Should project managers be risk takers? How much risk management is too much? Project managers are required to add value to their projects, and risk management throughout the process can seem like a bit of a gamble. Play it too close to the book, and you might not see the results that you’re looking for. Play it too loose, and you may find yourself explaining some serious losses.
Identifying and Prioritizing Potential Risk
Before you know whether you want to take on risk, you need to identify which risks have the highest potential of occurring and prioritize them by severity. Risk assessment is generally done based on prior knowledge of similar projects and a step-by-step overview of each critical stage of the current project. Ask yourself what foundational aspects the project relies upon and what would occur should something disrupt these critical components, then drill down to the likelihood of such an event occurring. How much damage would there be? How long would it take to recover?
Learning to Welcome the Positive Risks
A positive risk may seem like an oxymoron. But any situation that was not accounted for can be considered a risk. It is a risky event, after all. Risks that can be turned to your favor are really an opportunity, so it’s important to both identify any potential risks and determine their potential outcomes. This is where project management can become a balancing act: you need to weigh the potential rewards against the likelihood of a less than favorable outcome.
And there are some risks that aren’t strictly positive, but simply don’t have enough of a negative outcome to merit extreme worry. For example, there may be a risk that is likely to occur and impossible to avoid (such as a weather problem), but is minimally problematic (a delay of a day or two). These are risks that aren’t positive, but are at very least neutral. They should be planned for, but not worried about.
Planning Your Contingencies When Taking on Risk
You’ve outlined the risks that are available to you and you’ve identified the risks that are either positive or relatively neutral. At this stage, you need to create a contingency plan to deal with the risks that are most likely and you need to track the risks that you’re going to take on. And this is when you’re really going to need to ask yourself how much risk you can handle.
Risk management is usually decided on a case by case basis. How risky can the project be? How risky are you comfortable being? And how risky is each individual case? But whatever level of risk is decided, now is the stage that you control and manage that risk. Risk management isn’t about avoiding risk, but instead about controlling the factors leading up to and following that risk.
So, should project managers take a lot of risks? Proper risk management is critical for a successful project, and most project managers would do well to avoid the bulk of risks potentially facing their project. But that doesn’t mean that project managers should feel paralyzed by the potential for risk. Some element of risk will always be inherent in an agile and dynamic project, and avoiding all risks is neither possible nor healthy.