Project risk management

Project risk management (PRM) is concerned with the risks embedded within the project that could have effects on delivering the project on time, within budget and to quality. PRM could be seen as an extension of project planning. Chapter 28 of Hopkin’s (2014) book provides a discussion of three elements: the risk and uncertainty in projects, the project lifecycle, and the project risk analysis and management process.

Uncertainty in projects

Risk is often defined in terms of uncertainty or deviation from the expected project outcome. These uncertainties are undesirable, hence the focus of PRM on reducing the variability. The requirement of PRM is to identify the events that could trigger uncertainty and respond to these appropriately. PRM should also implement flexible processes to ensure that the organisation is able to capture new opportunities should they arise. The organisation should adapt its response depending on the project’s risk exposure and uncertainty:

• low risk exposure / low uncertainty: accept risk
• high risk exposure / low uncertainty: adapt procedures
• low risk exposure / high uncertainty: adopt contingency plans
• high risk exposure / high uncertainty: avoid risk

Project lifecycle

A project lifecycle has four stages: inception, planning, execution and closure.
Due to the dynamic nature of projects, risk management processes must be tailored to each stage of the project. As an example, uncertainty, which can be linked to cost, time and quality, will decrease with the evolution of the project lifecycle.

Project risk analysis and management

Project risk analysis and management (PRAM) was developed by the Association for Project Management in the mid-nineties. PRAM is a process that enables the analysis of the risks associated with a project. It represents a continuous process that can be started at any stage of the project lifecycle and can impact five elements of a project: feasibility, sanction, tendering, post-tender and during implementation.

Please watch this video on PRM:

In Chapter 1 of their book, Chapman and Ward (2012)  provide additional reading on PRM. They provide a project definition by listing the seven W’s: who, why, what, which way, wherewithal, when and where. The chapter also discusses project uncertainty and provides more detail on the project lifecycle stages.

Carvalho and Rabechini (2015) investigated the importance of soft skills on the performance of projects that had risk management processes. The authors tested their hypothesis on 263 projects spread over eight industries. They created a model that correlates the hard and soft sides of risk management with project success. They found that the soft side of risk management contributed ~10% of a project’s success. This paper looks into an aspect that is not typically covered within risk management books.

Activity 7.2

Consider the UK project HS2, the high-speed railway linking London to Birmingham and Manchester. What is the current stage of the project lifecycle, and what are the associated levels of risk exposure and uncertainty? Post your findings to the Discussion Board and label the message appropriately (The link to the Discussion Board is not available in this course taster).