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1. Scope Creep Risk
Scope creep is a risk that can happen when the content of a project changes. It is the phenomenon of adding more and more requirements to a project without considering the time and budget constraints.
It is essential to have an agreement before starting any project so that everyone knows what they are getting into and what they are expected to do. You can manage scope creep by setting up a scope management plan. Ideally, this plan should include the following:
- A list of every task that needs to be completed to complete the project.
- The estimated time for each task
- The estimated cost for each task
- The total cost of the project
2. Cost Risk
Cost risk is a type of project risk that occurs when the cost of a project exceeds its budget. Cost risks are often caused by unforeseen circumstances, such as increased material costs or labor rates.
PRINCE2 Foundation and Practitioner course focus on process-based learning through which project management becomes more accessible. One can mitigate cost risks by developing contingency plans and budgets for unexpected events. The cost risk can be managed by following the steps stated below:
- Establish a budget and a timeline for the project.
- Identify all of the costs associated with the project and estimate how much they should cost.
- Determine if any risks could cause costs to increase or decrease unexpectedly and identify ways to mitigate those risks.
- Create contingency plans if any of those risks come true, so you have a plan for when things go wrong.
3. Communication Risk
Communication risk is the risk of a message being misunderstood or misinterpreted. You can reduce these risks by using clear and concise language, avoiding jargon, and providing context for the message. Communication risk can be managed by:
- Ensuring that the message is to the point.
- Using appropriate channels for communication.
- Ensuring that the message is relevant to the audience.
4. Lack of Clarity
Lack of clarity is a widespread problem in the workplace. When it comes to a lack of transparency, it can be difficult for people to understand what someone is trying to say or what they seek.
It can lead to misunderstandings and miscommunications, which are not ideal for the workplace. Employers must ensure that their employees have the right skill sets when it comes to communication, so they do not have this issue at work.
There are many ways to manage the lack of clarity. One way is to meet with all the stakeholders and discuss what amendments need to be made. Another way is to meet with each stakeholder one-on-one and ask them what they need from you to do their job effectively.
5. Poor Scheduling
Poor scheduling is a common problem in the workplace. A lack of planning can cause scheduling problems. It can lead to a lot of stress and frustration for employees.
The first step to managing poor scheduling is to identify the root cause of the problem.
Is it due to a lack of communication? Could it be poor time management skills or an overload of meetings? Once you have identified the underlying issue, you can take steps to fix it. In such a scenario, you can reduce the risks by improving communication, setting up better meeting schedules, or changing your work hours.
6. Technology Risk
Technology risk is a company’s business being disrupted by new technologies. Technical risks in project management can be caused by changes in customer preferences, changes in technology, or regulations.
It is essential to understand that technology risk is not just about the technology itself but also how it will affect your business. As technology evolves, the risks associated with it double. Here are some things you should know and consider when managing technology risk:
- How to manage data privacy risk.
- What cybersecurity measures should you deal with.
- How to utilize ML and AI in upholding the company’s reputation.
- How to implement the best practices for managing technology risk.
7. Operational Risk
Operational risk refers to loss arising from inadequate or failed internal processes, people, systems, or external events. The first step in managing this risk is to identify the risks that are most likely to occur.
You can do so by conducting a risk assessment. The next step is to develop a plan to manage these risks if they happen. This plan should include the list of actions to be taken if the risks materialize and the steps to prevent them from happening in the future.
8. Health and Safety Risk
Health and safety risk is the probability of an event that can cause injury or death to a person. Companies must consider these risks when designing their products, processes, and procedures. Ideally, it would be best to work with executives in these areas to avoid health and safety risks.
- Inspecting workplaces to check that they are safe.
- Advising on how to manage risks.
- Issuing enforcement notices requiring employers to take a specific action.
- Bringing prosecutions against those who break the law.
9. Skills Resource Risk
The skills resource risk is a company’s risk when it does not have enough skilled employees to meet its needs. It can occur due to a lack of qualified applicants or because the company has not invested in training and development. There are many ways to manage skills and resource risk.
One way is by investing in training and development for current employees to take on new responsibilities. Another way is by hiring new employees with a suitable skill set or outsourcing work to other companies with the necessary resources.
10. Performance Risk
Performance risk is when a portfolio’s performance is worse than expected. Performance risk involves not meeting the performance expectations of a given investment. It is a type of investment risk that can be managed by diversifying investments and hedging against volatility.
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11. Market Risk
Market risk is a type of financial risk that arises from changes in market prices. It can be divided into two categories: systematic and unsystematic. Systematic risks affect all assets, such as inflation or interest rates, while unsystematic risks affect only a few investments, such as company-specific events.
Systematic risks are more difficult to manage than unsystematic ones since they affect all assets. They cannot be diversified by holding a portfolio of investments. The first step in managing market risks is identifying the risk sources. The second step is to assess the probability and impact of each risk. The third step is to formulate a plan for mitigating the risks.
12. External Hazards Risk
External hazards are the risks that come from outside of an organization. They include natural disasters, terrorism, and cyber-attacks. There are three categories of external hazards: physical, technological, and human. There are many ways to manage the risk of external threats.
One way is to use a catastrophe bond to cover the risk. A catastrophe bond is insurance that pays out when a disaster occurs. An alternative method is to invest in a portfolio of stocks that have historically had a low correlation with the stock market and are not affected by natural disasters.
13. Financial Risk
The risk of financial loss is one of the most important considerations for investors. Financial risk is the possibility of an investment losing its value. The financial risks in project management can be caused by several factors, including changes in interest rates, inflation, and economic growth.
The first step to managing financial risk is identifying your business’s risks. One can do so by looking at the company’s balance sheet and income statement. The second step is to assess the probability of a risk occurring and its impact on the company. You can determine the likelihood of a risk arising by looking at past events, current trends, and future predictions. You can evaluate the effect of risk by looking at how it would affect cash flow, profitability, or other aspects of the company’s operations.
The third step is to develop a plan for mitigating or avoiding these risks. This plan should include measures for preventing risks from happening in the first place and actions for dealing with them if they occur.
14. Technical Risk
Technical risk in project management is a project not meeting its objectives because of technical problems. The examples of technical risks in project management can range from the project’s complexity to the lack of knowledge and experience about the technology. Other examples include poor communication between team members and project managers and insufficient time to complete the project.
There are many ways to manage technical risk, but it is essential to know what kind of risks you are dealing with before addressing them. For example, if you have a software project and your team has never worked on this type of software before, then you should be more concerned about bugs in your code than how much memory your computer has.
15. Stakeholder Management Risk
Preventing conflicts and addressing them due to miscommunication, lack of alignment, or lack of stakeholder engagement is critical in any project. It is imperative to consider stakeholders’ needs and desires, set realistic expectations from the onset, and maintain communications to address any concerns regarding the project at various stages of development.
16. Vendor/Supplier Risk
Validating the reliability and efficiency of third-party providers is essential. Undesirable risks such as delays, low quality, financial problems, or inability to fulfill project requirements can negatively affect project schedules, costs, and quality. Managing this risk involves proper verification of vendors, establishing proper contracts, and scrutinizing their performance.
17. Regulatory/Compliance Risk
Failure to adhere to legal requirements, industry standards, and regulations can lead to fines, legal penalties, or critical time delays in a project. Keeping abreast of the newest regulations and carrying out compliance checkups ensures adherence to necessary regulations throughout project execution.
18. Resource Availability Risk
Securing timely access to personnel, equipment, or materials is equally important. Failure to address this can slow down progress and increase expenditure. Managing this risk involves having contingency solutions and installing backup plans in resource scheduling.
19. Quality Management Risk
Ensuring that the project meets the stated goals, objectives, and stakeholders’ expectations is crucial. Failure in this area can result in rework, higher costs, and loss of reputation. Adequate QA & QC measures are applied across the entire project to mitigate these risks.
20. Change Management Risk
Dealing with and overseeing changes can be demanding. Uncontrolled or poorly managed changes can result in cost and time overruns and a vague project boundary. A well-established change control process, stakeholder engagement, and proper analysis of any change are essential to address this risk.
21. Political Risk
In projects concerning public sectors or politically sensitive areas, political risks must be considered. Monitoring the political environment and establishing ways to manage identified risks are necessary steps to address this risk.
22. Dependencies and Interdependencies Risk
Managing several dependencies and interacting with related project tasks and other projects is crucial. Synchronization of work in subordinate programs is not always possible, leading to sequential violations of deadlines or complete failure. Proper management of these dependencies ensures project continuity and prevents disruptions.
23. Environmental Risk
Assessing the relevance of environmental factors like natural calamities, climate change, or the existence of ecological opportunities is essential. Such risks may lead to cost overruns, time wastage, material losses, or amendment expenses. Approaches to minimize these risks include carrying out environmental impact assessments and developing appropriate response measures.
24. Cultural and Diversity Risk
Issues may occur when working with multicultural groups or managing multi-teams, including misunderstanding, miscommunication, and conflict due to cultural disparity. Overcoming this risk involves learning about different cultures and enhancing interaction among employees.
25. Reputation and Brand Risk
Risks of reputational loss to the organization or damage to brand image from negative project outcomes or scandal must be considered. Poor execution can impact customer trust, market position, and business longevity. Effectively managing relationships with stakeholders and handling issues timely ensures that the firm’s and brand’s image and reputation are not at risk.