Components of Project Risk

10 Jan 2012
Posted by John Murphy

Most people learn about project risk 'on the job' by taking part in risk identification sessions, then assessing, monitoring and controlling them. If the process is handled correctly, the project will succeed and participants will move on to the next challenge. But before we jump into the mechanics, take a moment to think about what constitutes a risk.

In essence, for a risk to exist two bedfellows need to be present. If either isn't, then there is no risk. So, what are these two key components? Quite simply, they are Uncertainty and Constraint. That's it. If both exist for specific events or to the project as a whole, then you need to instigate an appropriate level of risk management.

That's okay, I hear you say, perhaps we are in an ideal situation and our project isn't exposed to any risk. But again we need to think a little deeper. What exactly do we mean here?

Take the case of no uncertainty. If that was truly the case, we could set precise completion dates, exact expenditure and rigid quality requirements because we'd know exactly how to achieve them. All our unknowns would have disappeared and we'd have total control over all aspects of execution, both internal and external. Does that fit the project you're on? If so, you can relax and know success is assured.

What about no constraints? In this case it doesn't matter what we know or don't know. There is nothing dictating what the ultimate deliverable is so we can take as long as we want, spend whatever it takes and end up with something that will probably perform (of course it doesn't really matter if it doesn't, we can just keep trying). Does that sound more like your situation? If so you can watch the world go by without a care in the world, knowing you can never be brought to book.

Looking at risk in this way demonstrates that being involved in a project that doesn't have risks is virtually impossible. That means that however simple a project seems, look closely at the uncertainty and constraints to identify where you need to focus your management of risk.