What is Risk Assessment in Project Management?

Risk is an inevitable factor when it comes to project management. And the last thing any project wants to face is risks. However, projects are created to take advantage of opportunities and resources, and with these come uncertainty, risk, and challenges. 

Therefore, risk management becomes a vital aspect of all project success. The project risk management plan addresses the procedure behind risk management, and its assessment meeting lets the project team determine, categorize, prioritize, and alleviate these risks ahead of time.

However, in any project, risk assessment is not a project manager's sole responsibility. Therefore, managers must conduct a special meeting to bring in the ideas of the whole team or, at a minimum, the following:

• Project managers act as the chairperson and enable the risk assessment meetings.
• The project manager must dedicate the roles of recorder and timekeeper to the project team members.
• Key stakeholders may bring value in determining project risks and alleviation & avoidance master plans.
• Subject matter professionals are specialists in certain project activities; however, they aren't formally assigned to the project but add value.
• The project sponsor may participate based on the project scope and size.

Phases of Risk Assessment in Project Management

In several projects, risks are determined and evaluated randomly. This is often malignant to a project's success, as unexpected risks arise that must be dealt with on an emergency basis instead of being prepared for and defended against in an estimated fashion.

Potential risks must be determined, categorized, measured, and documented. Rather than looking at the risks randomly, finding threats and grouping them into categories is much more efficient.

Below-given are the five phases of risk assessment during project management:

1. Identification of Risks

Before diving into risk assessment, the project manager will have fulfilled a list of risks from prior project experiences. These will be reviewed during the start of the project as a method of identifying a few common risks.

This will also offer a meaningful insight to the teammates to predict potential risks. While there are several techniques to identify risks, the Crawford Slip practice is one of the most common and effective methods.

Each risk found and discussed should be stated in a complete sentence that states the risk cause and the impact that the risk has on the project.

2. Categorizing and Grouping of Duplicates

Categorizing risks is a path to systematically identifying risks and offers a foundation of awareness, understanding, and action. Each project has its structure and difference.

Categorization makes it seamless to determine duplicate risks and prompts for identifying additional risks. The most common and efficient technique is to post the sticky notes on a large board where the manager has posted categories.

The participants then put their risks beneath the relevant category on the board. As they find the same risks, they stick the duplicates on top of each other. The manager then discusses the risks under each section with the participants. Once all the risks are identified, categorizing should be documented for stakeholder approval.

3. Qualifying Risks

Significant questions to assess any risk in projects are:

• What is a risk? How can I recognize the risk if it becomes a reality?
• What is the probability of the risk happening? Is it High, Medium, or Low?
• How serious a threat does it show to the project - high, medium, or low?
• What are the signs that project managers must look for?

A risk assessed as highly likely to occur and having a high effect on the project will require closer attention than a low risk in terms of both impact and probability.

4. Determining Risk Response

For the risks which have been determined with a higher risk score, the users will identify the signs or causes and find responses. Responses include:

• Adding the risk to the project plan and scheduling it.
• Adding funding to the project to alleviate any possible rise in expenses.
• Adding resources to the project to lessen any likely scarcity of dedicated resources.
• Creating an action course to eliminate or avoid risks.

5. Risk Documentation

The project manager will enter all the risks, responses, and probability-effect scores and maintain a document to explain them. The high-scoring risks will be added to the project management plan, and the document will be included as an appendix to the management plan.

Moreover, these high score risks will be added to the schedule to track the risk at the right time. Though these risks are added to the schedule, it isn't necessarily modified. This method offers visibility and awareness to the individuals of all high-scoring risks throughout the project lifecycle.