Project risk management and assurance

Why are so many organizations embarking on high-risk projects without demanding a strong project guarantee?

Projects fail for many reasons. Recent global studies indicate that inadequate risk management is a common cause.

Successful project managers aim to resolve high levels of exposure before they occur, through systematic risk management processes.

Many projects are inherently exposed to a myriad of risks and are often significant in scale, complexity, and ambition. The delivery of large-scale projects can often be negatively affected by a bias towards over-optimism.

The exposure of imperfect, insufficient or inadequate data increases, often resulting in overestimation of benefits and underestimation of costs.

Managing macro and micro level events related to the achievement of project deliverables, while balancing the needs of many stakeholders, has become increasingly important.

Assessing risks at both the portfolio and workflow levels helps increase confidence that risks are understood.

Projects are often prioritized based on their perceived exposure levels, and one has its own risk profile.

Project risk management

Project risk management focuses on identifying, analyzing, and responding to project events.

It should be designed to systematically identify and manage levels of uncertainty and potential threats to successfully meet project objectives.

Risk management processes should be iterative throughout the life cycle of a project and integrated into planning and project management activities. Smaller projects often require less work and regular follow up.

Complex projects need formalized processes to analyze, manage and report risks.

Good reporting is based on clear descriptions of all exposures, their impact on projects, and the potential costs of mitigation and inaction.

This helps ensure that project staff understand the potential impact that risks can have on the success of projects and have prepared strategies to minimize negative consequences.

Problems occur when there is limited visibility into risks at the project and portfolio level or approaches to risk management are ad-hoc and inconsistent.

Additional issues can arise when risks are identified but recorded at a very high level accompanied by highly subjective risk rankings, rather than being the result of a more substantive risk assessment.

When these issues arise, an organization would benefit from clearer, more formal and pervasive processes for capturing and monitoring risks.

Project and portfolio risk assessments

Project and portfolio risk assessments should be conducted to understand their risk profiles and associated threats to achieve business objectives.

Assessments should identify action plans to address identified risks and assign executive responsibility for managing them. Additional risk assessments should be performed on selected projects (perhaps prioritizing them by value or complexity).

Risk management processes must be continuous and monitored throughout the life cycle of a project.

Regular risk reports would provide project sponsors, senior responsible officers and steering groups with better visibility into project risk profiles.

Whether you’re responsible for overseeing or managing a project, strong project assurance will help you address the risks that threaten your success.