The project risk assessment process helps program managers and project teams make informed decisions regarding alternative approaches to achieving project objectives and the relative risk involved in each. Assessing and understanding the different aspects of risks increases the likelihood of success in meeting or exceeding the most important objectives (e.g., time) and clearly understanding when it is at the expense of other objectives (e.g., cost). Project risk assessments encourage the project team to take appropriate measures to:
- Avoid and/or minimize adverse impacts to project scope, cost, safety and schedule.
- Maximize opportunities to improve the project’s objectives with lower cost, shorter schedules, enhanced scope and higher quality.
- Avoid and/or minimize management by crisis.
A project risk assessment is a critical element to both program and project delivery cycles. Risk can typically be divided into the following three categories:
- Political – defined as stakeholders, communities, permitting, tenants, approvals, media, and internal project team issues (i.e., not knowing who is really in charge).
- Technical – this is the most common for design and construction projects and is typically represented by requirements, regulatory, technology, data, design, construction, maintenance, operations and life cycle cost. (i.e., health, safety, environmental, etc.).
- Contractual – this is most commonly related to funding, negotiations, scope of work, qualification requirements, certification requirements, incentives, penalties and defaults.
A project risk assessment approach includes assessing and managing risk. A project risk assessment is a qualitative approach to identifying risk, which includes both the positive and negative sides of risk, and evaluates the likelihood and potential impact. Risk mitigation, the most critical step in the process, is a creative thought process to develop alternatives while capitalizing on the “opportunity” risks and minimizing the likelihood and potential impact of “threat” risks.