How to evaluate projects and manage risk? Risk management goes hand in hand with project management. How smoothly a project runs will always factor on how well risk is identified, assessed and planned for. It is necessary to manage risk effectively in order to avoid and reduce risks that pose a threat to project completion and success.  

Projects are liable to change throughout the project life cycle. For this reason, risk management should be an integrated and ongoing part of project management. You do not identify potential risks once, plan for them and then forget about risk. Evaluating new risks as the project is progressing should be one of the ongoing activities of the project manager. On a regular basis, the PM should be running through the following tasks. 

Identify risks

Identifying and evaluating risks is a constant process. It requires complete honesty on the project manager’s part. There is no room for a ‘head in the sand’ approach to risk management. No matter how inconvenient a risk is, it needs to be acknowledged, and in evaluating risks, it is important to be honest again. It may be a small risk, but there is no sense in pretending that it is negligible when it is not. Correctly identifying and evaluating risks makes the next step easier. 

Document risks

Well-documented risks make planning easier for the whole team. A risk log, listing and describing risks along with the predicted impact of the risk and the mitigating actions that could or should be taken is invaluable.   Everyone involved should be able to access and easily update this risk log. This allows the whole team to see at a glance not only what risks exist but also what can be done about them and what has already been done by other team members. 

Prioritise risks

Not all risks are equal. In order to prioritise risks, the project manager needs to look at the impact the risk could have in terms of cost, time and the quality of the final deliverable. This needs to be assessed alongside another variable: how likely is it that the risk will actually occur? A risk that is very likely to occur but will have a very low impact may actually be assigned a lower priority than a less likely risk that would have a much bigger impact. 

Plan responses

Every risk should be planned for. The plan should include what can be done to avoid the risk and what can be done to reduce its impact. Planning responses to risks will also help identify where time and resources should be spent within the risk management process. If the actions needed to avoid that big-impact, low-probability risk are minimal and cheap, then it may make sense to avoid that risk and accept or reduce the very low-impact, high-probability risk. Ongoing, well-documented risk management will often make the next action crystal clear to everyone involved.