Do you find yourself working overtime, trying to deal with unexpected disruptions? Some negative events that you thought might happen has now occurred. And it's costing you more time and energy than you thought possible. Overwhelmed? Well, let's talk about project risks and issues, the differences, and why it's so important to manage risks.
What is Risk?
The Project Management Body of Knowledge (PMBOK) defines risk as, “An uncertain event or condition that, if it occurs, has a positive or negative effect on one or more project objectives.”
Let's examine a risk statement and underscore some key attributes of risks. Here's a risk statement:
Because the project team failed to review the requirements with the users, the project team may not meet the user's needs, resulting in unsatisfied users.
- Cause: Failure to review and validate the requirements
- Risk: Project team may not meet the user's needs
- Impact: Users will not be satisfied with the product
Notice the risk: project team may not meet the user's needs. Think of risk as events or conditions that might happen in the future.
What is an Issue?
So, how does an issue differ from a risk? Where a risk might happen, an issue has happened. When a threat occurs, it becomes an issue or problem. By the way, when an opportunity occurs, it becomes a benefit.
Why Distinguish a Risk from an Issue?
Are we splitting hairs? The distinction between risks and issues matters for a few reasons.
- Proactive Management Saves Time. “An ounce of prevention is worth a pound of cure.” Project managers should manage risks proactively. Project managers can save valuable time through prevention. As often noted, Project managers can eliminate up to 90% of threats through risk management.
- Measure of Management Effectiveness. If a project manager is experiencing lots of issues, it may be a sign that the project manager has not been managing the project effectively.
- Different Type Response. Issues require a different response than threats. Project managers respond to threats with different strategies: avoid, mitigate, accept, or transfer. Issues require corrective action to bring the performance of the project in alignment with the project management plan.
Risk vs. Issue Debate
Some project managers and risk managers are not convinced that the differentiation between risk and issue adds any value. Even though the risk has occurred (i.e. it is now an issue in terms of the differentiation) there is still uncertainty regarding the impact and the objectives that will be impacted.
What about Assumptions and Constraints?
While we are on this topic, let's clarify two other terms—assumptions and constraints.
- Assumptions. Assumptions are “a factor in the planning process that is considered to be true, real, or certain, without proof or demonstration” according to the Project Management Body of Knowledge. Assumptions may be a source of risks. Be sure to perform an assumption analysis periodically to validate assumptions.
- Constraints. A constraint is “a limiting factor that affects the execution of a project, program, portfolio, or process.” Constraints such as a budget or schedule constraints are factual. The project manager must continually consider these defined limits when managing risks, particularly when planning risk responses.