Trying to run a business or manage a large project can often feel like walking a tightrope. One wrong step, a single bad decision, a slip, and… let’s not go into the details.
Of course, you don’t have to go blindly into projects with no idea of the risks. That would be like planning to do a tightrope walk without checking the weather forecast and wearing a harness.
Project risk management helps you identify all possible risks, figure out the worst ones, and start taking action to deal with them.
In this article, we’ll show you how to identify, monitor, and mitigate risks for your project, so you can safely complete it and reap the rewards.
What is project risk management?
Within project management, risk management is the practice of identifying, assessing, mitigating, or even preventing risks to a project so you can complete it safely.
The whole idea is to predict and avert disaster before it happens so you reach your goals without issue.
It can be something as small as backing up your project files, in case a computer breaks down, or as massive as doing aerial mapping and 3D laser scanning to survey the area for a building project.
If you don’t want to end up like cartoon villains, outsmarted by a single unexpected twist of events, you need to take risks seriously.
Why is risk management important for business projects?
Risk management is essential because it helps you complete more projects successfully. A few cheap and easy-to-implement precautions can save you vast amounts of money in the long run.
But in a world with automated backups, built-in firewalls, and service guarantees, it’s easy to get complacent. And yet, doing business is riskier than ever before.
A breach of your cloud data could be fatal for your business. In the US, a single breach costs $8.64 million, on average, according to the latest IBM report.
So even risk mitigation — not prevention — could save your company millions. Plus, cybersecurity risks aren’t the only thing that can affect your company’s projects.
A supplier, partner company, or crucial client could go bankrupt, the weather could disrupt a shipment, or a worldwide pandemic could shut down an entire industry — thanks to 2020, that’s no longer a figurative example.
Unfortunately, the average camper is more prepared than most small companies.
They’ll check weather reports, bring rain gear even if the forecast is all sun, take emergency radio equipment, and more.
Many companies are willfully underprepared, hoping for the best out of naivety. If that sounds familiar, we’ll help you do something about it.
6 most common types of project risks
Before you can take steps to minimize risks, you need to figure out what could go wrong with your project. It’s a lot easier when you know what you’re looking for.
1. Environment, safety, and health risks
The first category of risks are environmental. This includes weather, markets, and more.
A storm could take power down, shutting down your plant or data center. Your whole team could get sick or quarantined and be unable to do any on-site work for weeks.
Due to global warming, extreme weather will only get more common, making it an essential risk to factor in for large-scale building projects.
You also need to figure out how it might impact your supply chain or factories.
Strategic or competitive risks
A strategic risk is an inherent risk that any large-scale business decision can backfire.
Even if, with all the information at the time, you objectively made the right choice, things can still go wrong.
For example, after deciding to develop a new product, a competitor could release a similar product years before your project is even close to done.
Scheduling and cost risksMost projects will exceed their initial budget and project schedule. Unless you want to fail, you must factor that in when you evaluate and plan a project.
If you’ve ordered services or rental equipment in advance, those expenses can quickly balloon out of control if your project doesn’t go according to plan.
The last thing you want is a parking lot full of idling equipment that costs thousands of dollars per day.
These risks come from working with a partner, like a SaaS company, supplier, or fulfillment company.
According to a 2020 study by Prevalent, the most common incidents were operational issues and vendor performance issues.
And since the average small business relies on 102 SaaS apps, there are plenty of things that can go wrong.
For SaaS, the worst-case scenario is that a data breach puts your customer relationships at risk.
For example, a payment processor could get hacked for their clients’ credit card information. Or, a power outage could knock out a hosting company’s data centers and have your website down for hours.
Since you chose to work with that vendor, this also puts your company in a bad light.
But the answer isn’t to do absolutely everything in-house.
That would involve a steep learning curve, lots of wasted capital, and its own unique set of risks.
Instead, make reliability, security, and operational track record a priority when choosing services and business partners.
Loss of support
Loss of support is a risk specific for projects and companies funded primarily by a few outside sources.
Your main project sponsor or a crucial VIP client can suddenly stop the funding, leaving your project without sufficient money to continue.
If the project is mission-critical to the future of your company, line up other potential funding sources. Your existing relationship could go sour, so be prepared.
How to use monday.com to assess and monitor project risks
The monday.com Work OS makes it easy to build a custom workflow for handling risks that suits your company.
Use a program risk register to collectively catalog project risks.
Do an initial risk assessment and start cataloging your risks using our project risk register template.
It includes IDs, categories, dates, status, probability, impact, and more. You can easily customize it to incorporate less or more based on your internal processes.
You can start filling it out by brainstorming risks in a meeting with your project team. Think about what can go wrong with each process or deliverable, and make a list.
But risk identification is only the beginning. For the list to be useful, you need to prioritize likely or potentially devastating risks.
Assess impact and probability to prioritize which risks to tackle.
Once you’ve got a list of risks, you want to rate their potential impact and probability of happening with a risk analysis.
A qualitative risk analysis sticks to rough estimates on a number scale. But our template also has room for a quantitative risk analysis that estimates the impact in actual dollar amounts.
A realistic estimate can help your team understand the gravity of the situation.
Assign a risk owner to enforce your risk management plan.
With a vague risk management plan and no responsibility, chances are nothing will change.
To counter that, mobilize your team and reduce your risk exposure by assigning a risk owner to every high-risk event.
For the highest-priority risks, create a contingency plan where you outline your risk response strategy.
It should feel like you’re Kevin McCallister in Home Alone, well prepared for everything the bad guys can throw at you.
Monitor projects closely with real-time dashboards and multiple sources.
With monday.com’s robust native integrations, you can easily sync data from multiple sources to keep your team up-to-date.
For example, you can keep up with leads and customer relationships to troubleshoot the effect of a marketing campaign or new feature you released.
You can then use custom widgets to build a reporting dashboard that makes it easy to keep up with even the smallest developments in real time.
When every decision-maker has access to real-time data, your company starts making better long-term decisions as a whole.
Share access directly with stakeholders to keep them informed.
Only 27% of companies are satisfied with reporting on key risks, according to AICPA research.
With monday.com, you can easily share and control guest access to relevant boards and dashboards.
That way, every external stakeholder can stay up-to-date or even contribute directly to the risk assessment and risk response.
Don’t leave project success up to chance
A whole host of things can impact or derail even the least complex projects.
From cyberattacks to changes in regulations, to competitors launching a new product, or a supplier going bankrupt, the possibilities are endless.
With project risk management, you can monitor these risks and have contingency plans in place to prevent or recover from disaster.
Use our risk register template to start managing your project’s risks today.