How to Manage Risks to Scope, Schedule, and Budget in Project Management

Today's projects are marked by a significant degree of uncertainty and risk. A project's risk management system can ultimately be a fundamental determining factor between its success and failure. As discussed herein, the risk management process comprises significant phases, including risk identification, risk analysis, responding to risk, and risk monitoring and control. There are various recommendations given to ensure that the risk management process of a project is successful.

One of the critical stakeholders in risk management is the managers and executive stakeholders, including the sponsors. Stakeholders in the managerial position have crucial roles and responsibilities in project management that directly impact the risk management process.

Every project stakeholder, particularly those in managerial positions should acknowledge that risks are inevitable. Therefore, they should develop a comprehensive risk management plan to help prepare for uncertain events. A thorough risk management plan should elaborate on the processes of risk management and the stakeholders responsible. The managerial team often has the overall understating of a project's objectives; hence are able to prepare for the unknowns and challenges in project management.

The relationship between the management and other stakeholders is significantly attributed to the success or failure of the risk management processes. The management should champion a healthy relationship between them and other stakeholders involved in the project. A collaborative relationship promotes seamless engagement on matters affecting the project. Further, a positive relationship ensures that parties can creatively engage on a project's challenges and work together to develop fundamental solutions. A collaborative relationship is also attributed to the communication processes within a project.

A project manager should emphasize the need and significance for the communication of risks and other uncertain events at the right time and to the right people. During the Covid-19 pandemic, organizations had to restructure their communication strategies by setting a new ground for communication, more so technologically-enabled, such as virtual conferencing. Continued comprehensive communication will ensure that each risk is identified and its probability of occurrence and impact analyzed. Further, the management should encourage all project stakeholders to submit risk reports and provide feedback on probable risk mitigation approaches. Further, risk management should be considered an all-inclusive process where all stakeholders are encouraged to actively participate. The inclusion of all project stakeholders ensures that every possible risk has been explored and different mitigation strategies submitted as risk response alternatives.

Further, risk ownership is a fundamental concept in project risk management. As a project manager, one should identify the most qualified member in the project and assign an appropriate risk to him or her that matches the member's skill or experience. Delegation of risk activities to other members ensures that the project manager is actively involved in the general concepts of the project to ensure its success. The project manager should develop an effective risk escalation and issue management process and communicate to all stakeholders. The escalation procedure should be developed and tailored to favor the lowest members in the stakeholders' hierarchy structure. Issues concerning the risk that cannot be handled by lower-level members should be escalated to higher-level stakeholders and so on until they are resolved. The escalation processes should be included in the communication plan developed during project management.

The risk management process should occur in the early stages of project management. Whereas risks can be identified at any point during project implementation, possible uncertain occurrences should be identified during project planning. Identifying risks early ensures that proper analyses of the risks are conducted and the best mitigation strategies sought. Further, identifying risks early on helps take into consideration the risk responses during the project planning process, including schedule and cost estimation phases, which helps develop accurate project estimates.

As discussed herein, risk management comprises different processes with risk analysis being among the most significant. Risk analysis helps determine the likelihood of a risk occurring and its impact on the project. Each risk should be analyzed at a micro level to ensure that all considerations have been made before developing the response plan. Today, different software tools provide in-depth analysis of risks and generate reports relevant to the probability of occurrence and impact. Software tools such as Oracle's crystal ball and @RISK use the Monte Carlo simulation technique to provide different possible future scenarios on the risk metrics, including the probability of occurring. The project manager should evaluate existing software products and advise the executive committee on the best alternative to integrating into the risk management process.

Throughout project management, an emphasis is drawn on the imperativeness of proper documentation. The risk management process contains critical outputs that are used as inputs by other processes within risk management or other project management processes such as quality management and schedule estimation. The core document in risk management is the risk register, which contains an inventory of all identified risks within a project. Project Management Institute (PMI) highlights other components of a risk register, including the outputs of qualitative risk analysis, risk responses planning, and the implementation of risk responses, and may contain potential risk owners. Moreover, the risk report contains information on the overall project risk and summary information on individual project risks. The risk report is often developed progressively throughout the risk management process. Moreover, other documents, including the assumption and issue logs are fundamental in risk management.

Project risk management should be considered a process and should be periodically revisited throughout a project's management process. Through risk monitoring, it is possible to track the identified risks, identify and analyze new risks, and evaluate the effectiveness of the risk management process throughout the project. Risk monitoring is also used to evaluate the effectiveness of the risk responses integrated as risk mitigation strategies. Monitoring risks helps gather current information about the overall project risk exposure and individual project risks. Current information on these project risk components is a critical input when making key project decisions. One of the primary objectives of the risk identification process is the determination of risk triggers. Each risk trigger describes a risk's warming conditions. Risk monitoring should not only be contained to individual risks and responses but also extended to the associated risk triggers where a change in the risk trigger signifies a change in the occurrence of the individual risk.

The risk management process is progressively undertaken throughout project management. One fundamental component of this process is the lessons learned. Project Management Institute (PMI) acknowledges the purpose of the lessons learned register developed in project management. Risk-related lessons from earlier processes or risk management should be comprehensively documented in the lessons learned register. One key benefit of the lessons learned register is that it can be referenced later and risk-related lessons applied thereon in the project or prospective projects. Moreover, the lessons learned from past and current projects should be taken into consideration when undertaking the risk management process from risk identification to monitoring risks.

Moreover, risk management relies on assumptions that form inputs for various processes, including the identification of risks, qualitative and quantitative risk analysis, risk response process, and the risk monitoring process. As a progressively, it is imperative to ensure that all assumptions made during all the risk management processes are valid. Further, it is recommended that the project manager is in a position to make new assumptions, identify new constraints, and change the existing assumptions and constraints. As discussed herein, documentation is paramount in successive risk management. All assumptions and constraints should be documented in an assumption log, which should be periodically updated with new information.