Project Management ToolBox, 3rd Edition

10RISK PLANNING

Project risk is associated with uncertainty. Uncertainty can lead to positive or negative outcomes. By understanding what creates uncertainty and risk on a project, we are able to manage it proactively. However, without good risk management practices and tools, we can find ourselves in crisis management as problem after problem presents itself, forcing a team to constantly react to the problem of the day. As one well-known author stated, “If you don’t actively attack the risks, the risks will actively attack you.”¹ Risk management is a preventive practice that allows the project manager to identify potential problems before they occur and put corrective action in place to avoid or lessen the impact of the risk.

Understanding the level of risk associated with a project is important for several reasons. First, by knowing the level of risk associated with a project, you understand the amount of schedule and budget reserve (risk reserve) needed to protect the project from uncertainty. Second, risk management is a focusing mechanism which provides guidance as to where critical project resources are needed—the highest risk events require adequate resources to address them. Finally, good risk management practices enable informed risk-based decision making. Having knowledge of the potential downside or risk of a particular decision, as well as the facts driving the decision, improves the decision process by allowing the project manager and team to weigh potential alternatives, ...