, forecasting, and responding to risk is a key part of successful project management.
However, the idea of risk analysis is broader and more nuanced than a single risk assessment. Assessments are just one piece of the puzzle; they increase visibility into risks and solutions, but they alone may not be enough to help organizations fully manage project health.
Thorough risk management involves assessing, but also tracking, monitoring, and responding to potential issues. Some organizations and industries are naturally more adverse to risk than others, so what effective risk assessment looks like can vary.
How to Conduct a Project Risk Assessment in 5 Steps
While some organizations create risk assessment templates and procedures unique to their needs, you can use this traditional method to conduct a project risk assessment without a hassle.
Step 1: Identify Your Risks
Before you can do anything to address risks, you first have to identify them. A risk, in this case, is any future event that could occur and impact your project.
Brainstorm all of the potential risks you can think of for each individual project to get started. You may want to review project materials, visit past projects, and speak with staff or management within your organization to gain a better understanding of what’s at stake.
This is also a good time to consider any risks that are specific to your industry–like legal restrictions or guidelines that must be followed–and make a note of them.
Step 2: Categorize Each Risk
With a list of all the potential risks for a project, your next step will be to give each one a category.
Whether you use a pen and paper, a whiteboard, or a software solution like Sciforma Vantage, organize your risks based on common features or solutions. For instance, you might create a category for risks related to contractors, one for internal risks, and one for risks related to suppliers.
Step 3: Measure Impact & Probability
The next step is to estimate each risk’s probability and potential impact. To do that, you may need to make some educated guesses based on what you learned earlier in the assessment process.
Determining probability means guessing how likely the risk is to occur. PMOs may need to consult other teams, departments, and past projects to understand each risk’s probability. It’s also wise to consult experts within your field for insight when previous project activity fails to provide any guidance.
Next, shift your attention to each risk’s impact on your projects. How significantly would the risk affect project health? Would it stop the project altogether or slow it down? Would its impact be too minor to worry about?
This method of measuring impact–by providing descriptions of what could happen if the risk occurs–is qualitative. However, some organizations prefer to use quantitative measures to assess risk.
This typically involves assigning a certain number or “score” to each risk based on how significantly it could derail a project. In some cases, the impact may be measured in profit lost if the risk happens.
Step 4: Prioritize & Problem-Solve
Now that you have a visual representation of all of your project risks, their impacts, and their probabilities, it’s time to compare what you’ve found to what your organization needs. Be sure to consider the risk tolerance levels within your organization–in other words, how able to handle risks your organization is–as you go through this step.
With a score or description for each risk, your team can decide which ones deserve the most attention. Typically, these are high-impact risks that have a high probability of occurring. Tackle these risks first, then move on to less pressing ones.
After you’ve ranked all of your risks by importance, you can begin to develop risk response strategies that make sense for your team. This might involve mitigating or avoiding risks by taking action to reduce their probabilities and the potential impact they might have.
Step 5: Monitor Progress with Regular Risk Assessments
Last but not least, ensure that your team continually assesses project risks with regular check-ins and updates. The process of managing risks is never-ending; from project planning to execution to completion, risk managers should identify lessons learned and implement them into future assessments.
Assess, Track & Address Risks with Sciforma Vantage
While you can opt to tackle a project risk assessment by hand, it’s far easier to gather information, create charts or spreadsheets, and share what you learn with your teams when you have the right technology at your side.
Sciforma Vantage is a project portfolio management software built to offer PMOs of all maturity levels a simple tool for centralizing their workflows. Manage everything from tasks to resources and project risks in one place so that your team can focus on what matters most: prioritizing the most strategic, valuable projects for your organization.
Request a demo today to learn more about how Sciforma can help you master project risk analysis and management.
