Jory MacKay on March 12, 2024 11 project risk examples: Watch out for these common pitfalls
Project management is a risky business. Whether you’re launching a new product, migrating an IT server, or remodeling an operational process, project uncertainty contributes to 66% of projects failing (or partially failing) every year.
Risk management is the art of anticipating potentially project-derailing dangers and putting actionable steps in place to minimize their impact. But the problem is that risks aren’t always obvious or apparent — until you’re knee-deep trying to slog your way out of one.
Knowing what risks you could face is a project management superpower. In this guide, we’ll cover the importance of risk management, how to recognize risks early on, and 11 examples of common risks to look out for.
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The importance of risk management in project management
Risk management is the process of identifying, analyzing, and managing events that affect, or could affect, your project. Done correctly, risk management helps project teams anticipate things that may not go to plan and put actions in place to reduce uncertainty.
Risks can be both positive and negative. But most of the time, project managers don’t actively manage upside risks and instead spend their time focusing on risks that can harm their project’s chance of success.
While any given project can have hundreds of individual risks, they almost always fall under a few categories, including:
- Unclear scope: Risks arising from confusion of the work to do.
- Technical issues: Solutions with many moving parts that can conflict.
- Communication: Miscommunication that leads to confusion and mistakes.
- Stakeholders: Opinions, priorities, and personality clashes across the project
- Business environment: Changes to the world around the project.
Without risk management, projects leave themselves open to failure. For example, a project that doesn’t consider the impacts of an increase in economic inflation may find itself wildly over budget when purchasing raw materials. If, instead, they’d spotted this earlier, they may have pre-purchased materials or requested an additional budget.
Aside from helping you to avoid disaster, risk management has a range of wider project benefits, including:
- More accurate project estimates: Factoring in risks and uncertainty helps project managers more accurately estimate their project’s timeline, budget, and benefits. This is because once the uncertainty is understood, it can be included in forecasting equations (such as PERT) or added as a contingency.
- Improves decision-making: When risks are understood they can be considered within the decision-making process. This helps project managers and other stakeholders make more informed judgments and improve the chance of project success.
- Stronger communication and clearer expectations. The core output of risk management is a “risk log” that’s used to communicate and set expectations. This helps everyone get on the same page and will mean fewer surprises if something does go wrong.
- The right escalations: Project teams need to know when to ask for help from senior stakeholders. Risk management provides a clear framework to assess and evaluate a problem, knowing when to escalate it upwards for senior support.
- Helps identify troubled projects: For program managers at large organizations running multiple projects, risk management helps identify projects that may be in trouble. Risk is an excellent indicator of overall project health that isn’t evident in scope, budget, and benefits.
- Focuses the team’s energy: There’s nothing like a show-stopping risk to get the team focused on the task ahead. Peril can be a great motivator, and identifying risks that could derail you is a great way to create pressure to help the team thrive.
Risk management is a core component of project management, but it’s an area that you can only truly master with experience. And oftentimes, that experience of a failed project is the best way to improve for the future.
Two methods to help you recognize risks early on
One of the greatest challenges with risk management is that you can do everything right, and things can still go wrong.
It’s impossible to identify, analyze, and mitigate every single individual risk — especially at the early stages. Instead, you have to look at risk categories to get a better understanding of what dangers could creep up along the way.
The first way to look at risks is to break them down by what you know about (or could know about them). This process typically looks at four different types of risks:
- Known-known risks: In essence, these aren’t actually risks at all, but information you can use to plan your project better. Here, you know what can cause uncertainty and have all the information to avoid or mitigate the risk.
- Unknown-knowns: These risks are ones that you don’t know about, but others in your wider stakeholder group do. To uncover these, you need to be actively working within your community to tease out additional knowledge and information to turn them into known-knowns.
- Known-unknowns: This is the core of what risk management is about. You know something out there could trip you up, but you don’t know the full scale of the impact. For these, it’s time to get to work and analyze the risk in more detail to come up with a plan!
- Unknown-unknowns: These are the risks that are impossible to plan for. No one knows what’s lurking in the dark, so it’s up to you to react as best you can when these risks inevitably impact your project.
While the known/unknown risk table is a common way to look at risks, there’s another lens to consider - this time, with just two different types:
- Project-level risks: These are risks that reside in your project and will have the power to affect your project. Essentially, these risks are entirely on you to identify, analyze, and prevent, with the consequences felt only by you if you don’t. Examples include an unclear scope, resourcing challenges, and stakeholder communications.
- Business-level risks: These are risks at a wider organizational level that affect everyone, including your project. While most of the time, they are out of your control to change, you can spot them ahead of time and try to plan accordingly. Examples include company policy changes, financial performance, or new industry laws and regulations.
No matter how you look at risks, it’s important to know there are some you can influence and some you can’t. As a project manager, you simply need to do the best job you can to keep you and your team on track.
11 common project risk examples (and how to avoid them)
Risk management is a skill that comes with practice. Sometimes, only a bad experience in the past can tip you off to a potential risk in the future. Luckily, many project managers have been caught out in the past!
To give you a head start, let’s look at 11 of the most common project risks and how you can avoid them for your project:
1. Project scope creep
One of the biggest risks to any project is the scope creeping over time. Scope creep is where the project team begins working on things they shouldn’t, either because they’re confused or their management is poor.
The consequences of scope creep: Left undetected, scope creep leads to the project wasting valuable time and resources on work that doesn’t add value.
Warning signs to look out for:
- Project milestones are missed
- The team is confused about what they’re working on
- The team seems demotivated or distracted from their core tasks
How to mitigate the risk of scope creep:
- Implement a strict change control process to track changes to the project scope.
- Connect regularly with the team using daily standups and one to one meetings to understand what’s being worked on.
Project risks aren’t always obvious - until you’re knee-deep trying to slog your way out of one.
2. Changes in your team
One of the most common challenges project teams face is when a key team member leaves the organization. Staff turnover is normal, and especially in long-term projects, at least one member of your team will leave.
The consequences of a team member leaving: If the missing person’s knowledge and expertise aren’t replaced, it can cause the project to slow down, your team to miss key milestones, or even a wider dip in morale.
Warning signs to look out for:
- A team member is distracted or demotivated
- A team member is frustrated with their manager
- Competitors are actively recruiting
How to mitigate the risk of team members leaving:
- Ensure team members are regularly documenting and saving their work so that you can quickly bring in a replacement if necessary.
- Vary the project work for team members to keep them motivated and engaged with the task.
- Make sure everyone knows how their work impacts the larger business goals of the company to create a sense of purpose in their day-to-day work.
3. Organizational changes
Businesses are always striving to stay ahead of their competition. Expect that the environment around you could change at any minute, with new strategies, reporting lines, and priorities coming from the top.
The consequences of organizational changes: Organizational changes can throw you off course, causing projects to get re-prioritized, budgets to be cut, and goals and objectives to be changed.
Warning signs to look out for:
- Changes in senior leadership
- Poor financial or product performance
- Changes in your market, such as new regulations or technological innovations
How to mitigate the risk of organizational changes:
- Work with your stakeholders to understand changes to different parts of the business.
- Regularly review your long-term product roadmap to adjust your strategic direction.
4. Team conflicts
Project teams are high-pressure environments and it’s inevitable that personalities will clash. As a project manager, the key is to expect conflict and plan ways to use it in a constructive way that keeps the project moving forward.
The consequences of team conflict: Conflicts in the team can lead to a drop in team effectiveness, lower team morale, and even quiet quitting.
Warning signs to look out for:
- Clashes in communication style between individuals
- High-pressure phases of your project, typically around release or go-live windows
- A drop in collaboration and communication across the team
How to mitigate the risks of team conflicts:
- Keep the team working collectively by incorporating team rituals into each week.
- Read up on conflict resolution tactics to turn a negative into a positive.
5. Technology failure
Technology is both the most helpful and most frustrating part of our lives. Especially when you’re delivering a new technology project, the chance of bugs, failed tests, or full-scale system crashes is much higher than usual.
The consequences of technology failure: Technology failure can cause a project to lose time, spend more money, and use excess resources.
Warning signs to look out for:
- Your project is creating a complex technical solution
- You’re working on an innovative technology system that no one has used before
- You have a lot of testing to complete across multiple teams
How to mitigate the risk of technology failure:
- Focus on specific IT project management techniques, including choosing between a waterfall or agile methodology.
- Spend time crafting a detailed test plan. The better the plan, the less chance of making a mistake!
6. Resource underperformance
Unfortunately, not every employee performs how you’d want them to. With projects being such fluid environments, it’s common that someone isn’t performing how they should, whether they have the wrong skills, they’re demotivated, or just not the right fit.
The consequences of underperforming teammates: Resource underperformance can slow the entire project down, causing you to fall behind schedule, waste money, and lose stakeholder confidence.
Warning signs to look out for:
- You’re falling behind on your project schedule
- The team regularly suffers from a mental block and can’t move forward
- Other team members are complaining of a high workload
How to mitigate the risk of underperforming resources:
- Use resource allocation techniques to ensure the right people are assigned to the right tasks.
- Buddy team members up with a mentor to provide extra guidance and tutoring on project team skills.
7. Cost challenges and budget cuts
Projects cost money, and unfortunately, no company has an infinite pot of it. A common project risk is that you’ll be hit with a budget cut and be asked to deliver the same scope with significantly less money.
The consequences of budget cuts: Cost challenges can make it difficult to operate, meaning you have to reduce your timeline, quality, or scope but still deliver the same objectives.
Warning signs to look out for:
- Poor financial performance within your company
- Other large projects and programmes running alongside yours
- Being asked to share resources with other projects and programs
How to mitigate the risk of cost challenges:
- Read up on the triple constraint and apply tactics to balance time, cost, and scope.
- When creating your initial budget estimations, allow for contingency in each item to give you a buffer you can afford to lose.
With the right approach, limitations can be liberating.
8. Supply chain delays
Suppliers are a big part of any project, but as an external stakeholder, you have less influence over them, leading to a higher chance of problems.
The consequences of supply chain delays: Supply chain delays can impact your timelines and lead to incurring additional costs.
Warning signs to look out for:
- Suppliers are slow to respond to requests or provide updates
- The timelines provided are vague and non-committal
- You don’t have a defined contract with penalties for late delivery in place
How to mitigate the risk of supply chain issues:
- Establish a structured communication plan with suppliers to stay aligned on progress, tasks, and delivery dates.
- If you don’t have a clear contract, set up a scope of work to ensure both parties know what’s expected and when.
9. Acts of God
Extreme weather, natural disasters, and terrorist attacks are just some acts of God that can impact your project. Often, these fall squarely into the unknown-unknown category, but there are some things you can do to manage them.
The consequences of acts of God: Acts of God can impact any aspect of your project, be it timeline delays, budget demands, new scope, or reduced benefits.
Warning signs to look out for:
- Keeping an eye on the news and current affairs can help you predict events out of your control
- Knowing your wider business and geographic environment helps you know if your risk profile for certain events is higher
How to mitigate the risk of acts of God:
- At the beginning of your project, complete a PESTLE analysis to survey your project environment.
- Maintain a general level of contingency in your budget and timelines to help you react to events outside of your control.
10. Changes to laws and regulations
Especially in sectors such as construction or financial services, the laws and regulations that govern industries are always changing. If these changes hit during your project, you may need to react at short notice.
The consequences of law or regulation changes: New laws and regulations often change the scope of a business’s services. These changes take time, cost money, and impact everyone’s objectives and goals.
Warning signs to look out for:
- External stakeholders begin asking questions about how things are done
- News stories about failings, accidents, or disasters in your industry
How to mitigate the risk of law and regulation changes:
- Identify any legal or regulatory contacts as part of your initial stakeholder analysis and keep in touch with them to stay on top of any upcoming changes.
- Attend industry events such as conferences and workshops to keep ahead of upcoming changes and help you prepare for any impacts.
11. Communication blockers
Regular and effective communication is the backbone of successful project management. So, if anything gets in your way of communicating with the team, there’s a risk everyone will become confused and disjointed.
The consequences of communication breakdown: Communication breakdown leads to other issues, such as scope creep, timeline delays, interpersonal conflicts, and resource challenges.
Warning signs to look out for:
- Team members need clarification, and their work is delayed
- Stakeholders ask more questions and need clarity on what the project is doing
- Collaboration is a struggle, with different team members doing different things
How to mitigate the risk of communication issues:
The best way to improve your project communication is to use a project management tool such as Planio. Planio helps you keep everything in one place, with features for task management, document creation, team chat, and project status reporting, all working together to maximize team collaboration.
Try Planio with your own team — free for 30 days (no credit card needed) — and see how easy it is to run a successful project.
To finish: how to handle risks the right way
While we’ve covered a list of common project risks, every project is unique, and you’ll face your own set of risks that need managing.
Whatever the risk, following a clear risk management process is your best bet for neutralizing the threat. Here’s what to do:
- Risk identification: Start by identifying the risks to your project and write them down in your risk register. Risk identification first happens in the early stages of the project and is completed by holding a risk identification workshop.
- Risk Analysis: Once you’ve identified your risks, it’s time to analyze them. Specifically, you’ll want to define their likelihood of happening, their impact on your project, and their proximity (i.e., how long until the risk could happen). This will help you rate and prioritize your risks in order of severity.
- Take Action: Now you know your risks inside out, it’s time to start managing them. Take action to mitigate each risk, working to decrease the likelihood and impact the event could have on your project. For example, if you knew there was a risk of team members conflicting, you might ask them to do separate work or swap them to another project.
- Reassess and start again: Once you’ve taken action to reduce your risk, you must reassess the situation to determine if the action has had the desired effect. If not, repeat steps two and three until you’re comfortable with the severity of that risk.
If you want to dive deeper into the risk management process, check out our Guide to writing a risk management plan in 7 steps.
Turn uncertainty into success
Learning to manage risk effectively is essential for the success of any project.
Whether it’s scope creep, communication blockers, technology failure, or acts of god, there are signs to look out for and actions to take that will help you beat the uncertainty and stay on track.
Like many things in project management, a project management tool is a great way to keep your finger on the pulse. If you’re struggling to get your tasks, issues, actions, and risks in one place, check out Planio, the tool 1,500 businesses a day trust for their project management needs.
