Learning Objectives
By the end of this section, you will be able to:
- Explain the stages of a project from initiation to closing
- Explain how to develop a project plan and schedule
- Determine how to identify, evaluate, and mitigate project risks
Project management is about properly understanding the requirements for a project and being able to manage that project based on scope, costs, schedule, quality, and risks. Project managers need to understand the role each of these plays on the project from initiation to closing. The PMBOK approach provides guidance on how to set up and manage projects successfully.
Project Stages
In project management, the successful execution of a project depends on a structured approach applied across various stages. These stages provide a framework for managing projects from their inception to their completion. Typically, there are five stages of a project, and various tasks within each stage make up the project management framework (Figure 9.11). The five stages are as follows:
- project initiation
- project planning
- project execution
- monitoring and control
- project closure
The PMBOK defines a comprehensive set of processes that guide project managers through each stage of a project. Following the processes ensures the project will be on time, be within scope and budget, have minimal risk, and be of acceptable quality.
Project Initiation
The project initiation stage marks the creation of a project and involves defining its purpose, objectives, and stakeholders. It’s like creating a road map for a project journey. Most times, projects come from the top down or bottom up—meaning that they are sometimes initiated by the company’s leadership and sometimes by managers within the company. The third way a project can be initiated is through a client. For example, your company may be selling a complex software application that requires the product to be carefully customized to a client’s operations. This would require a project to be initiated for the purpose of a sale made to a client. There are many factors that go into how an organization initiates projects and decides how they will be managed. During the initiation stage, project managers undertake several key activities.
Project Identification and Selection
Project identification entails recognizing opportunities or challenges that warrant a project’s initiation. Projects may be initiated to address market demands, meet organizational goals, or tackle specific problems. Once identified, potential projects undergo an evaluation based on factors such as strategic alignment, feasibility, and resource availability. Best practices suggest using methods like cost-benefit analysis, SWOT (strengths, weaknesses, opportunities, and threats) analysis, or business case development to assess project viability.
Stakeholder Analysis
Understanding stakeholders and their influence is crucial for project success. It is important to understand that failure to properly identify a key stakeholder can jeopardize an entire project. Project managers employ techniques like stakeholder mapping and analysis to identify key stakeholders, assess their expectations, and determine their level of involvement. Stakeholder engagement strategies are formulated to foster effective communication, collaboration, and stakeholder satisfaction throughout the project life cycle (PLC).
Project Charter Development
The project charter serves as a formal document that authorizes project initiation. Many large organizations may have a committee or leaders that determine which projects will be authorized to begin the charter initiation process. The project charter outlines the project’s objectives, scope, constraints, and success criteria. It also establishes your authority as the project manager and provides a high-level view of the risks and stakeholders involved. Developing a comprehensive project charter establishes a clear direction for the project and sets the stage for subsequent project planning activities.
Project Planning
Once your project has kicked off, it’s time to dive into creating a project management plan to ensure project success. This stage is about defining the project’s scope and the details of how progress will be accomplished. It is important to note that the scope, schedule, risks, and budget are all part of this stage and set the parameters for a successful project. A scope document, RACI documents, and project plan for how the project will be managed should all be considered during this stage.
Scope Definition
The scope includes the deliverables, objectives, and requirements of the project. Defining scope is like drawing the boundaries of your project. You want to be very clear about what’s included and what’s not. To establish a clear understanding of what the project entails, project managers employ a statement of work, a document detailing the requirements, deliverables, schedule, and responsibilities of the stakeholders of a project. Scope verification and control processes are also put in place to manage changes and ensure alignment with stakeholder expectations. Control processes mean setting up a change management process to keep track of the scope and the budget for these changes.
As a project manager, one of your most important jobs is to minimize scope creep, which is where the scope of the project grows beyond what was agreed on in the planning stage of the project as requirements are changed or modified down the line. It is a good idea to set up processes to help manage the scope, such as getting sign-off on a scope document before the project begins and setting up a proper procedure for stakeholders to change or modify the scope, called a change management process.
Schedule Development
Developing an accurate project schedule involves sequencing project activities, estimating durations, and creating a timeline (Figure 9.12). Techniques like network diagrams, critical path analysis, and schedule compression aid in scheduling activities and identifying dependencies. Project managers use scheduling tools and software to optimize resource utilization, manage project constraints, and mitigate schedule risks.
Resource Planning
The task of determining what resources are needed and when they will be needed is called resource planning. Project managers assess the availability and capabilities of resources, both human and nonhuman, to ensure efficient resource utilization. By considering factors such as resource skill sets, costs, and constraints, project managers develop resource management plans that align with project objectives.
Budgeting and Cost Management
Effective cost management ensures that projects stay within budget constraints. Project managers estimate costs, create budgets, and monitor expenditures against actual project costs. Techniques such as cost estimation, cost aggregation, and earned value management aid in budget development and cost control.
The planning stage is a perfect point in the project to ensure that you understand the PMO’s or the company’s escalation policies. Project managers use the PMO or company policies to decide when to escalate project overruns that can negatively impact the project. An escalation policy determines when the project manager should report budget issues, such as being under or over budget. Some projects may have specifications dictating that when projects are under budget, the client receives the excess portion to make additional changes later in the project or receives that money back on future payments. Think of a project like going on a weekend trip where your parent gives you a set amount of money to spend on the trip. They may say you can spend up to that amount, but if you don’t spend it all, you can’t keep the change, and if you go over that amount, it comes out of your pocket. This is why project managers need to be good at budgeting and managing costs on projects. Knowing the company’s policies and the client’s requirements is key to successfully managing budget and costs.
Project Execution
With a plan in place, it’s time to execute. This is where all the action happens. The project manager monitors progress, addresses issues as they arise, and ensures the project stays on track. The project execution stage involves implementing the project plan, managing resources, and monitoring progress. This stage focuses on coordinated effort and effective communication. This might be the shortest phase as far as the number of tasks to complete, but the work has just begun. The project manager goes from planning to executing the plans, which include a lot of other human beings and resources that need to be monitored.
During project execution, project managers oversee the execution of planned activities, ensuring that work is performed in accordance with the project plan. This includes coordinating resources, managing risks, resolving issues, and ensuring quality control. Effective leadership and stakeholder engagement are critical in fostering collaboration and maintaining project momentum. This is the stage at which communication becomes critical. You might have leaders and supervisors who have never worked together before or never worked with you. Set expectations and make sure everyone knows their job for the project.
Monitoring and Control
Continuous monitoring and control are vital to tracking project performance and ensuring adherence to the project plan, all in service to ensuring a successful end project. Project managers employ techniques such as progress tracking, performance measurements, and variance analysis to assess project status. Key performance indicators are established to monitor project objectives, deliverables, and milestones. Timely identification of deviations enables project managers to take corrective actions, adjust plans, and manage project changes.
The project manager may take on several different roles during this stage. They are leaders, managers, accountants, and human resources experts; they may also be technical experts depending on their backgrounds. Project managers must anticipate, imagine, adjust, fix, and stay on top of everything related to their project. If a project manager has a good team to work with, this part can be easy, but if the project manager’s team develops conflicts, this could mean a delay in deliverables or failure to deliver the right product or service.
Part of monitoring and control and the planning stages is risk management. Identifying, analyzing, and responding to risks is crucial to project success; thus, risk management is one of the most important jobs of the project manager. The process of risk management encompasses risk identification, qualitative and quantitative analysis, risk response planning, and risk monitoring and control. By actively managing risks throughout the PLC, project managers enhance project resilience and minimize negative impacts.
Project Closure
The project closure stage brings the project to a formal conclusion, ensuring that all project objectives are met and deliverables are handed over. This is the stage at which team members return to their previous work, or they move on to the next project. This is not true for the project manager. The project manager must complete all the paperwork and ensure the client or customer is happy with the outcome of the project. Project managers will ensure they met the budget or even came in under budget numbers, and the timeline would be verified to ensure that the project was delivered within the timeline agreed on by the client.
Deliverable Acceptance
One of the important items on a project manager’s closeout checklist should be the acceptance of deliverables. At this point in the process, project managers verify that the deliverables have been assessed and that all deliverables meet the scope and stakeholder requirements of the project. Formal acceptance procedures and sign-offs are obtained to confirm the satisfactory completion of deliverables. Best practices recommend involving stakeholders in the acceptance process to validate deliverable quality and promote customer satisfaction.
Project Evaluation: Knowledge Transfer and Documentation
Postproject evaluation assesses the project’s overall performance, including its success in meeting objectives, adherence to schedule and budget, and stakeholder satisfaction. Evaluation findings contribute to organizational learning, enabling improvements in future project management processes and practices. As the project concludes, knowledge transfer takes place to capture lessons learned and share best practices. Documentation of project artifacts, reports, and records facilitates knowledge retention and supports future projects. Project managers conduct project reviews and retrospective meetings to analyze project performance, identify areas for improvement, and enhance organizational learning. Usually, the PMO or another project manager would conduct an audit of the project and survey stakeholders on how to improve projects in the future. This information is collected and utilized to help PMOs change processes or policies to operate more efficiently. Some organizations may not have one electronic area within which to keep all of their project data, so it is important the project manager takes time to organize the knowledge and safely keep the data where it can be accessed for the next projects.
Developing a Project Management Plan and Schedule
To ensure successful project execution, project managers should develop a comprehensive project plan and schedule using real requirements and documentation. This phase involves several key steps, each of which plays a significant role in shaping the project’s direction and facilitating efficient execution.
Defining Project Objectives
The first thing the project manager must do is clearly articulate the project’s objectives and desired outcomes. This involves engaging stakeholders and understanding their expectations for the project and the deliverables. It is essential to establish SMART (specific, measurable, achievable, relevant, and time-bound) objectives to provide a clear direction for the project. Without this step, you can get to the end of the project and find the client is unhappy.
Identifying Deliverables
The project manager must identify with the stakeholders, including the client, specific deliverables the project will produce, including reporting and any other updating the stakeholders need. These deliverables can be tangible products, services, or outcomes that contribute to the project’s success. By identifying and defining deliverables, the project team gains a shared understanding of what needs to be accomplished.
Defining Scope
As you learned, the project scope defines the boundaries of the project, including what is included and what is excluded. A well-defined scope helps manage expectations, prevent scope creep, and ensure that the project remains focused on its intended outcomes. The project manager must also clearly document the project scope statement to provide a reference point throughout the project and ensure that the product and/or service being delivered meets stakeholder expectations as defined in the scope.
Work Breakdown Structure
A work breakdown structure (WBS) helps the project manager understand how the deliverables will be scheduled and any dependencies there might be in completing other deliverables, essentially breaking down the work into smaller, more manageable work packages and tasks. A WBS allows the project manager to see the project as bite-sized pieces and tackle them one by one. For example, if you have one team that needs to produce two deliverables, you may need to resource the first deliverable or divide the team if there are enough individuals to complete both deliverables on time. A WBS provides a structured view of the project’s tasks, activities, and subactivities, using some of these techniques:
- Activity sequencing: A WBS can identify logical dependencies between project activities to determine which activities must be completed before others can begin and establish the sequence in which activities should be executed. Dependency relationships can be of various types, including finish-to-start, start-to-start, finish-to-finish, and start-to-finish. This step helps in determining the flow of tasks and understanding the project timeline.
- Estimating activity durations: Accurate duration estimates help in creating a realistic project schedule. To estimate the time required to complete each activity, the project manager must consider resource availability, complexity, and dependencies. The project manager can use historical data or expert judgment if they have the experience. There are several estimation techniques that would be taught in a project management course or training, such as analogous estimating, parametric estimating, and three-point estimating to determine activity durations.
- Resource planning: The project manager needs to identify the resources required to execute the project activities as well as assess the availability and allocation of resources. This requires a solid estimation of the team’s skills, expertise, and availability throughout the project. Resources could include human resources, equipment, materials, and any other necessary assets. Good resource planning ensures that the right resources are assigned to the right tasks at the right time.
Developing the Schedule
Using the activity durations, dependencies, and resource planning, the project manager can create a project schedule. The schedule outlines the start and end dates for each activity and provides a road map for project execution. The project manager also considers constraints, milestones, and critical path analysis to ensure that the schedule reflects realistic timelines and dependencies.
Monitoring and Control
When the project is ready to move along with its tasks, the project manager must establish processes and tools for monitoring the project’s progress and managing any deviations from the planned schedule. The project manager must regularly track the actual progress against the planned schedule, identify variations, and take corrective actions as necessary, sometimes in a very short period of time. The project manager also needs to conduct regular project status meetings, update the project plan and schedule, and communicate changes to stakeholders. This is one of the busiest times for a project manager.
Ethics in IS
The Ethics Guy Podcast
Project managers need to make decisions on a regular basis that impact the project from an ethical perspective. This podcast episode specifically tackles project manager ethics and features Bruce Weinstein, “The Ethics Guy,” discussing what a project manager should do and whom they should be. The podcast Manage This is directed at project managers as they make important decisions not just for projects, but also for organizations, which involve resources, budgets, and leadership skills.
The Plan and Schedule in Action
To illustrate the importance of project planning and scheduling, consider a scenario of developing a new software application. Imagine you are a project manager responsible for overseeing the software development life cycle, from inception to deployment, at a high-tech firm that sells IT services to small- and medium-sized organizations. Your organization has recognized the need for a customer relationship management (CRM) system to enhance customer interactions and streamline business processes.
To effectively support the sales and customer management processes of a medium-sized organization that sells search engine optimization (SEO) services to large organizations, the CRM system your organization needs encompasses a range of specific requirements. These requirements are tailored to the organization’s unique needs and the nature of the services it provides, such as reviewing SEO data to determine gaps in web strategy.
The first thing you must do is accurately identify stakeholders in the project to ensure they are represented in the requirements gathering process. Once the stakeholders are identified, you can set up the processes for how to gather the needs and wants of the team and the organization. For example, should you have one big meeting, or should you break down various groups by function and meet with them separately? Or should you select certain individuals to be part of one higher-level meeting and then have others be part of another broad meeting to gather requirements?
As a project manager, the hardest part of the requirements gathering process is determining the difference between a “must-have” (needed) feature or function and one that is “nice to have” (wanted). Identifying both the needs and wants in the requirements is necessary when budgeting and designing the solution. If there is money left in the budget, you may be able to deliver on some of the wants instead of just the must-have features and functionality.
Table 9.1 outlines the key requirements for the CRM system gathered through stakeholder meetings and analysis of the future needs of the organization for this scenario.
| Requirements Document for XYZ Corporation |
|---|
| Through meetings with key stakeholders and end users, the following areas have been defined as departments or functions that will utilize the CRM: |
Lead management:
|
Contact and account management:
|
Opportunity and sales management:
|
Service management:
|
Communication and collaboration:
|
Reporting and analytics:
|
Integration and scalability:
|
These requirements will be documented in the requirements document that eventually will become the scope of the project. Project managers need to have this requirements document to determine the solution, budget, and timeline for the project.
Developing a well-structured project plan and schedule is critical to ensure a successful CRM software implementation. The project plan outlines the entire scope of work, including the specific deliverables, milestones, and activities required to complete the project. It serves as a road map, guiding the project team through the various phases of development, testing, and deployment.
Planning for the Solution
The next step in developing the project plan and schedule is to understand the solution or how the organization will go about finding the right solution. The solution can be developed in one of two ways: (1) use the requirements document to draft a request for proposal (RFP) to acquire vendors who can supply or build the solution or (2) determine the internal and external resources needed to build the solution and integrate it into the organization. Depending on the resources of the organization, it may be better to select a vendor who can deliver an off-the-shelf CRM system and integrate it with the internal organization. For the purposes of this scenario, a vendor will deliver the complete solution.
Project Objectives
In this case, the organization has defined the objectives to include improving customer satisfaction, increasing operational efficiency, and boosting sales revenue. These clearly defined objectives provide direction for the project and align the efforts of the project team with the organization’s strategic goals.
Deliverables
Since the organization is choosing an off-the-shelf solution and will have a vendor implement and integrate the CRM solution, the project manager’s deliverable is an RFP with the requirements categorized and defined, such as customer data management, sales pipeline tracking, and reporting functionalities. Under each of these categories, the actual requirements would be written to include in the RFP.
Next comes the selection process. The project manager will need to develop the criteria and process for the selection of the vendor. This information will become part of the RFP, so vendors know what to expect. For example, you may require the vendor to submit a proposal and a detailed demonstration of the features and functionalities requested in the requirements. Or you may require the vendor to submit their proposal in person as a presentation to key stakeholders.
Last, you will need to detail the transition and management plan for the project. This plan describes how the organization will work with the vendor and who the key points of contact would be. Typically this includes the project manager and, depending on the questions the vendor may have about the specifics of the project, perhaps someone from the organization’s leadership team or technical department.
Scope
Once the objectives and deliverables are defined, the project manager proceeds with scoping the project. Determining the boundaries of the project involves establishing what is within the project’s scope and what is not. Scoping this project should be simple since you are selecting a CRM vendor who will provide a solution and integrate it into your organization. As a member of the company acquiring the software, all you must manage is the RFP process and how you will work with the vendor to implement the solution. The vendor should provide its own project manager to work with you.
Creating a Work Breakdown Structure
With the scope defined, the project manager then creates a WBS (Figure 9.13). In the case of the CRM software development, the WBS could include activities such as requirements gathering, system design, coding, testing, user training, and deployment. The WBS breaks down what needs to be part of the schedule and estimates how long each task might take. Earlier the work was defined as follows:
- initiating the project
- acquiring the project requirements
- developing the RFP
- selecting the vendor
- overseeing the vendor’s implementation, integration, and training services
First, organize these master tasks across the top of the WBS. Under each master task, break down the task into smaller tasks and organize those accordingly.
Sequencing
Once the WBS is established, the project manager can identify the dependencies between activities and establish the sequence in which they should be executed. Sequence these subtasks for each master task and assign the number of work hours it will take to complete each task. For instance, system design cannot begin until the requirement’s gathering phase is completed. This activity sequencing ensures a logical flow of work and enables efficient resource allocation. Remember that your WBS will help you understand the dependencies of each task and the flow of the project and help determine the time each task will take to be completed.
To estimate the duration of each activity, consider various factors such as resource availability, complexity, and dependencies. For example, acquiring the project requirements may take a while because this task is dependent on the schedule of the stakeholders involved and the approval process required.
Next identify the resources required to carry out the project activities. This could include software developers, testers, and database administrators, as well as infrastructure resources for this project. Ensuring that the right resources are allocated to the right tasks at the right time is essential for maintaining project efficiency.
Bringing It All Together
Once the project plan is developed, the project manager will go to the calendar and begin using the WBS to turn the sequencing, resource allocations, and durations for each task into a project schedule. The schedule outlines the start and end dates for each activity, considering the estimated durations, dependencies, and resource availability. It provides a clear timeline for the project team and stakeholders, facilitating coordination and ensuring everyone is aware of key milestones and deadlines.
Future Technology
Using Artificial Intelligence or GPT for Project Management
Both AI and GPT are big in the business industry. How can project managers use GPT to assist in their work activities? Well, let’s ask Bing GPT, which was running on GPT Version 4 at the time this was written. In answer to this question, Bing GPT provided some very interesting information and an interesting recommendation.
Hello, this is Bing. I’m glad you asked. AI or GPT can help with project management in many ways, such as:
- Creating project plans and timelines by providing information on your assignment and getting suggestions from ChatGPT, an AI tool that uses machine learning to generate natural language responses.
- Getting feedback or optimization tips on your existing project plans or timelines by asking ChatGPT questions and getting in-depth answers.
- Delegating tasks to your team members by providing ChatGPT with the scope of the project and the strengths and weaknesses of each team member, then asking who should take on which task.
- Boosting productivity and improving project workflows by using AI-powered solutions that can automate task creation, provide PM insights, and handle uncertainty and risk.
However, there are also some limitations and challenges of using AI or GPT for project management, such as:
- Lack of context or expertise in certain areas or industries, which may lead to weak or inaccurate recommendations.
- Difficulty in dealing with complex or ambiguous situations that require human judgment or creativity.
- Ethical or legal issues that may arise from using AI-generated content or data without proper attribution or consent.
It is important that, if used, AI or GPT serve as a supportive tool rather than a replacement for human project managers. You should always verify the quality and validity of any AI-generated content or data before using it for a project. You should also be aware of the ethical and legal implications of using AI or GPT for project management and follow the best practices and guidelines for responsible AI use.
Project Risks
Risk assessment and management are important in today’s business world. In project management, effective risk assessment is crucial for managing successful project outcomes. Identifying, evaluating, and mitigating project risks are essential processes that help managers project, anticipate, and address potential obstacles that can impact project objectives.
Risk management is something people can use in every part of life, so the risk assessment described here can be applied to other activities, such as buying a car or getting a job, to determine what the impact of those risks would be on your life financially, time-wise, or in any other way.
Identifying Risks
The first step in a risk assessment is to define what a risk is and how it should be categorized. A risk is an event or condition that has a negative effect should it occur during a project. Identifying project risks involves systematically identifying potential events or circumstances that may have an adverse impact on project objectives. Project risks should be identified throughout the project and monitored for severity. Each time there is a delay in a deliverable, the chance of completing the project on time could become a risk or impact on the cost or budget of the project. There are various strategies for identifying risks in a project.
Engaging Stakeholders
Stakeholders possess valuable knowledge and perspectives on different aspects of the project that you may not have or that they are more familiar with. By involving stakeholders in risk identification activities, project managers can tap into their expertise and gain a comprehensive understanding of potential risks. Here are some tips on engaging stakeholders1:
- Brainstorming sessions: Organize brainstorming sessions with the project team, subject matter experts, and relevant stakeholders. It is the project manager’s job to encourage participants to freely express their thoughts and ideas about potential risks. This collaborative approach fosters creativity and allows for the identification of risks from diverse viewpoints.
- Interviews and workshops: Conducting interviews or workshops with key stakeholders can elicit their insights on risks specific to their areas of expertise. These interactions provide an opportunity to explore risks associated with project requirements, technology, resources, and external factors.
Utilizing Risk Identification Techniques
In addition to stakeholder engagement, various techniques can be employed to systematically identify project risks2:
- Checklists: A favorite among project managers, checklists that cover a wide range of risk categories relevant to the project can serve as prompts to stimulate thinking and ensure comprehensive risk identification. Examples of checklists include industry-specific risk checklists, lessons learned from previous projects, or risk categories derived from standards and best practices. The key is not to reinvent a process but to use the resources you already have available. The PMI provides several resources for risk assessment documents.
- Historical information review: Before you begin to gather risk data, analyze historical project data, lessons learned, and postmortem reports from previous projects to identify risks encountered in similar contexts. This technique leverages the experience and knowledge gained from past projects to proactively identify risks that may arise in the current project. Look for prior risk assessment documents from similar projects and determine if this project could encounter the same types of risks.
- Cause-and-effect analysis: Apply cause-and-effect analysis techniques, such as fishbone (Ishikawa) diagrams (Figure 9.14) or the five-whys technique, to identify potential risks by exploring the underlying causes. This technique helps uncover risks that may not be immediately apparent and enables a deeper understanding of their root causes.
- SWOT analysis: A SWOT analysis is used in business for determining new strategies and developing new products. The SWOT analysis identifies risks related to the project’s internal and external environment and helps identify potential threats and weaknesses that may impact the project’s success.
- Expert judgment: More experienced project managers have a lot of history with various types of projects and can readily identify risks. Junior project managers should seek input from subject matter experts or experienced professionals who possess domain-specific knowledge. Their expertise can help the project manager identify risks that may be unique to the project domain or require specialized insights.
Evaluating Risks
Once risks are identified, they must be evaluated for their impact, probability, and severity related to the project. To evaluate risks of the project, conduct an overall risk assessment (Figure 9.15). The risk assessment provides the team with an overall level of risk or risk exposure number and takes into consideration any threats to the project, including its budget, scope, quality, and schedule. For example, it would consider what would happen if the budget were depleted or if a natural disaster occurred.
For easy evaluation, the impact of a risk can be sorted across categories, such as the range from least to most in Figure 9.15. The likelihood of a risk (for example, an earthquake on the East Coast of the United States) happening is called the probability, which ranges from least to most. An earthquake on the East Coast of the United States has a least probability because history tells us this does not happen very often. The severity of the impact of a risk on a project’s cost, schedule, scope, and quality is also measured from least to most. A risk register documents the risk to the project being completed within budget, on time, within scope, with good quality, and with minimal risks. Figure 9.16 shows how a risk could be ranked. The project manager would then determine if the risk must be accepted or mitigated—or if it is so great that the project should be canceled.
The project manager assesses the probability and impact of risks with respect to the project. This is a hard task, especially for those lacking history or experience in this area or knowledge of disaster events like earthquakes. Here are some tips and a breakdown of the process to use when assessing the probability and impact of risks on your project3:
- Probability assessment: Evaluate the likelihood of each identified risk event happening. This can be done qualitatively by assigning probabilities (low, medium, high) or quantitatively by using historical data or statistical analysis to estimate the probability. The probability will be expressed as a percentage.
- Impact assessment: Determine the potential consequences or impact that each risk event can have on the project, such as scope, schedule, budget, quality, and stakeholders. Assess the weight of these impacts based on their severity and significance to the project. For example, if a project that is to be undertaken in a war zone or during the monsoon season, there will likely be some major risks to the project both in completing the project and in protecting the human resources who are performing the tasks on the project.
- Prioritizing risks: Prioritize risks based on their significance to the project. Prioritization will help you allocate resources so you can focus on managing the most critical risks. Known as risk scoring or ranking, the project manager assigns scores or ranks to each risk based on its evaluated probability and impact. For example, consider a project located in the polar ice caps during the winter season. The risk of getting enough goods and materials to this region is high in the coldest part of winter. This might be ranked as a high risk. Various techniques, such as risk matrixes, decision trees, or multicriteria decision analysis, can help evaluate these risks. The higher the score or rank, the greater the priority of the risk.
- Consideration of project objectives: Take into account the project’s specific goals, constraints, and priorities when prioritizing risks. Some risks may be more critical to achieving project success, while others may have a lower impact on overall objectives. An example would be a slowdown in the supply of materials to complete a project, such as silicon chips due to a major pandemic, or finding human resources to complete the project. The project would fail without either of these resources, so the project manager must plan for these obstacles and ensure there is time in the schedule to overcome or mitigate these risks.
- Review and refinement: Always regularly review and refine the prioritization of risks as new information becomes available or project circumstances change. This is critical because risks and situations can change frequently. For example, you could be at the end of a project when you realize your team doesn’t have a certain kind of tool to finish the highly technical assembly of some part. To help prepare for this, reassess the priority of risks at key project milestones or decision points to ensure that risk management remains aligned with project needs.
Risk evaluation is an ongoing process that requires continuous monitoring and review throughout the PLC. Following are some simple ways to continuously evaluate risks:
- Continuous monitoring: Continuously monitor the status of identified risks and track any changes in their probability or impact. Conduct regular risk assessments, status updates, and progress reports, and obtain stakeholder feedback.
- Periodic reviews: If you have a project that doesn’t have very many high-level risks, you might be able to conduct periodic risk assessments to reassess the evaluated risks and their prioritization. Along with this, review the effectiveness of existing risk mitigation measures and identify any new risks that may have emerged.
- Adjustments and updates: If you evaluate and measure each new development as it comes into the project, you likely encounter adjustments and updates. For example, maybe you have a change order. This would be a good time to adjust the risk assessment. You would adjust risk evaluations and priorities based on the current situation and any new project developments, and you would update risk response strategies, mitigation plans, and contingency measures to address any changes in the risk landscape.
Mitigating Risks
Mitigating project risks is a crucial aspect of risk management. It involves taking proactive measures to reduce the probability and impact of the risks that have been identified and evaluated. For example, suppose a project involves doing construction work during the monsoon season in Africa. Since there is very little rain in parts of Africa at most times, the project team might be able to mitigate this risk by scheduling around the monsoon season. Some risks may not be as easy to mitigate. In those cases, the project manager, along with the organization’s leadership, will need to determine how much risk the organization is willing to accept on the project. There are several strategies that can help project managers enhance their ability to navigate potential obstacles and improve project outcomes.
Developing Risk Response Strategies
Once a project manager has identified and evaluated the risks associated with a project, the next step is to develop risk response strategies. These strategies define the actions to be taken in response to specific risks:
- Avoidance: Identify risks that can be completely avoided by taking specific actions. You cannot avoid all risks, but if you can, do so. For example, if a project is at risk of exceeding the budget due to scope creep, establishing strict change control processes can help avoid unnecessary scope changes.
- Transfer: If you cannot avoid a risk, then consider risks that can be transferred to external parties. This can be achieved through contractual agreements, insurance policies, or outsourcing certain project activities to specialized vendors or partners.
- Mitigation: If other steps fail, implement measures to reduce the probability or impact of the risks. This may involve implementing additional quality control processes, conducting regular inspections, or enhancing project team skills through training.
- Acceptance: If a risk cannot be avoided, transferred, or mitigated, accept the risk and prepare for any consequences. Acceptance involves acknowledging the risk and its potential impact while developing contingency plans to address any adverse effects.
Implementing Risk Mitigation Measures
Implementing mitigation measures ensures that the identified risks are effectively addressed. The project manager would need to be sure that all stakeholders are aware of the risks and that the individuals responsible for mitigation measures are involved in the risk process. Clearly define roles and responsibilities for implementing risk mitigation measures. Assign specific team members or stakeholders to oversee the execution of mitigation actions. The project manager could do this, but it is most likely that another team member or leadership can resolve the issues. The project manager would still need to follow up and ensure the risk is mitigated to everyone’s satisfaction.
Next, develop a contingency plan. Identify potential fallback options or contingency plans to address risks that cannot be completely mitigated. A contingency plan outlines the actions the project manager would take if the risky event occurred, allowing for a quick and efficient response. Some companies may already have responses to these risks in their overall operations plan. Be sure that all stakeholders, including members of the leadership team, clients, and others, are aware of contingency plans. Communication is key in risk management, and when risk occurs, it can play a role in whether the end result is a successful project or one that goes wrong.
Finally, monitor and track the risks to be sure to mitigate them in the future. Continuous monitoring is needed to measure the effectiveness of the mitigation plan. Regularly track the status of risks, assessing whether the planned actions are reducing the probability or impact as intended.
Regularly Reviewing and Reassessing
Risk reviews are an ongoing process. It is important to adapt and refine mitigation strategies as circumstances continuously change. As a project manager, it is your job to ensure that these risks are constantly being reviewed and reassessed. Besides doing periodic reviews, focus on lessons learned from other projects where similar risks may have occurred. If you can capture and document these risks during a lesson learned, it could save you a lot of time and money on newer projects. Review your own projects’ risks from previous projects and see how these risks impacted your project and then determine if there would have been a different solution that you could have applied. Regardless of the process or methodology you choose, you must stay on top of managing risks so your project goes as smoothly as possible.
Footnotes
- 1Michael M. Bissonette, Project Risk Management: A Practical Implementation Approach. (Project Management Institute, 2016).
- 2Michael M. Bissonette, Project Risk Management: A Practical Implementation Approach. (Project Management Institute, 2016).
- 3Megan Bell, “How to Use a Risk Matrix in Project Management,” Project Management Academy, August 24, 2022, https://projectmanagementacademy.net/resources/blog/risk-matrix/#what-is-risk-matrix