What Is Resource Risk & How To Manage It Effectively
Manage Risk Like a Pro: Resource risk stems from a lack of sufficient or correct resources, often due to budget constraints, talent gaps, or supply chain issues. Proactive management and creative solutions are key to mitigating this risk.
Solutions for Limited Budgets: When facing budget constraints, consider extending project timelines, reducing scope, or delivering less complex outputs to deliver the project without overspending or compromising on functionality.
Estimate Wisely: Inaccurate estimates can cause resource risks. Improve your estimates by considering complexity and contingencies and allow adequate time and budget for project completion.
As a project manager, you don’t always have control over what resources are available. This makes resource risk on a project a real challenge.
Here’s how to manage it proactively and react confidently, improve your resource management capabilities, and increase the odds of project success.
What Is Resource Risk?
Resource risk is a specific type of project risk that comes from not having enough (or the right) resources to complete project work.
Resource risk can stem from not having enough budget, enough staff, specific skill sets, or the right software or equipment to do project work. Causes include shifting timelines, lack of core competencies, or supply chain issues.
Resource Risk Examples
To help you better prepare to handle resource risk and improve resource allocation (when the time comes), let’s look at some real-life examples and how you might be able to manage them to mitigate risk.
Lack of Resources
Most projects face resource limitations unless you have unlimited budget, time, top talent, and equipment. Common resource shortages stem from budget constraints, talent gaps, or insufficient time due to overbooking or hiring delays.
If you’re lacking budget, you’ll need to get creative. You might be able to lengthen your timeline (to get the right resources in place to complete the project without incurring overtime) or provide a less complex product or output (reduce the scope) that still gets the job done.
For example, if you have a limited budget for a website development project, start with a template and customize it instead of creating a full, custom design. This approach helps you deliver a functional product at a lower cost.
You can also make contingency plans or have a specific contingency budget that you can tap into in the event of a shortfall. Some agencies request a contingency budget of 10-20% to cover potential overages beyond initial estimates.
Unexpected Absences
Unexpected absences occur when team members take time off last minute due to illness, bereavement, or burnout. These are hard to plan for in most circumstances.
Mitigate the risk by assuming it will happen and adding wiggle room to your project timelines to avoid delays. Another option is to set up a system where team members can cover for each other if someone is unexpectedly away.
Inaccurate Estimates
Inaccurate project estimates can lead to resource risks if you underestimate the people, time, or budget required. For example, if you know your team usually takes 10 hours to complete a simple website homepage design, you should add a few hours for a more complex page.
When it comes to budget estimation, you also may run into risks if your client or other stakeholders are under the impression that your project should cost less than it will.
For example, let’s say you’re hired to build a website for a consulting practice. They have $100,000 for the project, but you think they need at least $125,000 to avoid budget overruns, and you’d like to price the project at $150,000 to keep it within expected profitability. In this case, you may face risk if you decide to book the project at $100,000 or estimate that you can do it with a smaller budget.
Overallocation
Overallocation happens when you have too many resources allocated to one project. This can cause project delays on other work, and it can also lead to your other resources being underutilized.
One of the best mitigation strategies for this is regular capacity planning. This way, you can see if someone on your project has the capacity for other work and get them working on additional projects simultaneously. One caveat here, though: too much context-switching can jeopardize overall project execution and lead to burnout.
Skill Gaps
Skill gaps are a potential risk; assess team skills and flag any gaps that could impact project outcomes.
For example, running a software development project without a user experience expert might lead to a less than optimal user experience when the application launches.
When initiating a new project, list the resource requirements before you do any resource planning or allocation to make sure you know what is needed, and flag any gaps once all resources have been assigned.
Conflicts
Scheduling conflicts can present a resource risk if you don’t catch them early. When you’re mapping out project milestones, note when a project team member has multiple milestones in the same week or on the same day.
For example, if Project A has a client presentation in 2 weeks and your designer is involved in preparing the presentation and has a lot of revisions due the same day for Client B’s website redesign, see if you can shift one of those tasks to make sure they have enough time to focus on the tasks at hand.
If deadlines can't shift, have another designer assist with edits or support the project in other ways. This not only meets client needs but also helps the designer develop valuable creative direction skills for their career.
Dependencies
Managing dependencies is also a critical part of resource risk management. To understand where your dependencies are (and the risks associated with them), complete dependency mapping as part of your project planning process.
If a dependent task is dragging on, it can jeopardize the entire project timeline. For example, a delayed website domain purchase can lead to a scramble during the site’s launch. This could be especially catastrophic if the chosen name has already been purchased by someone else.
Another common example, with some more external factors, is design and development. If your client or stakeholder takes too long to approve final designs before development, one of two things will happen.
The project may miss the launch or require a rushed schedule, risking errors in development. So, make sure your client or stakeholder understands this risk when you’re soliciting design feedback.
How To Mitigate Resource Risks
The best advice I can give for mitigating resource risks is to identify them proactively. This may be easier said than done, but the more projects you manage, the more you’ll see the same risks over and over again. This can help you plan proactively and prevent them from jeopardizing your project.
1. Identify Potential Resource Shortages
When you’re kicking off new projects or initiatives, identify potential resource shortages before you start. Use a forecasting tool to prototype your potential project plans see where resource gaps exist, and then remedy any shortages before they happen.
2. Conduct Capacity & Workload Planning
Regular capacity and workload planning can help you stay ahead of resource risks. It's like looking around the corner before you make a right turn on red. You can see what’s coming and time your movements just right.
If you work in an agency or a projectized team, meet periodically to review resource utilization levels and see who is under or overbooked to mitigate risks in real-time.
Have these meetings regularly (i.e. just at the beginning of a new project). This is because project schedules and project scopes can shift depending on many factors, which can lead to bottlenecks and changing resourcing needs.
3. Keep Team Members Engaged
Keeping your team members engaged throughout the project life cycle can also help mitigate resource-related risks. With an engaged team, you will be less likely to see unplanned absences, underutilization, or burnout. Resources with downtime can look for additional ways to contribute to the project or related initiatives.
If you are struggling to keep your team engaged, organize some team-building activities. This can be as simple as a thirty-minute block to play a game, talk about something other than work (if you have a small team), or have a coffee break—all of these work in person or virtually.
4. Conduct Succession Planning
Succession planning doesn’t happen often enough in most organizations. Having someone leave during a project can be incredibly disruptive, especially if they have skills that are hard to replace.
As part of your risk assessment, look at your project resources and their skills to determine who you can develop internally so they can build the skills needed if someone were to leave. You should also look at who you might have on your virtual bench if you find a resource gap.
Your organization’s training programs should take into account ways you can grow your team member’s skill sets to help them get ready for future advancement.
This kind of upskilling benefits everyone—the organization will have the resources to replace those who have moved on, and the individual will have more marketable skills to grow in their career.
5. Mitigate Dependencies
Using your workflows and dependency map, find all of the spots where dependencies present risks. If you’re not sure what you’re looking for, consider places where one person being delayed could delay the entire project.
For example, if you’re creating content for a tradeshow booth that needs to be printed and shipped by a certain date, make sure the person creating and approving the content can get their parts done on time. Remind all parties involved about the importance of staying on track.
If the pieces aren’t sent to the printer on time, they won’t be done in time to make the shipping date, and ultimately, they won’t be distributed on the tradeshow floor.
6. Monitor Utilization
While we’ve already talked about resource utilization, I’d be remiss not to remind you that this is not a one-and-done activity. Monitoring utilization frequently and making adjustments as needed can help keep staffing levels optimal.
If people are overbooked or underutilized, identify the cause. For instance, if developer A works faster than developer B but both have the same workload, developer A may experience downtime while developer B struggles and works overtime.
7. Plan Contingencies
A final word on mitigating resource risk would be contingency planning. You know all the bad cliches about the best-laid plans—why not come up with a few extra plans? This way if you run into a risk that could derail your project, you’ll have a few ideas to prevent it from happening. This can help lower stress for all parties involved in the project (including you)!
Tools For Managing Resource Risks
You don’t have to manage your resource risks alone! In addition to working with your team on risk mitigation strategies, several resource scheduling tools can help you take on this task.
You can use software to create a dependency map to show you where tasks may overlap or forecast how your resources are (or will be) utilized over time.
When it comes to choosing the right resource management tool for your projects, here are some of the best of the bunch:
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