Risk categories help project managers understand and plan for parts of a project that could go wrong. Discover best practices for identifying and managing risks in your project.
In his book, Comfortable with Uncertainty: 108 Teachings for Cultivating Fearlessness and CompassionBuddhist nun Pema Chödrön writes, “The root of suffering is resisting the certainty that, whatever the circumstances, uncertainty is all we really have.
Project risk management is a process that recognizes that things will go wrong. By establishing project risk categories, your team can mitigate unnecessary pain points by accepting the inherent uncertainties of project management and having plans in place to pivot as needed. Instead of pretending that everything will go exactly as planned, risk categories help you know how you’ll fare if it doesn’t.
Learn about risk categorization and best practices for managing those risks to bring you closer to realizing that all is uncertain.
Overview: What are risk categories?
Risk categories are specific elements within a project or its operating environment that could go wrong during the planning, implementation or monitoring phases of an activity. These risk categories take into account elements such as costs, schedule, available personnel, public reception and available inventory. They look at the details that go into making a successful project and think about what would happen if one or more of those details deviated.
4 types of project risks
A risk breakdown structure describes the various potential risks within a project. There are four main types of project risk: technical, external, organizational, and project management. Within these four types are several more specific examples of risk.
1. Technical risks
Technical risks refer to anything that could go wrong with your software, hardware, or any manual or other process document related to your project.
When listing your technical risks, consider whether you have enough computers, tablets, or other devices for everyone on your team. Ask if you have experts on staff to troubleshoot software issues that may arise or if you have access to outside vendors who could help you. Also check if you have created any user-friendly reference guides for your project implementation.
2. External risks
External risks are elements that could have an impact on your project and which are beyond the direct control of your organization.
When listing your external risks, analyze the current state of your market. Think about any problems that might arise with your subcontractors or suppliers. Review local, state, and federal regulations that impact your business area. Ask if your customers might change over time and how that would affect your project.
3. Organizational risks
Organizational risks refer to aspects of your company’s overall resources and culture that could impact the implementation of your project.
When listing your organizational risks, see if you have enough staff available to cover the time and effort required to complete your project. Check if your financial processes are working well enough to pay contractors on time.
Ask if you have the budget available to implement your project as planned. Determine if you have policies in place for who will make decisions on critical project issues.
4. Project management risks
Project management risks involve the functioning of the team working directly on your project and the internal aspects of your team that could impact the success of your project.
When listing your project management risks, examine your team’s culture and morale and determine if interpersonal issues could be impacting results. Check if you have established clear communication channels between team members and if people know who to contact with specific issues.
Determine if you have included all the people you need in the planning phase of your project or if there are other voices you need to consult.
How to manage risk categories
Any successful project management plan should include steps for managing risk categories. There are three key steps to achieve this.
1. Consult with a broad audience to identify risks
Identifying risks is the first, and perhaps the most important, step in a risk management plan. For the smoothest possible implementation, you want to have a good understanding of where your project is likely to go bumpy.
No one on your team can create a complete list of potential risks. Each person involved has a different perspective and specific expertise that can shed light on the risks that may require the most planning.
When identifying your project’s risks, consult with a wide audience. Ask your IT team members what they think. Consult a discussion group of your customers. Listen to your junior staff and gauge their attitude. The more feedback you get from diverse voices within your project, the better prepared you will be for risks that you might not be able to see for yourself.
2. Assign a lead to each risk
Once you have identified your risks, assign a person who will be responsible for each. You can put this information into a project tracker so your whole team knows who to turn to if someone needs help with a particular risk.
When assigning risk owners, consider which members of your team have the capacity to take on this role and their expertise. This can be a good way to give more people a sense of real ownership of the project, which can boost staff morale.
3. Track and prioritize your risks
Using project management software, you can then track and prioritize your risks. You will want to include ratings and metrics on the likelihood of the risk occurring and the financial and reputational impact of the risk should it occur.
When tracking your risks, include any decisions made about what actions your team will take if this happens. If so, keep track of when mitigation plans started, where they are in their implementation, who took what actions, and what the current results have been.
Best practices when categorizing risks for your project
When creating risk category levels, there are a few best practices to follow to get the most out of the risk management process for both your current project and the growth of your organization.
Look for common risk areas
Risk categories in project management can show you where you may have recurring risks. For example, you might notice that the majority falls under the organizational risk type. Seeing this can help your team find longer-term solutions for these risks rather than figuring out which fixes to apply to them for each new project.
As you identify and prioritize your risks, organize the information into a risk register, which will help your team better spot common categories. The Project Management Institute (PMI) notes that this tool can be one of the most important for project managers. You can consult the PMI risk register examples to get an idea of a format that might work for your project.
Integrate risk management into internal learning
Risk management doesn’t have to be a stressful or rigid process. People grow and learn from mistakes and challenges. You can make risk management accepted, even fun! — aspect of your team’s culture by incorporating it as part of your organization’s proxy learning strategy.
Ask team members to present how they overcame a particular risk scenario. Share risk monitoring tools and other process management tools with each other. Reward your staff for finding creative solutions to problems that arise.
In general, let risk be a natural and openly acknowledged part of the project management process. View risk not as a problem, but as an opportunity for effective team communication, internal learning, and shared compassion from staff.
Quantify your risks to inform prioritization
It can seem daunting at first having a long list of risks and not knowing which one to focus on first. A good way to start prioritizing your risks is to quantify them. If possible, consider what this risk would cost financially if it occurred.
Quantification of risk from a financial perspective includes topics such as loss of revenue, unforeseen additional expenses, costs of additional staff time or staff turnover, and any other expenses that would only occur if this risk materialized.
Identify and manage risk categories to limit suffering by accepting uncertainty
Project management shouldn’t be about controlling a situation, it should be about accepting that every task has inherent risks and that your team will need to learn how to navigate them. By identifying risk categories, your team can accept the groundlessness of reality and relax into the ever-changing stream of technical, external, organizational, and project management risks as they arise.