Whoever thinks there is such a thing as a risk-free project needs to pass over that cup of optimism around and take a sip of realism instead. Project management, as well as life, is full of risks. To quote Baz Luhrmann:
The kind that blindsides you at 4 p.m. on some idle Tuesday."
No matter how well you plan something out, unforeseen events can ambush you at any given moment. There's no fence high enough to protect you from them, but you can learn how to be ready and tackle them every time. The first step to learning how to do this is recognizing the types of risks in project management and how to handle them.
Don't be fooled into thinking one piece of content or a single project can prepare you for the jungle that is a business world. Piles of themed books and years of experience won't do the trick, either. However, you have to start somewhere, and you just might pick up some words of wisdom.
Risk categories in project management
There's a whole science behind these categories, but let us try to sum them up for you. One of the possible ways to classify risks is the PESTLE categorization:
However, project managers often use a more common set to assess a project's risk. Here we'll present three groups of risks that complement each other.
Performance, scope, quality, or technological risks
Performance risk is the potential that a product, service, program, or project will not deliver as much value as required. In other words, a company may invest effort, money, and time in a project that, once finished, doesn't do what it was intended to do. Even worse, some internal projects could lead to the detriment of KPIs.
Scope risk is linked to uncertain events or conditions that are related to the project scope. When a project scope is defined, it's easier to see what should and shouldn't be part of team activities.
Quality risk can include a wide range of factors connected by a common threat: not adhering to quality goals.
Technological risks are the repercussions of technology failure, or the potential for such a failure to disrupt business through software or hardware issues, security incidents, natural disasters, or human error.
All these risks are connected. For instance, technological problems can affect performance, influencing the duration (schedule) and project costs. Likewise, too many out-of-scope activities could compromise the quality and schedule of a project.
Just as the name suggests, it's the risk of not meeting set deadlines. Deadlines are sometimes crucial, and breaching them is not an option. Here's a simple example: organizing a solar eclipse-watching event. Extend the deadline, and there will be no eclipse to look at. Other times, being late means losing a lot of money, which brings us to our next type of risk.
The possibility of new and unforeseen varieties of costs appearing out of nowhere is something we face daily. But, what is cost risk in project management? Usually, when agencies make a deal with clients, the budget is one of the essential elements. Another important factor is the time estimate. It's nearly impossible to make an entirely accurate estimate, but one gets better at it with time and experience. Schedule and cost risks are tightly bound: costs may drastically rise if an extra effort is made to meet the deadline, or if the deadline is extended. Also, quality may be at risk if the funds are limited.
Business profitability Cheat Sheet
As you can see, these types of risk influence one another gravely. As if they weren't enough, there is a plethora of other risks, a list that isn't even finite. For example, one of them is the "act of God" (also known as force majeure), and it describes events outside human control, such as earthquakes, tsunamis, or pandemics. Or taxation risk, the potential of new tax rules and interpretations that could lead to a higher tax cost.
While there's not much to do in these cases, scope, schedule, and cost risks can be manageable.
Managing risks with ActiveCollab
Remember those estimates we talked about earlier? Well, you can create them in ActiveCollab. Set an estimated budget, the project's items, and send it to your client for approval. Once won, you can transform the estimate into a project and manage it entirely through tasks. Each task can have a due date and an assignee, so the responsible person knows what to do and when.
For starters, this is how you can minimize the schedule risk. If the project is divided into smaller units and delegated adequately to the right people, half the job is done. You'll avoid scope creep, too, as well-defined task lists will help you stay on track and avoid additional "surprise" tasks.
The next step is working on those tasks and subtasks. There's an integrated Stopwatch to help you track time on individual tasks or the project as a whole. You can also add expenses as the project unfolds. Add to these expenses all the tracked hours multiplied by the internal hourly rate, and you'll get the total cost of your project. Once it reaches a certain percent of the budget, you'll get a notification. See how the cost risk is moderated?
Complete control over your project helps you minimize the common types of risk when managing a project. And in a world full of uncertainties and changes, you need all the help you can get.