What Is Risk Management in Project Management?

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6 minute read

While risk management and project management seem to be about the same thing, they are two different concepts.

Risk management is all about evaluating and eliminating any threats directed to a business’ capital and earnings.

Project management, on the other hand, focuses on developing new products, services, or results. Therefore, the two concepts are different as far as managing tasks is concerned. Nevertheless, both risk management and project management require use of agile processes if stronger and more efficient outcomes are to be obtained.

risk management

“In assessing risk at StickOutSocial, Project Managers keep an Activity Log with our clients. The Activity Log is made up of 3 sections: Meetings, Risks and Decisions. This document has proven to be a great resource for all Project Managers at StickOutSocial in our efforts to present this information clearly to our clients. As well as keeping a clear track of all suggestions and approved decisions as we move through the various stages of a project.” – Laurie Markowski, Project Manager

What’s involved in Project Management?

Project management is the process of applying skills, knowledge, techniques and tools to a wide range of activities to bring projects from their initial phase all through to the final phase. There are generally five basic phases of the project management lifecycle, which include:

  1. Initiation phase
  2. Planning phase
  3. Execution phase
  4. Monitoring and control phase
  5. Documentation and completion phase

What Skills are needed for Project Management?

A project manager is the professional with the overall responsibility of overseeing a project from start to finish. Since there are a set of strategies to be implemented, it’s imperative that the project manager have strong organization skills. Since threats are to be expected along the way, it’s important that a project manager to be conversant with threat detection and risk mitigation.

Is a Project Team Necessary?

The need for a project team is dependent on the size of the project at hand. If it’s a small project, then the project manager can be able to oversee the project from start to finish without help.

The same can’t be said about large projects. This is because there are many objectives to be met, deadlines to be observed, and metrics to measure performance and project success. These many activities are too many for one person to handle, hence the need for a project team. A project manager can delegate specific tasks to specific individuals in the team to ensure successful completion of the project.

What does Risk Mitigation in Project Management Entail?

Risk mitigation involves evaluation of threats and identifying measures that can help an organization evade risks, and minimize their impact if they occur. Again, it’s the role of the project manager to implement risk mitigation programs that focus on identifying, analyzing, reviewing, tracking, and prioritizing risks.

Role of Project Managers in Risk Identification

An organization faces both positive and negative project risks. Positive risks are potential positive outcomes resulting from appropriately planned and exploited opportunities. Negative risks, on the other hand, are potential negative outcomes. The role of a project manager in risk identification is to review both potential positive and negative project risks. In other words, he must identify those risks that should be accepted (i.e. positive risks) and those to be avoided, mitigated, or transferred (i.e. negative risks).

Strategies that Project Managers Use to Address Risks

For every project, the project manager must review the probability of risks and establish what strategies are best in mitigating their potential outcomes. The following are the various project management risk response strategies:

  • Avoidance strategies: These are strategies that are focused on preventing the possibility of risks from occurring.
  • Transference strategies: At times, some risks are inevitable. In cases where risks are unavoidable, project managers implement transference strategies that focus on transferring those risks. A good example of how risks are transferred is in the case of insurance policies where the insured/policy holders transfer risk to the insurer when a risk occurs.
  • Mitigation strategies: These are strategies that are focused on mitigating the potential outcomes of risks that are likely to occur.
  • Acceptance strategies: At times, a risk can be accepted if the probability of it occurring is low compared to the benefits that can arise if the risk is taken. For example, deadlines for meeting market demands can be pushed forward, but still accept that there’s a risk of not meeting those deadlines.

How Does a Project’s Lifecycle Translate to Compliance?

During project management, the project team must observe a series of 12 values and principles, which include:

  1. Customer satisfaction
  2. Adapting to changes
  3. Constant delivery of working software
  4. Communication across stakeholders
  5. Provision of a supportive environment for employees
  6. Efficient relay of information across stakeholders
  7. Measuring development
  8. Promotion of sustainable development
  9. Continuous enhancement
  10. Efficiency maximization
  11. Establishment of essential architectures
  12. Customary reflection on efficiency

Organizations should view compliance as similar to a project as it helps in identifying ways to make the process more efficient. To make compliance agile, necessary tools have to be incorporated.

Author Bio

Ken Lynch is an enterprise software startup veteran, who has always been fascinated about what drives workers to work and how to make work more engaging. Ken founded Reciprocity to pursue just that. He has propelled Reciprocity’s success with this mission-based goal of engaging employees with the governance, risk, and compliance goals of their company in order to create more socially minded corporate citizens. Ken earned his BS in Computer Science and Electrical Engineering from MIT.  Learn more at ReciprocityLabs.com.

2018-06-22T16:46:24+00:00June 22nd, 2018|