How risky are your project risks?

An old saying reminds us, 'No risk, no reward.' Does it hold true for our projects as well? In project management, taking 'smart' risks can be the differentiator between success and stagnation of a project. But what is a 'smart' risk, and how do we find the balance between threat and opportunity? 

The human factor in risk perception 

First, people often see risks in projects as bad things that cause delays, budget overruns and failure. This view can make us avoid risks more than we should. According to the Association for Project Management’s (APM’s) Project Risk Analysis and Management (PRAM) Guide, a risk event is an uncertainty that can affect the achievement of a project's objectives, either positively or negatively. Therefore, a project risk could be a potential threat or an opportunity for improvement. It’s crucial to foster a culture that not only mitigates threats, but also seeks out beneficial risks. 

Governance: steering the ship through uncertain waters 

Second, effective risk management requires a clear project governance structure, which includes defined roles and responsibilities. When planning how to handle project risks, it’s important to have plans and controls that match the level of risk. The right people need to own the risks and be prepared to address any issues that arise. In this way, governance becomes a helpful framework for managing project risks, rather than a bureaucratic hurdle. 

Process: the blueprint for project risk ,management 

Third, project risk management should be an integral part of the project's daily decision-making process, not just a theoretical concept. This involves having a clear process that aids in fully understanding risks and provides a common language for all team members. The process facilitates identifying risks against project objectives and identifying preventive and recovery actions by assessing the causes and consequences of the risk event. 

The synergy of people, governance and process 

People, governance and process are not only the pillars of project risk management but also of project management as a whole. A project is about implementing changes to achieve planned goals, and inherently, projects are risky. Risks can occur at all stages of a project, from deciding a contracting strategy in the project definition phase to project design and construction in the project deployment phase. Project management is essentially about managing various risks throughout the project life cycle. Taking risks is about balancing the potential downsides with the potential benefits to make the best decision. 

In conclusion, projects are journeys into the unknown, filled with risks. However, by smartly taking on these risks, we pave the way for innovation and success. 'Smart' risks are not just about being cautious — they’re about being calculated. They involve making informed decisions that balance potential downsides with the possibility of rewards. So, when we ask ourselves, 'How risky are our project risks?' Let us remember that the answer lies in our willingness to transform uncertainty into opportunity. 

 

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