Risk Management and Protecting Your Bottom Line

Project Management has a lot of benefits, but Risk Management might be the single greatest.

Planning ahead for what could derail a project, developing clear strategies to respond, and communicating progress to leadership can mean the difference between project success and costly cancellations.

• 28% of project funds are lost due to cancellations with low performing project management practices compared to just 9% with high performing practices. (PMI.org)

Risk vs Incident: Preventing Disruptions

First, clarifying a common misunderstanding:

• ➔ A Risk is a potential event that could harm your project.
• ➔ An Incident is when that risk becomes reality, often bringing extra costs, delays, or reduced benefits.

An Example:

• ➔ Risk: A vendor might miss a critical delivery window that would cause a delay.
• ➔ Incident: The vendor actually misses the delivery window.

Building Risk Strategy

Risk Management is not about preventing all incidents, that is impossible. It is about identifying what could happen and deciding in advance how your team will respond.

A Risk Matrix is the foundation of risk assessment. It evaluates:

• ➔ The likelihood of a risk occurring
• ➔ The severity of impact should it occur

Both are typically rated as Low, Moderate, High, or Extreme.

With the Matrix established, the organization defines tolerable thresholds, such as:

• ➔ Green = Acceptable Risk, no planning needed.
• ➔ Yellow = Needs attention and a mitigation strategy should be developed.
• ➔ Orange = Critical and an immediate mitigation strategy should be developed.
• ➔ Red = Executive level interaction and decision making is required.

Identifying and Tracking Risks

Every project should have a “Risk Register” that lists out potential incidents and scores them against the standardized matrix. This is a living document that should be updated throughout the project lifecycle.

• ➔ New risks should be constantly identified and added.
• ➔ Old risks that have passed with or without incident should be closed.

Examples of Risk:

• ➔ Material delays that would impact the schedule.
• ➔ Incomplete requirements may cause rework during development.
• ➔ Key personnel (single points of failure) becoming unavailable.
• ➔ AI hallucinations resulting in quality defects and errors.

Mitigation Planning in Action

Once risks are identified and scored, mitigation plans are developed for all Orange and Yellow risks.

Focus on the most likely and harmful (Orange) first:

• ➔ Material Delays: Contact alternate vendors (pre-identified) or adjust project scope.
• ➔ Loss of Key Personnel: Contact XYZ contractor that has the necessary skillset.

The Executive Advantage: Controlled Outcomes and Lower Costs

Embedding Risk Management into project practices leads to measurable results:

• ➔ Fewer unplanned costs due to avoided disruptions.
• ➔ Faster recovery when risk turns into an incident.
• ➔ Greater confidence from stakeholders and clients who know there is a plan.
• ➔ Improved outcomes for projects overall.
• ➔ Fewer cancellations due to unforeseen project derailment.

Conclusion: Risk Management is Business Protection

For executives, risk management is not an operational detail, it is a strategic advantage. It ensures projects stay aligned to business goals, protects investments, and prevents avoidable disruptions.

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