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Submission: On January 17 via manual from US — Scanned from DE
Submission: On January 17 via manual from US — Scanned from DE
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<option value="Atlas Authority">Atlas Authority</option>
<option value="atSistemas">atSistemas</option>
<option value="Autentica">Autentica</option>
<option value="Automation Consultants">Automation Consultants</option>
<option value="Avant">Avant</option>
<option value="Avoset">Avoset</option>
<option value="AZARA Consulting">AZARA Consulting</option>
<option value="BDQ">BDQ</option>
<option value="beecom AG">beecom AG</option>
<option value="Bisende">Bisende</option>
<option value="bit2bit Americas">bit2bit Americas</option>
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<option value="Borlas">Borlas</option>
<option value="Brainbits">Brainbits</option>
<option value="Burti">Burti</option>
<option value="ByteSource Technology Consulting GmbH">ByteSource Technology Consulting GmbH</option>
<option value="catworkx">catworkx</option>
<option value="Clearvision">Clearvision</option>
<option value="Communardo">Communardo</option>
<option value="Contribyte">Contribyte</option>
<option value="Coyote Creek">Coyote Creek</option>
<option value="cPrime">cPrime</option>
<option value="Decadis">Decadis</option>
<option value="Deiser">Deiser</option>
<option value="Demicon">Demicon</option>
<option value="Design Industries">Design Industries</option>
<option value="Deviniti">Deviniti</option>
<option value="Digilac">Digilac</option>
<option value="DONOS">DONOS</option>
<option value="DragonAgile Consulting, Inc">DragonAgile Consulting, Inc</option>
<option value="e-Core">e-Core</option>
<option value="ease solutions">ease solutions</option>
<option value="Easysecrets">Easysecrets</option>
<option value="eBusiness Design">eBusiness Design</option>
<option value="Eficode">Eficode</option>
<option value="Elegance Group">Elegance Group</option>
<option value="Elite IT Consulting Group">Elite IT Consulting Group</option>
<option value="EnevaSys">EnevaSys</option>
<option value="Enreap">Enreap</option>
<option value="EPS Software Engineering AG">EPS Software Engineering AG</option>
<option value="Expium">Expium</option>
<option value="Eyzee">Eyzee</option>
<option value="G2">G2</option>
<option value="Generativ">Generativ</option>
<option value="Genius Gecko">Genius Gecko</option>
<option value="GetConnected">GetConnected</option>
<option value="Hagen Management">Hagen Management</option>
<option value="Herzum">Herzum</option>
<option value="Highway Three Solutions Ltd.">Highway Three Solutions Ltd.</option>
<option value="HighwayThree Solutions">HighwayThree Solutions</option>
<option value="Honicon">Honicon</option>
<option value="HyperVelocity Consulting">HyperVelocity Consulting</option>
<option value="iDalko">iDalko</option>
<option value="Indra Philippines Inc.">Indra Philippines Inc.</option>
<option value="Inetum Realdolmen">Inetum Realdolmen</option>
<option value="Information Officer">Information Officer</option>
<option value="Infosys">Infosys</option>
<option value="InlogiQ">InlogiQ</option>
<option value="IT Solutions Delta">IT Solutions Delta</option>
<option value="Itera">Itera</option>
<option value="ITs4U">ITs4U</option>
<option value="IXPERTA">IXPERTA</option>
<option value="iZeno">iZeno</option>
<option value="Klee Group">Klee Group</option>
<option value="Koios">Koios</option>
<option value="Köstebek Teknoloji">Köstebek Teknoloji</option>
<option value="kreuzwerker">kreuzwerker</option>
<option value="Life in Codes">Life in Codes</option>
<option value="Linkyard">Linkyard</option>
<option value="Matrix Devops">Matrix Devops</option>
<option value="META-INF">META-INF</option>
<option value="Methoda">Methoda</option>
<option value="MicroGenesis Techsoft Pvt Ltd">MicroGenesis Techsoft Pvt Ltd</option>
<option value="MoroSystems">MoroSystems</option>
<option value="New Verve">New Verve</option>
<option value="Nimaworks">Nimaworks</option>
<option value="Now Consultians">Now Consultians</option>
<option value="NSI">NSI</option>
<option value="OAT Solutions">OAT Solutions</option>
<option value="OpenSource Consulting">OpenSource Consulting</option>
<option value="Origo">Origo</option>
<option value="Ouidou">Ouidou</option>
<option value="Ovyka">Ovyka</option>
<option value="PIX Software">PIX Software</option>
<option value="PMIS">PMIS</option>
<option value="PractiProject">PractiProject</option>
<option value="Praecipio Consulting">Praecipio Consulting</option>
<option value="Progrez">Progrez</option>
<option value="Resight">Resight</option>
<option value="Riada">Riada</option>
<option value="Rivet Group">Rivet Group</option>
<option value="Rubric">Rubric</option>
<option value="Run by Ideas">Run by Ideas</option>
<option value="scalenow">scalenow</option>
<option value="Scaleraworx Inc">Scaleraworx Inc</option>
<option value="Scolution">Scolution</option>
<option value="Seibert Media">Seibert Media</option>
<option value="Servilo">Servilo</option>
<option value="Shiwaforce">Shiwaforce</option>
<option value="Sii">Sii</option>
<option value="SmartIS">SmartIS</option>
<option value="Snapbytes">Snapbytes</option>
<option value="Soflab">Soflab</option>
<option value="Softlist">Softlist</option>
<option value="Sourcesense">Sourcesense</option>
<option value="Spectrum Groupe">Spectrum Groupe</option>
<option value="STAGIL">STAGIL</option>
<option value="Strategenics">Strategenics</option>
<option value="Stretch">Stretch</option>
<option value="SVA">SVA</option>
<option value="Swarmit">Swarmit</option>
<option value="team neusta">team neusta</option>
<option value="TeamBit">TeamBit</option>
<option value="Teamlead">Teamlead</option>
<option value="Techanics">Techanics</option>
<option value="Technology Systems">Technology Systems</option>
<option value="TechTime Initiative Group">TechTime Initiative Group</option>
<option value="Tecnofor">Tecnofor</option>
<option value="Tempest">Tempest</option>
<option value="TietoEVRY">TietoEVRY</option>
<option value="Togetha">Togetha</option>
<option value="Transition Technologies">Transition Technologies</option>
<option value="Triangu">Triangu</option>
<option value="Trinidad Wiseman">Trinidad Wiseman</option>
<option value="Twinit">Twinit</option>
<option value="Twybee">Twybee</option>
<option value="Unlimax">Unlimax</option>
<option value="Valiantys">Valiantys</option>
<option value="vCloudTech">vCloudTech</option>
<option value="Vishnu Artists">Vishnu Artists</option>
<option value="VSF">VSF</option>
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<p class="text-base-20 text-body-l">Enterprise Program & Portfolio Management right in monday.com</p>
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June 20, 2022
PROJECT RISK ASSESSMENT: AN EXAMPLE WITH A RISK MATRIX TEMPLATE
Project Management Risk Management
Agnieszka Sienkiewicz
“Begin with the end in mind” (Stephen Covey) is to say, “Think first what could
go wrong.”
A project is a collection of interconnected tasks that are bound to specific
timelines, resources, and deliverables. Any task could carry a certain
uncertainty (risk) that, if it happens, could affect the project’s success. In
this regard, project risk comprises two factors: the probability of happening
and the consequences if it does.
While you cannot avoid risks entirely, with the help of risk management methods,
such as the project risk assessment matrix, you can evaluate the potential
damages caused by those risks. And consequently—increase the likelihood of
successful project completion.
Today, you are going to learn about:
* What is a project risk assessment?
* What is a project risk matrix?
* How to create a risk matrix template for your project.
* How to visualize project risks on a risk matrix.
* Types of risks in project management.
WHAT IS A PROJECT RISK ASSESSMENT?
A project risk assessment is a process that aims to gain a deeper understanding
of which project tasks, deliverables, or events could influence its success.
Through the assessment process, you identify potential threats to your project
and analyze consequences in case they occur.
Risk assessment takes on many forms. It could be a simple matrix or a database
using sophisticated algorithms. In this article, we will focus on a risk
assessment matrix.
WHAT IS A PROJECT RISK MATRIX?
A project risk matrix, also known as a Probability and Severity risk matrix, is
a graphical risk analysis tool in the form of a table (matrix). It is typically
square, but some risk matrices are rectangular or circular. A risk matrix gives
you a quick view of project risks and their consequences’ severity (impact). You
use it to allocate ratings for each risk based on two intersecting factors:
* The likelihood (or probability) of a risk to occur (x-axis).
* The impact (or severity) if a risk occurs (y-axis).
The higher a risk ranks for these two factors, the bigger threat it poses to
your project.
The bottom-left corner of the matrix is where the likelihood and impact of
a risk occurring are very low. On the opposite side, in the top-right corner,
the likelihood and the impact are the highest. In short, when the likelihood
increases, the risk moves to the right; if the impact increases, then the risk
moves up.
To denote the threat level, many risk maps feature a red-yellow-green
color-coding that indicates whether risks are significant-, moderate- or
low-level concerns respectively. (Hence why risk matrices are often called risk
heatmaps.) You may also come across risk heatmaps that use different shades of
one color instead of red-yellow-green.
Once you assess the likelihood and impact of each risk, you will be able to
prioritize and prepare for them accordingly.
RISK MATRIX TEMPLATE: CREATE A RISK MATRIX FOR YOUR PROJECT
A risk matrix is a useful tool for project planning that you can create in just
a few steps. In this article, we will create a risk assessment form and
a respective 5×5 risk matrix template for a construction project.
STEP 1. IDENTIFY PROJECT RISKS
Start by brainstorming and analyzing potential risks and opportunities related
to your project scope. Leave no risk behind. Depending on your organization and
project, your list of risks might include several types of risks, such as cost,
environmental, and legal risks.
(You will find a comprehensive list of risk types at the end of this article).
Hint: If you are not a huge fan of lists and prefer visual methods, you can
follow a work breakdown structure style to identify and categorize your risks.
Or, in other words, you could create a sort of “risk breakdown structure” for
your project. Take a look at the example below.
“Risk breakdown structure.”
STEP 2: DETERMINE THE RISK LIKELIHOOD
In this step, you need to identify the likelihood of a given risk happening. On
a 5×5 matrix, you express the likelihood scale on 5 levels:
* 1 – (Very unlikely): A very slim chance for this risk to occur.
* 2 – (Not likely): Low chances for this risk to occur.
* 3 – (Possible): Fifty-fifty chances for this risk to occur.
* 4 – (Probable): Good chances for this risk to occur.
* 5 – (Very likely): You can bet this risk will occur at some point.
STEP 3. DEFINE THE IMPACT SCALE
Next, you rank your risks based on the impact they would cause on your project
if they occur. The impact scale also has 5 levels:
* 1 – (Negligible): This risk will hardly impact your project.
* 2 – (Low): You can easily handle the consequences of this risk.
* 3 – (Moderate): It will take some time and effort to mitigate the
consequences of this risk.
* 4 – (Significant): This risk could cause long-term consequences that will be
hard to recover from.
* 5 – (Catastrophic): The impact of this risk might wreck your project.
STEP 4. CALCULATE THE RISK RATING
Assign each risk a corresponding risk rating based on the likelihood and impact
you have already identified. For example, a project risk that is very likely to
happen and will cause major safety hazards will receive a higher risk rating
than a risk that is unlikely to occur and will cause very minor harm.
The formula for the risk rating is as follows:
Likelihood x impact = Risk rating
e.g., Likelihood (4) x Impact (5) = Risk rating (20)
(A risk with such a high rating could threaten your project, therefore you
should monitor it closely.)
Risk rating formula.
Since we work on a 5×5 matrix, the risk rating values will range from 1 to 25.
* 1 – 6 (Low): Low-rating risks most likely will not happen. If they do, they
will not be a threat to your project.
* 7 – 12 (Medium): Some medium-rating risks might happen at some point. You do
not need to prioritize them but you should not ignore them either.
* 13 – 25 (High): High-rating risks are serious and very likely to happen
threats. They can cause your project to go off the rails, so you should keep
them in mind when planning your project.
STEP 5. DRAW YOUR RISK MATRIX
To draw a risk matrix, extract the data from the risk assessment form and plug
it into the matrix accordingly. In our example, we identified risks for which 5
levels of likelihood and 5 levels of impact were sufficient. Therefore, we get
the 5×5 matrix that looks like this:
The risk ratings in the lower-left quadrants are the lowest, therefore they have
a green color; the ratings in the upper-right quadrants are the highest—hence
the red color.
IMPORTANT NOTES ON CREATING A RISK MATRIX TEMPLATE
The 5×5 template we have created in the previous steps is only an example of how
you approach creating your matrices. You can create a separate matrix for an
entire organization, a specific program, or a project. In each case, it could be
different. Therefore, there are a few important things about risk assessment
matrices to note:
1. When defining your matrix, think about the number of intervals for the
likelihood and impact. How many rows and columns will it have? For example,
a 3×3 or 3×4 matrix could suit your project better. When you decide on your
matrix size, place labels and values on its scales accordingly.
2. Likelihood and Impact scale intervals are numerical values (e.g., 1 – 5 or
0% – 100%). You place those values on your matrix but you can also use them
to describe the likelihood and impact of certain risks. Depending on your
project, it could be, e.g., safety, quality, cost, schedule risks, etc. (You
will find several risk types at the end of this article.)
Let’s take a look at some examples.
As you can see from the above, the numerical value for the impact is the same.
However, the description for each risk type is different. Therefore, you may
need to define interval names for individual objectives and their respective
impacts and probabilities.
3. Your scale will not always be linear. You may observe it with risks that
carry high impact—those will often have larger intervals than low-impact
risks. Take a look at the table above, and compare the interval for the
“Low” impact (0-3%) and the “Catastrophic” impact (50-100%). The discrepancy
is quite significant—the impact of a fatal injury will be much greater than
that of a scratched finger.
4. Instead of risk rating values in your matrix, you can plug in the number of
risks you identified in your project for each quadrant. For example:
(In fact, that is pretty much how the BigPicture Risk matrix report looks like.
Read on to learn more about visualizing risks in the BigPicture app).
5. The labels in brackets on matrix scales are arbitrary. You can name your
values however you want. For example, Impact (1) could have a label:
“Insignificant.”
6. Your risk form and matrix are not the type of task that you complete and
forget. You should manage your risks throughout the life of your project. A
common mistake in project management is creating a fairly standard risk
register during the project planning and not returning to it until something
happens. Project managers should carry out regular risk assessments to be
able to react to changes in the project environment on an ongoing basis.
VISUALIZE PROJECT RISKS ON A RISK MATRIX
What might have struck you is that the matrix does not offer much room for
putting risks directly on it. It could work for a few, but if you have dozens of
them, it will become cluttered and a pain to use. Not to mention that over the
course of your project, you might need to identify new risks and revise the
existing ones for their likelihood and impact. This means you will need reliable
software to visualize and work with project risks efficiently.
If you are a Jira user, you will feel at home. The BigPicture risk matrix
resembles Jira Sprint Board.
The risk software we would like to introduce is BigPicture which seamlessly
integrates with Jira. It offers many key features that will help you assess and
monitor your project risks.
Not a BigPicture user yet? Start your free 30-day trial today. Or visit our demo
page to play with the app straight in your browser — no registration or
installation needed.
VIEW YOUR RISKS ON THE RISK MATRIX
The BigPicture Risk module enables you to generate a risk assessment matrix with
a default size of 5×5. The matrix features two scales: the risk consequence and
risk probability.
The risk consequence scale has the following values: Trivial, Low, Medium, High,
and Severe. Whereas with the risk probability scale, you can assign the
following values to a risk: Almost none, Low, Medium, High, and Very high. If
you enable the heatmap mode, the app will color the risk cards based on their
risk rate with four default colors: green, yellow, orange, and red.
VISUALIZING RISKS FROM THE RISK ASSESSMENT EXAMPLE
Let’s return to our construction risk assessment form and see what the risks
will look like on the BigPicture risk heatmap.
If you are a Jira user, you will feel at home. The BigPicture risk matrix
resembles Jira Sprint Board.
The electrical leakage has the highest probability (likelihood) and consequence
(impact). That is why you will find it in the top right corner (the app colored
a risk card of such a high-priority risk with red color). The app automatically
calculates the risk rating, so you do not have to worry about manually updating
the heat map.
If you want to move any risk to a different quadrant (because its impact or
likelihood has changed) you can edit the risk or use a drag-and-drop feature. Of
course, you can place several risk cards in a given quadrant. Our simple project
has only 5 risks but yours might carry many more and BigPicture will visualize
all of them for you. If you notice your risk map getting really busy, you can
display risks in a compact mode.
Risk heat map (compact) in BigPicture.
POPULATE YOUR RISK MATRIX WITH RISKS AND ISSUES
You can add any issue type to the risk heat map as long as you select the
Consequence and Probability fields and assign them respective values. (You will
need your Jira admin to preconfigure the fields you will be able to add to your
tasks.)
So when you create a new task or edit the existing one, just add those two
fields to make it pop up on your risk matrix.
In our risk assessment form, we did not add any issues, epics, or
milestones—only risks. So how come those risks are on the heatmap? By clicking
on any quadrant, you can add new and existing tasks and tasks as risks directly
on the risk matrix.
Click “Create new Jira issue” and provide details for your risk (remember about
the Probability and Consequence fields).
Since you can add project tasks as risks, and risks directly to the matrix, you
can use the BigPicture’s Risk board in two ways.
RISKS AS TASKS APPROACH
The first approach is about directly adding the tasks as risks to the risk
matrix. Those tasks will not result from the project plan (unlike typical
project tasks that must be completed) and will serve as risks alone.
Let’s come back to the “Water leakage” risk as an example. Previously, we added
it directly to the matrix as a typical risk that carries some probability and
impact. Such a model will not readily show you which task(s) a given risk
relates to. However, you could connect this risk to the actual tasks it has an
impact on using Jira Issue Links. Also, by adding a task as a risk to the
matrix, you can immediately read what this risk is about (e.g., the risk of
“Water leakage”).
PROJECT TASKS AT RISK APPROACH
(This approach is more popular among BigPicture users.) You can also add
individual project tasks to the risk matrix. Unlike in the previous model, you
will not see details about the risk just by looking at the matrix. Because, in
fact, you would be looking at the task, not a risk as such. But you will know
the probability and the impact of the risk that this task is related to.
For example, let’s say you want to add a “Road building task” to the risk
matrix. You situate this task on the matrix according to the risk’s probability
and impact. You do not know that this task is at risk due to the potential
“Water leakage” but you know the likelihood and impact of it. If you want to
have a more detailed overview of a given task at risk, you can add the info
about the risk to the issue (e.g., as a comment or a relevant attachment).
CUSTOMIZE YOUR RISK MATRIX
If the default look of the BigPicture risk matrix is not optimal for your
project, you can customize it.
* Transpose the whole matrix and/or invert individual scales (one or both
simultaneously).
* Change the scale names (e.g., from “Consequence” to “Impact”).
* Add and delete Probability and Consequence individual values. For example,
let’s say you want to see only the risks with the highest ratings on your
map. In such a case, you delete low and medium values.
Here, we deleted the 3 lowest values from both scales (and changed their names
while we were at it). Consequently, only the most likely and severe risk
remained.
* Configure the risk matrix to have SAFe® ROAM-based quadrants.
* Use the card view creator to see more details on your risk cards.
RISK MATRIX REPORT
The Risk matrix report gives you a quick overview of your existing risks in each
matrix quadrant. You can use this report for risks present in your program,
project, or iterations on a lower hierarchy level (on the ART level, the report
will also display risks from the PI iterations and the PI sprints).
When you hover over a given quadrant, you will see a list of risks with their
corresponding statuses.
You can rename the report, invert the risk scales, or transpose the whole risk
report matrix.
9 TYPES OF RISKS IN PROJECT MANAGEMENT
Arguably, the biggest indicator of the risk likely occurring is whenever your
project has something “new” in it. For example, a “new supplier” for safety
goggles; “new processes” according to which employees will carry out their work;
“new technologies” that the higher-ups want to introduce; a “new software
developer” the company wants to hire for the current project.
Of course, there are many types of risks to consider when assessing your
project. These could be:
1. Cost risks
2. Schedule risks
3. Performance risks
4. Operational risks
5. Market risks
6. Governance risks
7. Strategic risks
8. Legal risks
9. Environmental risks
COST RISKS
They indicate there is a possibility that the project’s cost will exceed the
budget. Cost risk might occur due to poor budget planning, inaccurate cost
estimating, and scope creep. This type of project risk can cause other risks to
emerge, such as schedule risk and performance risk.
Example: “The cost of steel might increase over the next quarter.”
SCHEDULE RISKS
This risk occurs when activities take longer than expected, typically due to
poor planning. Schedule risk can impact cost risk because any delay in
a schedule could increase the costs of a project.
Example: “Hiring a new foreman might take longer than anticipated.”
PERFORMANCE RISKS
Performance risk is the risk of a project failing to produce the expected
results. It is a complex risk that can result from the activities of several
parties, so it can be hard to pinpoint the exact reason behind it.
Example: “The level of noise might increase after the office redesign.”
OPERATIONAL RISKS
This type of risk results from poor implementation and process problems such as
distribution, procurement, and production. And since any of these could cause
the project to produce results differing from project specifications,
operational risk is a type of performance risk.
Example: “Insufficient funds to pay for the next batch of goods.”y
MARKET RISKS
Market risk could be, among others, competition, commodity markets, and foreign
exchange. Because these types of risks are highly unpredictable, planning for
them is difficult without sound expertise.
Example: “Foreign exchange fluctuations due to…”
GOVERNANCE RISKS
This risk concerns the company’s top management and other important stakeholders
with regard to their ethics and company reputation. This risk can be fairly easy
to mitigate because it largely depends on the stakeholder’s behavior.
STRATEGIC RISKS
Those risks are another type of performance risk. Strategic risks stem from
erroneous strategic decisions concerning the selection of people for the job,
the tools, as well as the technology that does not help with the work as
expected.
Example: “The application might not be compatible with systems already in use.”
LEGAL RISKS
Legal risk is the consequence of legal obligations, such as law of the land,
local laws, and statutory requirements. This type of project risk is also about
the contractual obligations, as well as avoiding and handling any lawsuits
against the company.
Example: “Export license might not be granted.”
ENVIRONMENTAL RISKS
Those risks pertain to external hazards that one cannot fully avoid or even
foresee. For example, storms, floods, earthquakes, force majeure, pandemics,
terrorism, labor strikes, etc.
Example: “Severe weather conditions might delay the maintenance works.”
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--------------------------------------------------------------------------------
Agnieszka Sienkiewicz All articles by the author
Content writer at BigPicture. Previously, Aggie worked for SaaS companies
writing specifically about eCommerce and marketing. As a continuous learner and
advocate for knowledge-sharing, she creates content for beginners as well as
more advanced readers. She loves clean plant-based food and morning workouts.
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