project risk management plan

How to Create a Project Risk Management Plan

The word “risk” has a complicated reputation. To some, it is a terrifying thing to be avoided. To others, it’s an exciting motivator. To project managers, it’s an inevitable part of the process that should be expected and planned for.

Project risk refers to any unplanned event that pops up throughout a project that could impact its timeline, budget, or quality of deliverables. Despite the often negative connotation, risk can be either positive or negative depending on how it’s handled. A project completed over-budget is probably negative, while finishing under-budget is a risk that is likely to be well-received.

The idea behind project risk management is to get ahead of any potential risks — both good and bad. It's part of the project planning process that helps your team be proactive rather than reactive. The more you prepare for the unexpected, the less any surprises will derail your project.

Why Manage Risk?

In his book, Done Right, Workfront CEO Alex Shootman points out that you can’t and won’t win all the time. “To succeed, you must face the risk of failure and be resilient to whatever comes out of left field,” writes Shootman. “What keeps me going in tough times is the knowledge that success tomorrow lives on the other side of today’s failure. There’s always another chance to win.”

The resiliency that Shootman describes is made possible by project risk management. By preparing for what can go wrong, you’re always a few steps ahead of potential failures. It may seem like a pessimistic way to start planning for a project, but you’ll be glad you did. These five steps will get you started.

The Project Risk Management Process

  1. Identify stakeholders and potential problems. Gather your entire project team and encourage team to speak up about any potential risks. Involve all stakeholders in this brainstorm to collect as many ideas as possible. Instruct everyone to think about their role in the project from start to finish, and make note of everything that could go wrong or that could go not according to plan. The more brains you have thinking about potential risks, the better.

    Draw from past projects as well. What went wrong under similar circumstances? Talk to other project managers who have tackled equivalent projects. Find out what they learned, and what risks they wish they had planned for.

  2. Evaluate potential risks. Once you’ve created a comprehensive list of potential risks, organize them in order of likelihood and importance. Determine how much each risk could impact your project, and categorize them accordingly. Will it dramatically throw off your timeline and budget? Or is it only a low-priority risk that isn’t worth worrying about

    This information can be compiled in what’s called a risk register. While it is an evaluation of potential risk at the start of your project, think of it as a living document. Managing project risk is an exercise in learning from experience, and you may need to make changes before the project is complete.

  3. Assign ownership for each potential risk. Prioritizing your project risks will help you decide how many resources should be allocated toward addressing each risk. Assign a team member to oversee each risk. That person will be responsible for jumping into action should the potential risk turn into an actual issue. Assigning risk ownership ensures that someone is always keeping an eye out for each problem, and quickly resolving those that become reality.

  4. Create responses ahead of a possible disaster. The project manager and the owner of each risk should work together to determine how they are going to react to each risk should it occur. Whenever an issue arises during your project, refer to your risk register, communicate with the appropriate risk owner, and implement your pre-determined response.

    In Done Right, Shootman says that in his experience, “all projects will have at least three disasters and they won’t be related to the technical tasks at hand. They will be rooted in communication. And it’s usually not how you avoid the disaster that matters. It is how you handle them realizing that the disasters likely stem from miscommunication, vagueness, or failure to share vital details and decisions at the right time.” In order shorten risk response time, you’ll need important information to be shared efficiently.

    Your risk management plan should be visible to all of your team members, so everyone knows which risks to watch out for, and who to contact should one of them arise. In this digital age, you can easily connect your enterprise with one work management solution. Workfront’s platform allows you to centralize your project information. Viewing your risk management plan in a single location enables everyone to recognize and respond to issues as quickly and efficiently as possible.

  5. Monitor risks. Unfortunately, you can’t just create your risk management plan in the beginning and expect everything to run smoothly throughout the rest of the project. It’s important to monitor risk until the project is completely finished. New risks are bound to surface, and you’ll want to make sure those in charge of each risk response are doing their jobs correctly.

Have a System in Place

Risk management is difficult and complex. It is impossible to predict everything that will go wrong or that won’t go according to plan, but it certainly helps to try. Having a system in place when things start to break down will improve your chances of success. You’ll learn from your mistakes, and each project after will be better for it.

As Shootman advises in Done Right, “accept that if you strive for the extraordinary, you will not always succeed. But also accept that you don’t become great at getting extraordinary work done by avoiding risk, surprises, or mistakes.” Anticipating risk will only encourage your team to be flexible. They won’t be afraid to try new things and make mistakes, because they’ll know they are backed by resilient leaders.

Over time, effective project risk management can reduce overhead, and get your teams working smarter. Project managers will get the help they need putting out fires, and problems that could have been major will be reduced to minor bumps in the road.

Workfront simplifies the process of creating a project risk management plan. Collaborate with your team in one location, increasing communication and transparency throughout the project. Everyone will be able to provide input and watch out for potential problems together, minimizing the number of risks that turn into disasters. If you’re ready to start identifying risks for your next project, contact us today.

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