6. Develop the Project Risk Plan

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By developing a project risk plan, you prepare for the possibility that errors, omissions or miscalculations will occur and will have an adverse impact on costs or schedules.  

learly, if projects always went according to plan, there would be no need for project management. We would simply plan and initiate them. But things don't always go according to plan. In fact, more often than not, things are overlooked, ignored, misunderstood, neglected, unavailable, problematic or unresponsive. Hence the need for project management and, more specifically, the project risk plan and the process of managing risk.

Even when managing small projects, things can go catastrophically wrong; so it is always a good idea to spend some time at least thinking about the possibilities, and putting some contingency plans into place. Risk is a problem, and the best way to address any problem is to ask the right questions.

The first question a project manager should ask about risk is, "What could possibly go wrong?" As it turns out, there is a fairly standard set of issues that contribute to project risk. You can easily get a leg up on the whole risk management process by successfully addressing the following questions:

• Do we fully understand the goals and objectives for this project? 
• How detailed and accurate are our cost and effort estimates for tasks? 
• On which tasks are our estimates most likely to be wrong? 
• Do we have enough committed resources to do the job? 
• What kind of resource availability problems could we have? 
• Do we understand the requirements and deliverables of the project? 
• Do our resources have the skills to do the job? 
• What changes might the customer or sponsor want that would effect the project scope? 
• How likely will non-team members be able to live up to their commitments and deadlines? 
• What kind of technical problems could we have? 
• What could cause the project deadlines to change? 

With any risk you need to consider two variables -- the probability that the risk will occur, and the impact the risk will have on the project. Both of these are usually represented as low, medium, or high and are often presented in matrix form.

If you list and number all the risks and fit them into the matrix, you'll be in a position to make intelligent decisions about how to handle them.

Obviously, you can avoid all the risks by cancelling the project. That is not usually an allowable choice, so the next best thing is to determine the action to take for each risk element based on where it falles in the risk assessment matrix.  In some cases either cost or schedule risks can out weigh the other, in which case a separate matrix is often used -- one each for cost and schedule -- and decisions are made based on which is most important.

Low to medium impact and probability risks are often just accepted, tracked and handled ad hoc. High probability and high impact risks are usually included and budgeted in a project risk plan. Of course you'll need to deal with these risks in a manner consistent with how your organization or your customer's organization deals with risk.

In some cases, you can transfer the risk to someone else by using insurance or special language in contracts. Of course, then you're dependent on someone else fulfilling their part of the bargain -- which can be another risk in itself.

- Jake Alexander

Next in the series: Allocating Resources