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Project risk is an unpredictable event that causes a project to not go as planned. As a small business owner, you know there’s no such thing as a risk-free project. There are numerous circumstances that can delay your projects and cause you to spend more than you anticipated.
Here are 22 of the most common examples of project risk, along with helpful tips to manage them. Skip to a specific risk category, or jump to our infographic for a quick overview.
Scope risks include any events that interfere with your project’s objectives, deliverables, or timeline. Even though these are quite common, simple risk management techniques can reduce their likelihood of occurring.
Scope creep occurs when your team adds additional features or requirements to a project that weren’t authorized at the beginning. It often results from making unachievable promises to clients.
How to manage this risk: Work closely with your client when developing your project’s objectives. Also, avoid unsupervised communication between your team and the client — be sure to receive client feedback in writing.
If you start a project with poorly defined objectives and only a vague idea of what your deliverables will look like, you’ll likely have to make major changes later on in your project. That could mean a lot more money out of your pocket.
How to manage this risk: Develop detailed project objectives before beginning your project, and make sure everyone is on the same page. Create prototypes of your deliverables so that no one is surprised with the end product.
Similarly, if your objectives and deliverables are too difficult to understand, then your client could have a false idea of how the project will turn out. That could lead to friction with your client later on.
How to manage this risk: Comb through your project’s objectives and deliverables line-by-line with your team and with your client. Allow for a discussion of each item and open yourself up to the possibility of revisions.
You’re probably quite familiar with cost risks since they can have a substantial effect on your bottom line. Here’s how to plan for these risks.
If money could be better used on another project or in a different area of your business, you might need to make budget cuts. You could likely work with budget cuts of up to 25%. However, with anything over that, you might have to reconsider your project.
How to manage this risk: Often, there’s not much you can do to prevent necessary budget revisions. However, if you’re scrambling to respond to one, try staggering your work. Can some element of the project move to the next fiscal year when there could be additional funding available?
It’s one of the most common examples of project risk. Over the course of your project, one component of the project—or many components—eats up more money than you anticipated.
How to manage this risk: You don’t know what you don’t know. Make sure you constantly track the progress of your projects using various metrics so that you can make small resource tweaks as you go. Additionally, check your contractors’ capabilities before you start the project. If something goes wrong, can they help fix it, or will you need to hire another contractor?
If it seems like there’s never enough time to complete your project goals, you’re likely not managing your time risks effectively.
Maybe you’ve just taken on a higher priority project, and you need to reallocate some of your team members. Perhaps your client no longer wants to move ahead with the project as planned. Changing priorities can cripple a project.
How to manage this risk: Communicate with your team and your client to figure out what direction the project needs to go. Keep your ego in check, and maintain your focus on the tasks at hand.
You could fall into the trap of scheduling deadlines according to your ideal, fast-paced timeline, instead of a slower, perhaps more realistic timeline.
How to manage this risk: Incorporate adequate time for planning, design, testing, retesting, documentation, and client feedback. Also, make sure you account for breaks and do not stretch your team too thin.
It’s pretty common to establish goals at the beginning of a project only to realize that you didn’t correctly anticipate the work involved.
How to manage this risk: Gather feedback from your technical team to assess the feasibility of certain tasks. If something isn’t feasible, be honest with your client.
Technology adds an additional layer of project risk. According to one estimate, only about 30% of IT project implementations are successful.
Moving millions of pieces of data from one software system to another presents complex challenges. Delays in the migration process can cost you a ton of money and push you out of scope.
How to manage this risk: Migrate only the data necessary for the current phase of the project. Additionally, develop comprehensive quality assurance protocols to test for migration issues.
You may run into issues with the software that you use. Perhaps a given program is not compatible with your existing operating systems. Maybe the software can’t do everything it was supposed to do, or it’s too complex to understand.
How to manage this risk: Validate all software requirements and design specifications. Also, perform tests early on in the project and retest after any fixes.
Often, the tools you need for your project are not ready for deployment at the time you need them. This could make your client unhappy and delay the project.
How to manage this risk: Develop cost and schedule contingencies when you’re developing your scope so that you brace yourself for implementation delays.
Your team powers your project and ensures that deadlines are met on time. Of course, people’s motivations often change, which presents unique sources of project risk.
You never know when a team member will need to leave your team for any number of reasons. A sick family member. A spouse’s new job. The list goes on and on. The average employee turnover rate in the US, according to the Bureau of Labor Statistics, hovers around 15%. You should always expect some turnover among your team.
How to manage this risk: You can’t prevent unexpected life events, but you can prepare. At the beginning of your project, identify other employees within your business who could perform the roles of your current team members.
You could run into issues if you make a decision that your team disagrees with. If the disagreement is strong enough, your team might expend resources working on something other than what you want them to work on.
How to manage this risk: Recognize that you make final project decisions, but actively listen to your team’s concerns. If your team remains steadfast on a particular approach to a problem, initiate a cost-benefit analysis.
Especially when projects don’t go as planned, your team’s morale could plummet. Feelings of hopelessness or ambivalence could sabotage your project goals moving forward.
How to manage this risk: Empower your team by complimenting them in front of their peers. Create a positive environment that doesn’t feel predictable or boring. Experiment with team bonding events outside of work.
Maybe you’re not meeting deadlines that you thought you’d easily meet. It could be the case that your team’s not comfortable with their tasks and taking additional time to learn new skills.
How to manage this risk: People sometimes misrepresent their skills with the intention of saying they can do something and learning how to do it later. Establish skill tests to assess your team’s abilities and assign your team members to appropriate tasks.
Poor communication factors into almost every type of project risk. Some studies estimate a third of all project failures result from ineffective communication.
Your team has to work together. That doesn’t mean they have to like one another, and often they won’t. You’ll want to address team conflicts early on before they affect your project’s deliverables.
How to manage this risk: Circulate a questionnaire that asks about your team’s preferred working styles. Additionally, conduct one-on-one interviews to identify potential conflicts among your team before they become a problem.
As projects progress, you might find yourself clashing with your client. Perhaps your client is too hands-on or maybe even too hands-off. Either way, you’ll want to keep the communication channels open and healthy.
How to manage this risk: Establish one or two main points of contact to speak with your client. Alert your client of issues before they grow too large. Formalize the feedback process by requiring communications in written form.
Sometimes, complex topics can’t be easily communicated. This could lead to frustration among members of your team or between you and your client.
How to manage this risk: Simplify difficult-to-explain topics with infographics or other visual aids. Before you make any decisions, ensure that everyone understands all facets of the problem.
You’ll likely rely on a whole host of vendors and contractors to complete your project. When they don’t come through on key deliverables, your project could suffer.
Contractors default on their obligations for a number of reasons. Perhaps changes in the economy make the project no longer feasible. Or, maybe your contractors find themselves overworked and understaffed. You’ll want to make every effort to avoid this extreme type of project risk.
How to manage this risk: Assess your contractors’ abilities before you hire them. Most importantly, check their references to determine if they have a reasonable success rate. As with other parts of your project, ensure that your contractors’ duties are well defined.
Problems with securing products from your vendor can trigger a chain reaction that can cause you to miss deadlines and default on your client’s deliverables.
How to manage this risk: Ask your vendors for a list of references from their primary clients. Verify they have liability insurance, they’re financially solvent, and they comply with other licensing and regulatory requirements.
You can never think of all possible factors that might hold back your project, but here are some external project risks that you should consider.
Last year, 14 natural disasters struck the U.S., and each caused $1 billion or more in economic damage, according to CNBC. Disasters can close your business and prevent you from completing your project on time and within budget.
How to manage this risk: Prepare your business for natural disasters by developing a written disaster recovery plan. This might seem obvious, but almost 70% of small business owners say they don’t have one in place.
If your relationship with your client sours, your company could face a lawsuit. Although this scenario is unique and extreme, you should prepare yourself for the potential fallout.
How to manage this risk: Ensure your attorney includes an arbitration or mediation clause in your client agreement to avoid costly court battles.
Check out the infographic below for a closer look at project risk statistics.
Sources: Carleton University | Esri | Project Management Works | Gallup | G2 | SheKnows | Stacker | The Book of Odds | Project Management Institute | BrightWork | The Surety & Fidelity Association of America | Colour Blind Awareness