Risk assessment in project management: How to best assess risks on your projects
What is a risk assessment for project management?
Risk assessments are common in workplaces and on industrial sites all over the world. They serve as a powerful tool for companies and workers to assess the risks of the tasks, activities and projects they are undertaking so that they can create proactive measures which mitigate the chance of risks turning into something more problematic - like an incident.
There are a number of different types of risk assessments which companies engage in, but the underlying goal of brainstorming, understanding and controlling potential risks is much the same.
Unlike a working at heights risk assessment or confined space risk assessment or lone work risk assessment which seeks to address the risks associated with an immediate task - risk assessments in project management look at more macro-level issues usually involving commercial and financial elements as well as broadly applicable environmental, safety and quality issues.
What are some of the common project management risks?
No matter what type of work you do and what kind of projects you manage, there is going to be some level which you need to manage and minimise.
Because the term 'project' is so broad, we are going to focus mostly on industrial projects and industrial companies like construction, oil and gas and mining. These companies are very traditional project-based companies, and their projects are also fraught with some of the most extreme risks of any projects in the world.
Some of the most common risks which these companies must navigate include:
- Scope creep - Uncontrolled changes to project scope
- Budget risk - Cost overruns etc.
- Integration risk - Activities involving the integration of different technologies, systems etc.
- Contract risk - The risk that another party will not deliver on the 'contract'
- Schedule risk - schedules are forward looking and usually involve significant risk
- Health and safety - broad level safety risks associated with a specific project (outside of the day-to-day risks)
- Regulatory risk - Risks associated with potential new or changing regulations
- Procurement risk - The risk of certain suppliers not being able to fulfil promises or deliver the goods and services required
- Design risk - The risk that a design does not meet actual requirements or expectations
- Reputational risk - The risk that your reputation will be damaged due to a performance, quality etc. issue
- Market risk - Fluctuations in commodity prices and other external market forces
This is not an exhaustive list of the risks associated with a typical project, which illustrates the level of difficulty and uncertainty companies face in simply delivering a project.
It also highlights the need to focus on managing these risks, and make sure everyone is aware and cognisant of the risks by performing a proper risk assessment for project management.
Why are risk assessments important for project management?
So why are risk assessment for project management important?
While companies have developed and adopted a number of processes and procedures over the years in order to naturally adapt to the risks encountered - projects, companies and risks are always evolving.
Every project is a little different. It may require a different set of parties, involve different economic circumstances, involve specific environmental risks which put your reputation and other stakeholders at risk and more.
Conducting a risk assessment for every project, and at multiple stages or phases of a project is necessary practice when you are talking about million and billion dollar projects.
Your risk assessments provide you with an opportunity to brainstorm the risks which might arise and develop controls which you can put in place throughout the project.
Your risk assessment also gives you the opportunity to continuously improve. Taking a minute to assess risks and look back at how those risks eventuated on other projects gives you a great opportunity to make constant improvements to how you manage risk and ultimately deliver better projects over time.
An example risk assessment in project management
So what does a risk assessment for project management actually involve?
The example risk assessment below is a proven and reliable framework for summarising an individual project risk. The example below describes the risk of new contractors being untrained and unsafe to work.
You'll notice that the risk assessment doesn't simply involve stating the risk and moving on. There are key sections for describing the impact that this risk could have on the project, as well as the related function.
The meat of the risk assessment and critically important part of performing this activity lies in properly assessing that individual risk.
This is done by assessing the risk on two dimensions:
- The likelihood of the risk eventuating
- The seriousness of the risk if it does occur
When combined, these assessments form the overall risk assessment which provides a grade for the risk. This grade, when compared to other risks on the projects, enables companies to best prioritise their resources and risk mitigation efforts.
The final piece of the puzzle is that there is a mitigation or preventative action which is taken to minimise the chance of risks turning into issues.
Your individual risk assessments should describe what mitigation actions will be implemented, as well as identify the person who is responsible for this action. This makes your risk assessments actionable, and ensures there is some accountability involved in how the action pans out during project management.
It's also helpful to identify when this risk was last identified on a project, and how the score compares to the last review. Has the risk associated with a specific safety issue been reduced due to improved processes and procedures, or is it higher now that you have less safety personnel on site. This is all important information for your business and for your risk assessment for project management.
Prioritising and maintaining your project risk profile
The best way to summarise and look through your project management risk assessments is by assembling (or converting your forms) into a risk register.
This register enables you to look at all of your risks from a high level, and compare and contrast the different risks to best prioritise each risk and make informed decisions about how to tackle those risks.
A risk register serves as your single source of truth for all of your risk assessment for project management. Here, people can add new project management risks to the register, and view and adjust risks as the project progresses.
Conducting risk assessments at the start of the project is the first step in risk best practice, but monitoring how you mitigate and manage these risks as well as adapting to a changing environment and changing risks is the real key to risk assessments for project management.
Improving how you manage risk through project delivery
A risk assessment in project management is actually one of the easier project management steps.
Most companies can identify and outline the risks associated with their projects quite well, especially in the planning and scope of work phases. But it's in managing and minimising risk throughout project delivery where things get hectic and things begin to fall apart.
Construction and industrial projects have continued to become more risky over the years. Increased regulation and more paperwork and admin have resulted in more projects being delivered late and over budget.
One of the best way to manage this risk throughout a project is to get real-time information and insights about the project - throughout the project.
This can be achieved through construction management software and general project management software.
These tools enable you to get information from the field in real-time.
Instead of waiting days or weeks to get information about your projects and how things are going, you get information as it happens.
This enables you to see what's happening and course-correct throughout a project, which enables you to manage all types of projects risks:
- Commercial risks
- Financial risks
- Environmental risks
- Quality risks
- Safety risks
Managing risk on your projects is becoming more and more important, and the companies who can both develop risk assessment in project management, and then deliver their projects in accordance with these assessments and prioritisation is the key to delivering on time and on budget.
About Lance Hodgson
Lance is VP of Marketing at Sitemate. His aim is to bring awareness to a brighter future for the Built World where industrial workers and companies work smarter.