The Types of Risks in Project Management
The types of risks in project management are very common for all projects. We need to know what risks are. Risks are the potential events that have both a negative or positive influence on the situation. Risks are calculated by adding or multiplying the Impact value and the Probability of Occurrence values. One should know that the risks cannot become zero it can only be minimized. The risks are treated in several ways such as accepting the risks, mitigating the risks, avoiding the risks, sharing the risks, transferring the risks, and risk contingency plans. Take up the online PMP certification to understand the project risk examples.
No projects are perfect, there are some main and common risks associated with the project management and there are some risks that are inherent to any projects. All projects require treating these risks to manage and control projects successfully. Risks are natural to any projects only thing that varies is the Impact and Probabilities of Occurrences.
The risk management process involves that the risk register be maintained for all the risks and their treatment. The risk evaluation can be done in 2 ways: Qualitative process and the Quantitative process. In this article let us see the types of risks in project management. If you want to know the difference between risk and issue click here.
The risks can be further elaborated to other dimensions such as proximity to the risks and risks detecting capability etc. The risk management process is as follows,
Identification of risks
Assessing the risks
Evaluating or Analyzing the risks
Treating the risks
Documenting the risks
Types of risks in the project management in detail
1) Operational Risks – These types of risks involve making the right processes and then technologies and handling the production, procurement, and distribution of the products or services, etc. This also involves day-to-day operations, the operational costs, and making sure that everything functions smoothly.
2) Cost Escalation Risk – If there is no proper management of the projects and no proper tools used then there will be a huge escalation in costs so the project needs to ensure that everything in the project goes on smoothly and accurately to avoid cost escalation. Cost is one of the triple constraints that need to be planned and looked into from the start of the project till the end. PM needs to ensure that the entire project is done well within the budget.
3) Security Risks – These risks are very important that is the product developed is secure and does not allow unauthorized access, unintentional/intentional modifications, and is available when required. The security is not only for software projects but applies to all projects of varied nature. These project risks examples are that if you are constructing a building the building needs to secure in every aspect for the users of the building. Similarly, if you are in logistics you need to ensure that the products securely reach the customer and so on.
4) Governance Risks – These risks pertain to the top management of the company, the stakeholders, and other management people where the stakes are high in reputation, profitability and customer retention, etc. These types of project risks are very important when it comes to managing a large organization.
5) Legal Risks – This pertains to the law of the land, local laws, statutory requirements, etc. These risks are also about the contractual obligations and handling or avoiding any lawsuits against the company. The customer contracts must be read and understood properly to avoid these types of risks. We need to obey the local laws and the laws of the land where we operate and sell our services or products. To know more about the types of risks in project management take up the PMP online training course.
6) Strategic Risks – One must carefully select the projects that provide the maximum benefits to the management and the organization. The strategic risks consist of choosing the right project, selecting the right people for the work, selecting the right tools, and selecting the right technology for the realization of the products or the services in the project management.
7) Performance risks – These risks are about the performance of the products as well as the project. The project must start, progress, and end smoothly as per the management of triple constraints of scope, cost, and time. The specifications maintained in the project ensure that the product is as per the requirements and performs satisfactorily.
8) Market Risks – These pertain to the market capture, brand image of the organization and the products, and how to hold on to the older market and expand the market in the future. Any customer complaints can drastically affect the market in which the products are released.
9) Environmental Risks – These are the risks that are due to act of God or human-made such as Flood, Act of terrorism, War, Riots, Pandemic, Earthquake, Tsunami, Famine and other disasters. We need to prepare for the crisis and business continuity with a crisis management plan and business continuity plan respectively.
10) Scheduling Risks – In project management you need to prepare the workflow and for that, you need to sequence the work or the tasks and schedule them. The scheduling involves the time, the resources used and the types of project management done that is Kanban, Agile, Lean, Six Sigma, etc. If you do not do the scheduling properly there will be undue delays, quality issues, escalation in costs. Therefore to manage the workflow one must use PERT/CPM methods to know how long the project takes to complete, what is the completion time for each of the tasks, how best to schedule the tasks and resources needed to schedule the tasks etc. To learn more on the types of project risks online PMP training in a reputed institute.
We have seen the 10 risks in project management that may involve careful consideration and treatments to make the project management successful. Enroll for the PMP certification training from one of the best institutes such as StarAgile and leverage your professional career to great heights. Happy Learning!!!