Project management is "the application of knowledge, skills, tools, and techniques to project activities to meet the project objectives" (PMBOK®—6th Edition). So, how does project risk management fit in the world of project management?
Project risk management fits in project management like a hand in glove. Project managers can use it to achieve their project objectives and goals. How?
Good risk management always starts with clear project objectives and goals. That is to say, project managers who manage risks without project objectives as the basis are simply playing games. There is an appearance of risk management but these individuals are simply going through the motions.
Good risk management always starts with clear project objectives and goals. —Harry Hall
Allow me to illustrate. First, imagine Bill, the project manager, who asks the project team to identify threats and opportunities with no reference to project objectives (the objectives may not even exists). The responses will be based on each team person's perspective of the project. And many times, team members see the project differently.
Second, imagine Sue, a project manager, who has worked with the project sponsor and key stakeholders to develop a project charter. Furthermore, the project charter includes clear project objectives and goals.
Rather than asking the team open-ended questions to elicit threats and opportunities, Sue lists each project objective/goal and asks what may help or hinder the team's ability to achieve each objective. See how this works? Hand in glove.
Objective. Something toward which work is to be directed, a strategic position to be attained, a purpose to be achieved, a result to be obtained, a product to be produced, or a service to be performed. —PMBOK®—6th Edition
Every project has risks—uncertain events or conditions that, if they occur, have a positive or negative effect on one or more of the project objectives. So, the purpose of project risk management is "to increase the probability and/or impact of the opportunities and decrease the probability and/or impact of the threats" (PMBOK®—6th Edition, Page 395).
Consider a project that is undertaken with the objective/goal to decrease the cycle time of a process from an average of 14 days to 5 days by the end of the year.
The project team identified the following threats:
Now the project manager assigns a risk owner to each risk. The risk owners develop and execute the risk response plans. These activities reduce the probability and/or impact of these threats, ultimately leading to the achievement of the project objectives.
Project managers should integrate project risk management in all aspects of their projects—schedule, budget, quality, procurement, communications, stakeholders, scope/requirements, and resources. Let's look at three integration examples.
Some people view risk management as an extra layer of work that provides little value. Performed properly, risk management will reduce the overall effort and propel the project to success. If not, rethink your risk management. The benefit should always exceed the cost.
Not sure if you are on the right track? Here are 12 Sure-Fire Ways to Improve Project Risk Management.
Feeling uncertain about the future of your projects? Not sure how to untangle the mess?
Spend five minutes per day for 21 days--discover practical risk management techniques that can help you turn uncertainty into success!
Plus, you'll get weekly project management tips.