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When starting a new project, the responsibility of risk management falls squarely on the project manager's shoulders. While it may sound counterintuitive, the most successful project managers are those who meticulously plan for the worst-case scenarios. Potential risks will arise, and it’s your job to devise a mitigation strategy in your project plan to ensure your team is well-prepared and set up for success.

In this article, we will explore practical steps, templates, real-world examples, and the project management software that can help you navigate risk management and lead your projects with confidence.

What Is Project Risk Management?

Project risk management is the systematic process of proactively identifying, analyzing, evaluating, and responding to potential risk events that could impact your project's objectives. Some common project risks include unrealistic deadlines, cost overruns, scope creep, and changes in stakeholder priorities.

Risk management is not about reacting to problems as they arise but identifying the risk probability and planning for them in advance.

Why Is Risk Management Important?

Not all risks are created equally. Here’s why it’s important to identify and address risks before they become issues. 

  • Foresight for informed decisions: Identifying roadblocks early can give you a clearer project view. This empowers informed decisions and mitigation strategies, boosting your success rate.
  • Prioritization for easier risk triage: Risk management goes beyond acknowledging problems. It equips you to prioritize threats based on likelihood and impact, ensuring you focus on what matters most.
  • Reduced costs and delays: Identifying issues early can minimize costly delays and budget overruns that often occur when scrambling to fix problems after they arise.
  • Enhanced stakeholder satisfaction: Delivering projects without hiccups builds trust with stakeholders. Risk management showcases your ability to anticipate and address challenges, leading to a strong reputation for getting things done. 

Types Of Risk On Projects

Proactive risk management isn't just about anticipating problems; it's about considering all possibilities to ensure a successful project. Here's a breakdown of common project risks and what to prioritize:

types of risk on project infographic
Keep these different types of risks in mind when planning for risk management.

How To Manage Risk On Projects

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1. Identify Risks

Identifying risks involves brainstorming all potential threats and opportunities that could impact your project. Gather your team and stakeholders for a workshop, and get the ideas flowing by considering:

  • What could go wrong? List anything that might delay, derail, or negatively affect your project.
  • What could go right? Consider unexpected positive developments that could benefit your project.
  • Review past projects. Think about challenges faced in similar endeavors and how they can inform your risk assessment.

Example: Let's say you're leading a website redesign project. Here's a sample risk identification list:

  • Risk: A key developer gets sick and falls behind schedule.
  • Risk: Unforeseen compatibility issues arise between new design elements and existing plugins.
  • Opportunity: Discover a new design tool that significantly improves workflow efficiency.

2. Analyze Risks

Once you've identified your risks, analyze their likelihood of occurring and the potential impact they could have on your project. A common technique is to use a risk matrix or risk management plan.

This is essentially a grid with a severity rating (high, medium, low) on one axis and a probability rating (very likely, likely, unlikely) on the other. Each risk is plotted on the matrix based on its likelihood and severity.

Example: Your website redesign risk matrix might show that developer illness is a "medium likelihood" but a "high severity" risk. Focus on mitigation strategies here to prevent significant impacts on the project timeline. Compatibility issues, on the other hand, might be "low likelihood" but "medium severity." While less likely to occur, a plan to address them would still be wise.

risk assessment matrix infographic
Using a risk matrix can help you prioritize which risks to focus on when creating mitigation plans.

3. Prioritize Risks

Remember, not all risks are equal. Use the risk matrix from Step 2 to identify the risks that fall into the "high likelihood" and "high severity" categories. These are your top priorities and should be addressed first.

4. Assign An Owner To Each Risk

For each identified risk, designate the team member responsible for monitoring and developing mitigation strategies. This promotes accountability and ensures someone is actively watching out for each potential issue.

Choose team members with the skills and experience most relevant to their assigned risk. For instance, the most technically experienced team member might be best suited to monitor compatibility issues.

5. Mitigate Risks

There are several ways to mitigate risks, such as:

  • Avoidance: Can you completely eliminate the risk by changing your approach?
  • Reduction: Can you lessen the likelihood or impact of the risk?
  • Transfer: Can you shift the ownership or responsibility for the risk to someone else (e.g., insurance)?
  • Contingency planning: Develop a backup plan in case the risk occurs.

Example: To mitigate the risk of a key team member falling ill, a mitigation strategy could be to delegate some tasks or have a backup team member trained and ready to step in.

By creating mitigation plans, you're prepared to address potential challenges and minimize their impact on the project.

6. Monitor Risks

Risks don't stay static. Regularly review your risk register and update it as needed.

Schedule a series of project meetings to manage risks proactively. Ensure you’re aligned on the communication format and cadence for these meetings. Whatever you choose, always remember to be transparent so your team has full visibility.

Risk Management Plan Template

basic risk management plan infographic
A very basic risk management plan could look like this.

In its most minimal form, a risk management plan could be a handful of pages describing:

  • How and when to assess risk
  • The roles and responsibilities for risk owners
  • At what point the project risk should trigger an escalation

This can also be done using a RAID log, which can help you track risks, assumptions, issues, and dependencies so that the project manager and team can stay aligned.

Get access to our action-ready RAID log template through DPM membership. You’ll also get a filled-in sample to see how it should look when complete.

RAID log infographic

Tools For Managing Risk

Imagine managing a complex project with dozens of potential risks. Tracking them all on paper or in spreadsheets is a nightmare.

Luckily, there are many simple to advanced tools to help you streamline tasks, improve communication, and provide a source of truth for risk management.

Getting in front of potential risks like technical bugs, scope creep, and unexpected delays will help you drive more successful projects.

Here’s a list of the best project management software for achieving this:

Find specific risk management software here.

Best Practices For Managing Risk

Here are some additional best practices and strategies to elevate your risk management game.

1. Foster a Culture of Open Communication

Create a risk-aware culture where open communication is encouraged. Schedule regular brainstorming sessions specifically dedicated to risk identification and mitigation. Frame these sessions as collaborative problem-solving exercises, not opportunities for finger-pointing. This fosters an environment where team members feel comfortable raising concerns and suggesting solutions.

2. Integrate Risk Management Throughout the Project Life Cycle

Risks can emerge at any stage. Regularly revisit your risk register and update it during project meetings. This ensures consistent monitoring and adaptation of mitigation strategies. Consider using a project management software with built-in risk management features to streamline this process.

3. Conduct a Pre-Mortem Analysis

Hold a pre-mortem analysis workshop early on. Ask "what if" questions to envision worst-case scenarios and identify potential failure points. Use these findings to inform your risk mitigation strategies.

4. Leverage Scenario Planning

Identify 2-3 potential future states (positive and negative) for your project. Brainstorm how you'd adapt your approach to succeed under each scenario. This helps you develop flexible strategies that can adapt to changing circumstances.

5. Celebrate Risk Management Successes

Publicly recognize team members who identified or mitigated critical risks. This reinforces the importance of risk management and motivates continued vigilance. Consider using a RAID Log to track identified risks, actions to address them, issues (changes), and decisions made.

Join For More Insights On Project Risk

We did a workshop on managing risk—it's only available to DPM members. If you're not a member, consider joining our active community of fellow project managers.

Jean Kang
By Jean Kang

Jean is the founder and CEO of Path to PM and a LinkedIn Learning Instructor, paving the path for future program managers. Jean is recognized as a top LinkedIn Program Management Voice and has worked at top tech companies such as LinkedIn, Figma, and Meta.

Galen Low
By Galen Low

Galen is a digital project manager with over 10 years of experience shaping and delivering human-centered digital transformation initiatives in government, healthcare, transit, and retail. He is a digital project management nerd, a cultivator of highly collaborative teams, and an impulsive sharer of knowledge. He's also the co-founder of The Digital Project Manager and host of The DPM Podcast.