Practical steps on how to manage risk in a project

By Indeed Editorial Team

Published 11 April 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

It's not unusual to encounter certain risks or unexpected events when working on a project. While it may not sound reasonable to prepare for how things may go wrong, it's best to be proactive. Setting up a plan to mitigate potential risks helps ensure problems are easier to solve if they occur. In this article, we discuss effective steps to take when managing project risks.

What is project risk managing?

Learning how to manage risk in a project means trying to identify, analyse and react to it before it occurs. It isn't simply responding when an unexpected event happens but planning and making adequate preparations for any eventualities. Managing project risks ensures that you perform the project within the required timeframe, budget, and intended goal.

What is a risk?

A risk is any situation that may affect your project's completion time, budget, and end goal. It's a potential event that becomes an issue when it materialises. Therefore, risk management focuses on identifying, analysing and planning for these risks, so they don't escalate into problems. Regardless of the kind or size of the firm involved, managing risk in project management is beneficial.

Organisations and businesses take on new projects from time to time, and each of these projects comes with its own risks. Learning how to manage risk in a project is essential to completing the project. The risk management process may vary for different corporations, but you may consider it before and during any project. Making deliberate preparations in advance to tackle possible risks reduces the chance of damage and negative impacts that your project may come across.

Related: Project management skills and how to improve them

7 steps on how to manage risk in a project

Risks are inevitable, and since they're unpredictable, it's best to prepare before managing your project. Rather than letting unexpected circumstances overwhelm you, you can have a system in place to prevent and properly handle them. It may serve as your contingency plan. The following are steps you may consider when managing project risks:

1. Define your project

It's a crucial first step to set a clear definition of the project you're working on before starting. Define your goals, the tools you require and how long it may take to achieve those goals. Creating a clear picture of your project's demands and what it seeks to achieve puts you in a better position to detect possible risks.

Suppose you have a team working with you, set up a meeting where everyone can discuss the project and bring up suggestions on the best way to get things done. Getting opinions from everyone involved helps determine the best approaches or decisions. When you've clearly defined what your project is all about, it's easy to point out risks peculiar to that project that may occur.

Read more: How does project planning work? (With steps and FAQs)

2. Identify any possible project risks

You can identify possible risks after you've defined your project goals and requirements. Think of all potential risks that may come up during your project. Do this with any team members or partners. Discuss the factors and tools needed to complete the project and let everyone know areas they think issues may develop from. It may be in marketing, technology, budget, materials or advertising. Take note of anything that comes to mind.

It may help to create a spreadsheet for project risks. Include relevant fields such as date, risk description, likelihood or probability of occurrence, potential impact, risk response and status. This process keeps you on top of your game when tracking and managing risk.

Related: What is a risk management framework? A comprehensive guide

3. Analyse project risks

Potential risk analysis is critical to managing risks in projects. Determine how these risks may impact your work and their likelihood of occurrence. This process may require you to get a lot of information together, but appropriate data may better equip you to perform a more accurate analysis.

Risk analysis enables you to find the specific ways potential risk may impact your project. Risks may affect your budget, work hours, or the nature of the materials required. With a detailed analysis, you can monitor these risks and prevent them. Also, the impact on your project may lessen when you're equipped with adequate information about potential stakes.

Related: How to perform a risk analysis (with tips)

4. Define the appropriate responses

After determining the likely risks, your project may encounter and their impact, select the best approach to tackle them. Place more attention on stakes with the highest likelihood of occurring and potential impact. It's important to know how you're going to handle these potential risks.

Discuss with your team members the most effective ways to tackle these risks. This step may involve providing the answers to questions. For instance, you might deal with questions like 'what's the fastest way to get the computer server running again if it crashes' or 'how do we deal with unsatisfied clients'.

5. Estimation

Since you've determined the best action to take when handling your project risks, estimating extra costs can add much value to your project. Determine what you may require to cover each risk and how much it may cost to do so. For instance, you might pay the hospital bills if someone gets hurt during a building project.

Put down some estimates for the best and worst-case scenarios. Include the total cost in the aggregate to the overall estimated project amount. That way, there's a solid contingency plan if you spend extra money.

6. Appoints owners for risks

The process of identifying and analysing possible risks isn't complete if there isn't someone in place to oversee everything related to the identified risks. Designate owners to take charge of specific risks. It may help to select owners based on their skills and areas of expertise. Regardless of how you go about your selection, you might assign people to stay on top of these risks and take charge when the need arises.

Even if you feel you have accounted for all the risks, having the right people to oversee things helps keep risks low. You may attract new risks by not appointing someone to look out for problems. Putting a person in charge also prevents team members from struggling to make decisions, which ensures things go smoothly.

7. Perform regular reviews

A vital part of managing project risks is performing regular reviews. Create a weekly or monthly schedule to discuss risks and identify new potential stakes. The process of risk management isn't one that you can do once and forget about. It requires careful planning, monitoring and review throughout the entire project.

The active participation of team members or stakeholders in the project is vital to improve success during the review process. Meetings are a core part of this process because it allows the team members to gather, monitor their progress and plan for future possibilities.

Positive risks

When talking about how to manage risk in a project, many people think of it in only a negative way. But there are positive risks as well. While negative risks are events that may potentially hamper a project, positive risks are advantageous to the project. Think of them as extra benefits.

Examples of positive risks include getting more customers than planned or discovering a better advertising opportunity. It's necessary to manage positive risk and take advantage of it. When taking measures to monitor and control risks, keep positive risks in mind. This step better equips you to fully enjoy any extra benefits you may encounter along the way. Here are some further ideas that may help you deal with positive risks:

  • Determine the positive risks that may occur. If it's something you may benefit from, find ways to increase the probability of occurrence.

  • Discuss potential positive risks with your team and encourage exchanging ideas or contributions on how to take advantage of beneficial risks.

  • There are scenarios where there's nothing to do. Point out those cases, and when they arise, don't stress over them.

All the tips above can help in project risk management, but each project has particular needs. You can create a customised pattern of how to go about handling the risks your project is susceptible to. Therefore, it's best to know the resources for your project and how to achieve your goals before you start. It puts you one step ahead in managing potential risks.

As a team leader or project manager, It's your responsibility to guarantee that every member of your team shows confidence in their role. An unproductive team may contribute to increased risk. Ensure that all staff are active throughout the project. With everyone involved, risk management can be a much smoother process.

Related:

  • How to perform effective risk analysis in project management

  • What is positive risk in project management? (Plus examples)

  • What is a risk register? (Plus how you can make one)

  • What is risk management in the construction industry?

  • A guide to risk assessment (with a risk assessment template)


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