Key issues in project risk management
Research shows that risk has the lowest maturity rating of all project management knowledge areas. The key reason for this lies in the complexity of the risk concept: risk deals largely with uncertainty, can be positive and/or negative with the former potentially yielding large rewards, there are causes and consequence for the project if risk is managed poorly, and the risk continuum ranges from known to unknown. It’s no wonder that project managers are increasingly focusing their attention on risk identification and management to prevent project failure.
A contribution to effective project risk management is to identify risk issues that will become important in the foreseeable future. They are defined as key issues, requiring special attention over the next three to five years. This may be due to the increasing importance of the issue to the success of a project, not understanding the nature of the issue due to its complexity, continued difficulty in managing the issue, and changes expected in the nature of the issue.
My current research aims to provide guidance to project managers on where to focus their attention and/or resources in the foreseeable future so that project risks are managed as effectively as possible.
For the first phase of the study, 29 issues were identified from a review of the project risk management literature. Items were randomised and presented to project managers with the request to rank them in order of importance as a key issue for the next three to five years.
Project managers were again asked to participate in the second phase by ranking the 10 top issues that had been identified. This was done through an online survey. The 10 items were ranked in the following order:
- Understanding the Risk Concept
- Agreeing on what is Project Risk
- Recognising Risk Events
- Developing a Risk Management Approach
- Determining Risk Tolerance
- Preparing the Risk Management Plan
- Developing Organisational Risk Processes
- Estimating Risk Severity
- Preparing the Risk Breakdown Structure
- Creating and Updating the Risk Register
The items attracting most attention are about the nature of project risk. This is feedback from a group of experienced project managers (half had 10-20 years experience and one-third more than 20 years) with the majority rating their knowledge of project risk management as high.
Considering that the majority of respondents were employed as consultants and contractors, with projects typically lasting between six and 24 months, gaining an understanding of project risk and risk events becomes critical since there has to be agreement with the project client about the existence of project risk.
Items ranked below the top three reflect a mixture of issues relating to planning (developing a risk management approach and plan), the organisation (determining risk tolerance and risk processes) and risk analysis (estimating risk severity, preparing the risk breakdown structure and risk register).
Findings so far should assist project managers to pay attention to issues that were identified as being of key importance in the next three to five years. Thus knowledge about a critical area of project management is provided to enhance the prospects for the successful completion of projects.