The Project Benefits are Clear
All project managers face a perennial question: Is managing risks worth the effort? Like any business decision, the answer hinges on a cost-benefit analysis. Including a risk management component in your project requires a significant investment of resources and might appear excessive to some stakeholders. However, the advantages of project risk management, especially for complex projects, will far surpass the associated costs.
Here's a breakdown of the key benefits:
Lower Costs: Adequate risk analysis reduces overall costs and the frustration stemming from preventable problems. It reduces the amount of project rework by addressing the root causes of significant issues sooner rather than later.
Project Justification: The primary objective of project risk management is to bolster the odds of achieving project goals. While success can never be guaranteed, being aware of common failure modes will markedly improve success rates. For this reason, effective risk management can help validate the feasibility of a project or highlight its impracticality.
Project Prioritization: Identifying the project risk level helps managers and stakeholders prioritize the project. High-risk projects may defer to lower risk projects that deliver similar benefits. However, high-risk and high-reward may garner additional resources, thereby reducing the risk.
Project Portfolio Management: An ideal project portfolio for an organization balances lower and higher-risk projects in alignment with business objectives. Understanding project risks is crucial to achieve this balance.
Fine-Tuning Project Plans: Risk analysis helps identify weaknesses in project plans, prompting adjustments and resource reallocation to mitigate risks. In extreme cases, it may reveal the need for fundamental changes in project approach.
Establishing Contingency: Risk analysis justifies schedule and resource contingency by demonstrating the uncertainty of project outcomes. For high risk projects, it might help justify the idea of defining a range for project objectives rather than a single-point target.
Project Communication and Control: Effective project communication hinges on a solid, credible plan. Risk assessments enhance awareness of potential problems within the project team, influencing work methods to avoid difficulties. Risk data is useful when negotiating with project sponsors, helping to define objectives, budgets, and timelines.
While it requires effort and commitment, the benefits of managing project risks — from reducing costs to ensuring effective communication and control — are substantial and often vital for the success of complex projects.
Risk Register by ProjectBalm is a cost-effective tool that helps you record and manage your risks.