Defining Project Risk
Different people have different perspectives related to a project. Sometimes there is a possibility that even the best people do not get success while executing plans. Several internal and external factors play a vital role in the outcome of a project. The external factors are the ones that play a vital role in the cause of project risks. In the formal language, a risk is an event due to which a project is affected negatively. This means that risk factors are to be taken care of so that the project can run successfully.
Risks, if managed efficiently, can be mitigated and prevented from causing any trouble for the business. Several factors need to be considered, and a proper understanding of risks is a must to prevent them. This article will highlight examples of risk registers that should be captured in every project.
Categorization of Risks
Before coming over to the 20 project risk examples, you must know the type of risks that you can come across. To understand a risk, you need to know that risk is categorized into different types, which are listed below:
1. External Risk: There are many people involved in a business. Externally, a project needs help from vendors, and the dependence on these vendors brings a high degree of risk in the execution of a project.
2. Execution Risk: This risk arises due to a lack of support from the organization. There is additional time available in an organization, and it happens when people in the organization can find another better way of utilizing the resources. In case the project does not have a scope of flourishing, people or management will not waste their time and efforts on the same project. Instead, they will utilize the resources in some better field or project.
3. Technology Risk: Technology has been increasing by leaps and bounds and sometimes new projects might need the implementation of the latest technology in the project. There is a possibility that the organization cannot acquire the latest technology due to factors related to finances. This gives rise to risk factors and is therefore categorized under technology risks.
4. Regulatory Risk: Some rules and regulations are set by the local authorities or the state government, and companies need to abide by them to maintain a healthy relationship with the bodies. Sometimes strict rules are set for projects indulged in International trade practices. If a project skips any of these, then it causes a higher risk factor.
5. Stakeholder Risk: Last but not least is the risk factors related to the stakeholders. Stakeholders are people who have an interest in the performance of the project. Stakeholders involve regulators, customers, investors, suppliers, managers, etc. The risk factor arises when the stakeholders cannot execute a project wisely.
Now that you are aware of the different types of risks, you can understand the project risk examples and find ways to overcome them.
20 Main Project Risk Examples and Their Mitigation Strategies
To begin with, the 20 main project risk examples and how to mitigate these risks will be discussed in the upcoming paragraphs.
1. Purpose and Need not well-defined: The first project risk example is the risk related to the need and purpose of the project. This is a medium type of risk but it can get transferred to the high project risk category if the project is impacted by this factor.
Mitigation: Any organization needs to complete a business case if it is not provided beforehand. Also, the need and purpose of the project have to be mentioned and defined accurately.
2. Incomplete project design and deliverable definition: The second project risk example is incomplete project design and deliverable definition. It is a low-risk factor but can eventually become a high-risk factor if not controlled beforehand.
Mitigation: It is always beneficial to appoint a subject matter expert to prevent such a risk. The experts will help you define the project by conducting design workshops. This way, the risk can be prevented efficiently.
3. Difficulty in defining and understanding project schedule: Every project must have a specific completion period. If there is no set schedule or if there is difficulty in understanding the project schedule then this project risk example will arise. It is included in the low-risk category but can cause a medium risk to the project.
Mitigation: Workshops are really important in such cases. All should conduct scheduled workshops with the team members. This will help them manage time efficiently and also avoid missing tasks.
4. Risks related to budget: There may be times when the costs go beyond the revenue, and in such scenarios, this project risk example arises. There may be uncertainty in every business activity related to the future, and when the cost exceeds revenue, the risk factor becomes severe.
Mitigation: To prevent such risks, all should analyze the external factors and the internal factors that hinder the project’s working and keep some cash aside for meeting the crisis soon.
5. Resistance to changes: This is another project risk example in which if a project does not implement changes with the changing trends, it will cause issues in the project. For example, if technology has to be changed in an organization, and the team members resist the changes, it will cause a problem with respect to the working of the project.
Mitigation: A successful project is the one that goes with the flow. This means the flexible project will see long-lasting success in comparison to the projects which resist those changes.
6. Risks related to the resources: The next project risk example is related to the resources. This risk arises if the project cannot acquire the relevant resources, for example, skilled workers, finances, and so on.
Mitigation: A project must show a bright picture to the investors and the team members related to the project’s success. This way the project can attract more investors to fulfill the financial aspects and also attract skilled workers to give their best.
7. Lack of control over staff priorities: The next project risk example is related to the staff members. If a project fails to create a backup for team members, then the project will be delayed, which is indeed a negative aspect that may give rise to other risk factors.
Mitigation: To prevent this risk factor, a project manager must take the initiative to brief out the importance of the project to the other managers. The manager should schedule the dates for performing each task and provide backup for every team member. If anyone leaves the project team, time must not be wasted in finding another candidate suitable for the profile. Instead, a backup must be kept ready to avoid such risks.
8. Risk factors related to disputes: A project is handled by many people, and it is likely to happen that disputes can arise due to different thoughts, different, and different expectations. So therefore, this is included in the project risk examples.
Mitigation: The way to avoid such risks is to conduct meetings regularly and let all the team members and project-related personnel participate so that the issues can be discussed openly and a relevant solution is provided as soon as possible.
9. Unplanned work risk: There are several tasks to be performed by each one related to the project. When tasks are not planned efficiently, then this type of risk arises, and the project will have cases of delayed work more than the tasks which are being completed.
Mitigation: To avoid this risk, one must attend the project schedule workshops and analyze the previous projects. You must check all the plans and quantity surveys and document the findings. This must be reported to the project manager before the project kicks off.
10. Communication issues: One of the other project risk examples includes the communication channel between the people related to the project. Due to a lack of communication, there will be no clarity, and instead, confusion will arise which will be stressful for the efficient running of the project.
Mitigation: To prevent such risks, the communication plan must be established considering the audience, frequency, and goal of the project. Along with the plan, the right communication channel is to be established through emails, phone calls, writing, and so on.
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11. Risk related to errors: Another project risk example is related to errors. The team members must not be forced to complete tasks in a limited time as this will increase the possibility of getting errors. This type of project risk also arises when the team is working under pressure.
Mitigation: To avoid such risks, it is important for the project team to have enough time to complete the tasks and space must be given to the workers to do the task as per their skills and efficiency levels. The task duration must not be reduced certainly as it will increase the possibility of getting errors.
12. Escalating project conflicts not reported timely: This gives rise to other project risk examples. According to this, conflicts arising in the team and outside the team are not handled timely when the conflicts arise. This is a low to medium risk factor if it causes an impact on the project.
13. Delay in projects: Delay in competing for earlier projects causes this risk to occur in the current project.
Mitigation: To avoid such risks, trackers must be made to analyze the task completion and delays must be reported immediately so that the relevant action plan can be made to complete the tasks as soon as possible.
14. Increased workload due to policy changes, direction or statute: It is a low to medium risk factor. The statement itself states that increasing workload or reducing the timeline for the tasks will cause a problem in completing the project efficiently.
Mitigation: Proper management of ties must be done, and if possible new employees can be hired to compensate for the project requirements rather than the increasing workload of the existing team members.
15. Health and Safety: This is another field of risk where if the health and safety of the project team are ignored, the project will be affected,
Mitigation: To avoid such risks, team members must be provided with the facilities like first aid at the project site.
16. Change in Exchange rates: If the project involves making payments and collecting revenue in multiple currencies, then the change in the exchange rate will cause a risk.
Mitigation: To prevent such risks, proper knowledge of the exchange rates must be given to the team members and exchange must be done when the rate is affordable.
17. Quality-related risk: The input and output of the project hinder the quality, which causes this risk.
Mitigation: A quality check must be done for each step, and if changes are required, these must be implemented right away.
18. Resource suppliers’ risk: Other project risk examples include risks related to the resources. If the project does not acquire the required resources on time, the project will face many problems.
Mitigation: To avoid such risks, resources must be gathered before starting the project by analyzing the requirements efficiently.
19. Risk related to the partners: There is a possibility that the project partner does not meet the project’s obligations. In such a case, the risk arises.
Mitigation: An agreement must be made and signed by the parties to abide by the set rules and regulations to be followed. This will avoid partner obligations.
20. Market-based risk: Another example of project risk includes market-based risk. This is related to the price of the commodity. Changing market conditions will cause this risk.
Mitigation: To avoid such risks, market analysis is essential from time to time, and necessary changes must be made following the demand of the customers.
Now that you are aware of the 20 most common risk management strategies examples analyze them efficiently and select the right remedy for the risk as soon as possible.