The Risk Management Process in Project Management (2023)

When you start the planning process for a project, one of the first things you need to think about is: what can go wrong? It sounds negative, but pragmatic project managers know this type of thinking is preventative. Issues will inevitably come up, and you need a mitigation strategy in place to know how to manage risks when project planning.

But how do you work towards resolving the unknown? It sounds like a philosophical paradox, but don’t worry—there are practical steps you can take. In this article, we’ll discuss strategies that let you get a glimpse at potential risks, so you can identify and track risks on your project.

What Is Risk Management on Projects?

Project risk management is the process of identifying, analyzing and responding to any risk that arises over the life cycle of a project to help the project remain on track and meet its goal.Risk management isn’t reactive only; it should be part of the planning process to figure out the risk that might happen in the project and how to control that risk if it in fact occurs.

Related: Free Risk Tracking Template for Excel

A risk is anything that could potentially impact your project’s timeline, performance or budget. Risks are potentialities, and in a project management context, if they become realities, they then become classified as “issues” that must be addressed with a risk response plan. So risk management, then, is the process of identifying, categorizing, prioritizing and planning for risks before they become issues.

Risk management can mean different thingson different types of projects. On large-scale projects, risk management strategies might include extensive detailed planning for each risk to ensure mitigation strategies are in place if project issues arise. For smaller projects, risk management might mean a simple, prioritized list of high, medium and low priority risks.

How to Manage Risk

To begin managing risk, it’s crucial to start with a clear and precise definition of what your project has been tasked to deliver. In other words, write a very detailed project charter, with your project vision, objectives, scope and deliverables. This way risks can be identified at every stage of the project.Then you’ll want to engageyour team early in identifying any and all risks.

Don’t be afraid to get more than just your team involved toidentify and prioritize risks, too.Many project managers simply email their project team and ask to send them things they think might go wrong on the project. But to better plot project risk, you should get the entire project team, your client’s representatives, and vendors into a room together and do a risk identification session.

With every risk you define, you’ll want to log it somewhere—using a risk tracking template helps you prioritize the level of risk. Then, create a risk management plan to capture the negative and positive impacts of the project and what actions you will take to deal with them. You’ll want to set up regular meetings to monitor risk while your project is ongoing. Transparency is critical.

What Is Positive Risk?

Not all risk is created equally. Risk can be either positive or negative, though most people assume risks are inherently the latter. Where negative risk implies something unwanted that has the potential to irreparably damage a project, positive risks are opportunities that can affect the project in beneficial ways.

(Video) What Is Risk Management In Projects?

Negative risks are part of your risk management plan, just as positive risks should be, but the difference is in approach. You manage and account for known negative risks to neuter their impact, but positive risks can also be managed to take full advantage of them.

There are many examples of positive risks in projects: you could complete the project early; you could acquire more customers than you accounted for; you could imagine how a delay in shipping might open up a potential window for better marketing opportunities, etc. It’s important to note, though, that these definitions are not etched in stone. Positive risk can quickly turn to negative risk and vice versa, so you must be sure to plan for all eventualities with your team.

Project management software can help you keep track of risk. ProjectManager is online software that helps you manage risks in real time. Create risks just as you would tasks, assigning an owner, dates, priorities and tags. You can even view risks on your project menu which can be sorted and filtered to your liking. Then, use the dropdown menu to note the risk’s status to mitigate it accordingly. Get started with ProjectManager today for free.

How to Respond to Positive Risk

Like everything else on a project, you’re going to want to strategize and have the mechanisms in place to reap the rewards that may be seeded in positive risk. Use these three tips to guide your way:

  1. The first thing you’ll want to know is if the risk is something you can exploit. That means figuring out ways to increase the likelihood of that risk occurring.
  2. Next, you may want to share the risk. Sometimes you alone are not equipped to take full advantage of the risk, and by involving others you increase the opportunity of yieldingthe most positive outcome from the risk.
  3. Finally, there may be nothing to do at all, and that’s exactly what you should do. Nothing. You can apply this to negative risk as well, for not doing something is sometimes the best thing you can do when confronted with a specific risk in the context of your project.

ManagingRisk throughout theOrganization

Canyour organization also improve by adopting risk management into its daily routine? Yes! Building a risk management protocol into your organization’s culture by creating a consistent set of tools and templates, with training, can reduce overhead over time. That way, each time you start a new project, it won’t be like having to reinvent the wheel.

Things such as your organization’s records and history are an archive of knowledge that can help you learn from that experience when approaching risk in a new project. Also, by adopting the attitudes and values of your organization to become more aware of risk, your organization can develop a better sense of the nature of uncertainty as a core business issue. With improved governance comes better planning, strategy, policy and decisions.

6 Steps in the Risk Management Process

So, how do you handle something as seemingly elusive as project risk management? You make a risk management plan. It’s all about the process. Turn disadvantages into an advantage by following these six steps.

Identify the Risk

You can’t resolve a risk if you don’t know what it is. There are many ways to identify risk. As you do go through this step, you’ll want to collect the data in a risk register.

One way is brainstorming with your team, colleagues or stakeholders. Find the individuals with relevant experience and set up interviews so you can gather the information you’ll need to both identify and resolve the risks. Think of the many things that can go wrong. Note them. Do the same with historical data on past projects. Now your list of potential risk has grown.

(Video) Project Risk Management - How to Manage Project Risk

Make sure the risks are rooted in the cause of a problem. Basically, drill down to the root cause to see if the risk is one that will have the kind of impact on your project that needs identifying. When trying to minimize risk, it’s good to trust your intuition. This can point you to unlikely scenarios that you just assume couldn’t happen. Use a risk breakdown structure process to weed out risks from non-risks.

Analyze the Risk

Analyzing risk is hard. There is never enough information you can gather. Of course, a lot of that data is complex, but most industries have best practices, which can help you with your risk analysis. You might be surprised to discover that your company already has a framework for this process.

Related: Risk Matrix Template

When you assess project risk you can ultimately and proactively address many impacts, such as avoiding potential litigation, addressing regulatory issues, complying with new legislation, reducing your exposure and minimizing impact.

So, how do you analyze risk in your project? Through qualitative and quantitative risk analysis, you can determine how the risk is going to impact your schedule and budget.

Project management software helps you analyze risk by monitoring your project. ProjectManager takes that one step further with real-time dashboards that display live data. Unlike other software tools, you don’t have to set up our dashboard. It’s ready to give you a high-level view of your project from the get-go. We calculate the live date and then display it for you in easy-to-read graphs and charts. Catch issues faster as you monitor time, costs and more.

Prioritize Risks & Issues

Not all risks are created equally. You need to evaluate the risk to know what resources you’re going to assemble towards resolving it when and if it occurs.

Having a large list of risks can be daunting. But you can manage this by simply categorizing risks as high, medium or low. Now there’s a horizon line and you can see the risk in context. With this perspective, you can begin to plan for how and when you’ll address these risks. Then, if risks become issues, it’s advisable to keep an issue log so you can keep track of each of them and implement corrective actions.

Some risks are going to require immediate attention. These are the risks that can derail your project. Failure isn’t an option. Other risks are important, but perhaps do not threaten the success of your project. You can act accordingly. Then there are those risks that have little to no impact on the overall project’s schedule and budget. Some of these low-priority risks might be important, but not enough to waste time on.

(Video) What Is Risk Management In Project Management? All you need to know...

Assign an Owner to the Risk

All your hard work identifying and evaluating risk is for naught if you don’t assign someone to oversee the risk. In fact, this is something that you should do when listing the risks. Who is the person who is responsible for that risk, identifying it when and if it should occur and then leading the work towards resolving it?

That determination is up to you. There might be a team member who is more skilled or experienced in the risk. Then that person should lead the charge to resolve it. Or it might just be an arbitrary choice. Of course, it’s better to assign the task to the right person, but equally important in making sure that every risk has a person responsible for it.

Think about it. If you don’t give each risk a person tasked with watching out for it, and then dealing with resolving it when and if it should arise, you’re opening yourself up to more risk. It’s one thing to identify risk, but if you don’t manage it then you’re not protecting the project.

Respond to the Risk

Now the rubber hits the road. You’ve found a risk. All that planning you’ve done is going to be put to use. First you need to know if this is a positive or negative risk. Is it something you could exploit for the betterment of the project? If not you need to deploy a risk mitigation strategy.

A risk mitigation strategy is simply a contingency plan to minimize the impact of a project risk. You then act on the risk by how you prioritized it. You have communications with the risk owner and, together, decide on which of the plans you created to implement to resolve the risk.

Monitor the Risk

You can’t just set forces against risk without tracking the progress of that initiative. That’s where the monitoring comes in. Whoever owns the risk will be responsible for tracking its progress towards resolution. But you will need to stay updated to have an accurate picture of the project’s overall progress to identify and monitor new risks.

You’ll want to set up a series of meetings to manage the risks. Make sure you’ve already decided on the means of communication to do this. It’s best to have various channels dedicated to communication.

Whatever you choose to do, remember: always be transparent. It’s best if everyone in the project knows what is going on, so they know what to be on the lookout for and help manage the process.

Managing Risk with ProjectManager

Using a risk tracking template is a start, but to gain even more control over your project risks you’ll want to use project management software. ProjectManager has a number of tools including risk management that let you address risks at every phase of a project.

(Video) Project Risk Management Overview | PMBOK Video Course

Gantt Charts for Risk Management Plans

Use our award-winning Gantt charts to create detailed risk management plans to prevent risks from becoming issues. Schedule, assign and monitor project tasks with full visibility. Gantt charts allow team members add comments and files to their assigned tasks, so all the communication happens on the project level—in real time.

Kanban Boards for Managing & Prioritizing Risks

Use our kanban boards to sort and prioritize your risks if they exist in a more agile environment. You can use custom tags to identify tasks as risks within your project. Or, you can dedicate a whole project within ProjectManager to managing risks, so you can quickly see how the urgent risks are being addressed.

Risk management is complicated. A risk register or template is a good start, but you’re going to want robust project management software to facilitate the process of risk management. ProjectManager is a cloud-based tool that fosters the collaborative environment you need to get risks resolved, as well as provides real-time information, so you’re always acting on accurate data. Try it yourself and see, take this free 30-day trial.

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What is risk management process in project management? ›

In project management, risk management is the practice of identifying, evaluating, and preventing or mitigating risks to a project that have the potential to impact the desired outcomes. Project managers are typically responsible for overseeing the risk management process throughout the duration of a given project.

What are the 5 risk management process? ›

Here Are The Five Essential Steps of A Risk Management Process
  • Identify the Risk.
  • Analyze the Risk.
  • Evaluate or Rank the Risk.
  • Treat the Risk.
  • Monitor and Review the Risk.
Jan 20, 2022

What are the 7 risk management processes? ›

The 7 steps below provide a good framework for effectively managing project risk.
  • Step 1- Outlining Objectives. ...
  • Step 2 – Risk Management Plan. ...
  • Step 3 – Identification. ...
  • Step 4 – Evaluation. ...
  • Step 5 – Planning. ...
  • Step 6 – Management. ...
  • Step 7 – Feedback.
Jul 10, 2017

What are the 4 major steps of project risk management? ›

The 4 steps are:
  • Risk Identification.
  • Risk Analysis.
  • Risk Response Plan.
  • Risk Monitoring and Control.

What is risk management process and why is it important? ›

Risk management is the process of identifying, assessing and controlling threats to an organization's capital and earnings. These risks stem from a variety of sources, including financial uncertainties, legal liabilities, technology issues, strategic management errors, accidents and natural disasters.

Why risk management process is important in project management? ›

A good risk management strategy allows businesses to identify various strengths, weaknesses, threats, and opportunities. Planning for unexpected events ensures that project managers can readily respond to risks in case they arise. This requires a clear definition of risks and the identification of mitigation measures.

What are the six project risk management processes? ›

The 6 steps of project risk management
  • Identify. To identify risks, create a project risk management plan by putting together a list of all potential project risk events. ...
  • Analyze. For each risk you've identified, analyze the likelihood, severity, and response plan. ...
  • Prioritize. ...
  • Assign. ...
  • Monitor. ...
  • Respond.
Oct 10, 2022

What are 8 risk management processes? ›

Eight steps to establishing a risk management program are:
  • Implement a Risk Management Framework based on the Risk Policy. ...
  • Establish the Context. ...
  • Identify Risks. ...
  • Analyze and Evaluate Risks. ...
  • Treat and Manage Risks. ...
  • Communicate and Consult. ...
  • Monitor and Review. ...
  • Record.
Jul 21, 2019

What are the types of risk management in project management? ›

9 Common Types of Project Risks
  • Cost Risk.
  • Schedule Risk.
  • Performance Risk.
  • Operational Risk.
  • Market Risk.
  • Governance Risk.
  • Strategic Risk.
  • Legal Risk.

What are 3 components of a risk management plan? ›

The risk management process consists of three parts: risk assessment and analysis, risk evaluation and risk treatment.

What is risk management process and its phases? ›

The Risk Management Process is a clearly defined method of understanding what risks and opportunities are present, how they could affect a project or organization, and how to respond to them.
  • Step 1: Risk Identification. ...
  • Step 2: Risk Assessment. ...
  • Step 3: Risk Treatment. ...
  • Step 4: Risk Monitoring and Reporting.
Sep 27, 2021

What is the most important process in risk management? ›

Risk Analysis: The Most Important Risk Management Stage.

What are the steps of the risk management process? ›

Steps of the Risk Management Process
  1. Identify the risk.
  2. Analyze the risk.
  3. Prioritize the risk.
  4. Treat the risk.
  5. Monitor the risk.

What are the objectives of risk management? ›

The objective of risk management is to control risks. When the potential risks are identified, measured, and monitored, then the final objective is to find out ways to deal with or control those risks. in evaluating whether the risk is worth spending time and money on.

What are the 12 principles of risk management? ›

12 Principles of Risk Management (PMBOK – with an Agile slant)
  • 1) Organisational Context. ...
  • 2) Stakeholder Involvement. ...
  • 3) Organisational Objectives. ...
  • 4) Management of Risk Approach (N/A) ...
  • 5) Reporting. ...
  • 6) Roles & Responsibilities. ...
  • 7) Support Structure. ...
  • 8) Early Warning Indicators.
Jul 28, 2009

What are the 11 principles of risk management? ›

Here are 11 principles to consider for your business risk management plan:
  • Create and protect value. ...
  • Be integral to your process. ...
  • Be part of decision making. ...
  • Explicitly address uncertainty. ...
  • Be systematic, structured and timely. ...
  • Be based on the best available information. ...
  • Be tailored.

What are the 10 principles of risk management? ›


How many processes are there within project risk management? ›

Risk management includes six main processes in PMBOK theory. These are risk management planning, risk identification, qualitative risk analysis, quantitative risk analysis, risk response planning, and risk monitoring and control.

What are the three C's of risk management? ›

The Three C's for Risk Management Success
  • 1) Communication. In many cases the Risk Register is only shared and reviewed amongst the Managers or senior staff and is seldom shared with the project teams. ...
  • 2) Closed Loop Planning. An informal Risk Process tends to be monitored on an infrequent basis. ...
  • 3) Collaboration.
Feb 22, 2015

What are the 4 categories of risk management? ›

There are four main risk management strategies, or risk treatment options:
  • Risk acceptance.
  • Risk transference.
  • Risk avoidance.
  • Risk reduction.
Apr 23, 2021

What are the five 5 measures of risk? ›

The five principal risk measures include the alpha, beta, R-squared, standard deviation, and Sharpe ratio.

What are the five 5 categories of risk? ›

There are five categories of operational risk: people risk, process risk, systems risk, external events risk, and legal and compliance risk.

What are the 5 components of risk? ›

There are at least five crucial components that must be considered when creating a risk management framework. They include risk identification; risk measurement and assessment; risk mitigation; risk reporting and monitoring; and risk governance.

What are the 5 levels of risk? ›

Most companies use the following five categories to determine the likelihood of a risk event:
  • 1: Highly Likely. Risks in the highly likely category are almost certain to occur. ...
  • 2: Likely. A likely risk has a 61-90 percent chance of occurring. ...
  • 3: Possible. ...
  • 4: Unlikely. ...
  • 5: Highly Unlikely.
Mar 18, 2021

What are the 10 golden rules for project risk management? ›

  • Make it a regular thing. Make risk management part of your day to day operations. ...
  • Identifying Risks. Focus on ways you can identify risks early on. ...
  • Communicating the Risks. ...
  • The Opportunities of Risks. ...
  • Allocate an Owner to the Risk. ...
  • Prioritise Risks. ...
  • Strategic Approach. ...
  • Plan and Implement.
May 12, 2020

How do you monitor project risks? ›

We recommend following a 5-step approach to risk monitoring and management: identify and assess current risks, prepare response plans, track the occurrence and evolution of risk, identify new contingencies, and evaluate the quality and effectiveness of your risk monitoring process and strategy over time.

What are the 3 levels of risk management? ›

The risk management process consists of three parts: risk assessment and analysis, risk evaluation and risk treatment.

What are the 3 types of risk management? ›

Widely, risks can be classified into three types: Business Risk, Non-Business Risk, and Financial Risk. Business Risk: These types of risks are taken by business enterprises themselves in order to maximize shareholder value and profits.

What are the 4 C's in risk assessment? ›

Competence: Recruitment, training and advisory support. Control: Allocating responsibilities, securing commitment, instruction and supervision. Co-operation: Between individuals and groups. Communication: Spoken, written and visible.

What are the 6 elements of risk? ›

This article describes the steps in the process — your job is to put them into action as soon as possible.
  • Step One: Identify Risk. ...
  • Step Two: Source Risk. ...
  • Step Three: Measure Risk. ...
  • Step 4: Evaluate Risk. ...
  • Step 5: Mitigate Risk. ...
  • Step 6: Monitor Risk. ...
  • 4 Practical Tips for Complying With Monaco Memo.
Jan 10, 2018


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