Chapter 6:

Creating the Project Risk and

Communication Plans
 A formal, comprehensive project risk plan
allows the project manager to be proactive
regarding the innumerable things that can and
do go wrong with a project.
Project Risk
• is any unforeseen thing that might — or might not —
occur during a project.
• isn’t necessarily negative; it’s just an event where the
outcome is uncertain.
• can have either a negative or positive effect on the
project’s objectives.
Business risks
• are uncertain factors, internal or external, that
threaten the financial health of an organization.
– Examples of external business risks would be
natural disasters or cyberattacks. Internal business
risks are threats that come from within the
company, such as falling out of compliance, having
too much debt, or labor disputes.
Most Common Project Risks

• Cost Risk • Operational Risk

• Schedule Risk • Market Risk
• Performance Risk • Legal Risk
• Governance Risk • External Hazard Risks
• Strategic Risk • Project Deferral Risk
• Cost Risk
– is an escalation of project costs.
– It is the risk that the project will cost more than
the budget allocated for it. P
– due to poor budget planning, inaccurate cost
estimating, and scope creep.
• Schedule Risk
– is the risk that activities will take longer than
expected, and is typically the result of poor
planning.
– Delays result in missed timelines and a possible
loss of competitive advantage.
– Missing the timeline to perform its intended
mission.
• Performance Risk
– is the risk that the project will fail to produce results
consistent with project specifications.

– A project team can deliver the project within budget and

schedule and still fail to produce the results and benefits.

– can lead to cost risk and schedule risk when the

performance of a team or technology results in an
increase in cost and duration of the project.
• Governance Risk
– relates to board and management performance
with regard to ethics, community stewardship, and
company reputation.
– It is directly related to the behavior of the
executives who are project sponsors and
stakeholders.
– This risk is easier to mitigate and manage with
proper stakeholder engagement.
• Strategic Risk
– are types of performance risks.
– It results from errors in strategy, such as choosing
a technology that does not work as expected.
• A good example would be choosing a project
management software that does not help the project
team in their responsibilities but instead takes more of
their time to work on the software than on the actual
project.
• Operational Risk

– includes risks from poor implementation and

process problems such as procurement,
production, and distribution.
– It is also a type of performance risk because poor
implementation prevented the ideal outcome to
happen.
• Market Risk

– include competition, foreign exchange, commodity

markets, and interest rate risk, as well as liquidity
and credit risks.
• Legal Risk
– arise from legal and regulatory obligations.
– They can come from contract risks and litigation
brought against the organization.
– Internal legal issues are also legal risks.
– These are unpredictable and can come from state
policies, business competitors, and employees.
• External Hazard Risks
– risks from storms, floods, and earthquakes.
– They can also result from vandalism, sabotage,
and terrorism.
– Other sources are labor strikes and civil unrest.
– All serious incidents can have severe impact on
cost and schedule.
• Project Deferral Risk
– refers to the risks associated with failing to do a
project.
– Like project risk, this risk can arise from any of the
risk sources.
– It can also occur if there is only a limited window of
opportunity for conducting a project.
– Failure to conduct the project now creates a risk that
makes it impossible to effectively conduct a project
later.
Project Risk Management
• “the process of conducting risk management
planning, identification, analysis, response planning,
and monitoring and controlling risk on a project.”
Six Steps Process for a PROJECT RISK PLAN
• Step 1: Make a List
• Steps 2 and 3: Determine the Probability of Risk
Occurrence and Negative Impact
• Step 4: Prevent or Mitigate the Risk
• Step 5: Consider Contingencies
• Step 6: Establish the Trigger Point
Remedies... Prepare a RESERVES!
Establishing Reserves
• comprehensive risk plan can be compromised if you
realize that you do not have the time or means to
take appropriate action.
• enables you to leverage the plan to its fullest
potential.
Contingency reserves

• are designated amounts of time and/or

budget to account for risks to the project that
have been identified and actively accepted.
• They are created to cover known risks to the
project
• Management reserves are designated
amounts of time and/or budget included in
your plan to account for risks to the project
that cannot be predicted. Sometimes you
don’t know what you don’t know.
Management reserves are created to cover
unknown risks to the project.
The Communication Plan
Project communication plan

• should include an e-mail protocol and much

more.
• Plan how you will communicate effectively as
your project matures.
• Project managers work in a constrained,
demanding environment where good is often not
good enough.
• Project managers and team members must
predetermine how stakeholders should interact
to achieve maximum efficiency as they move
through the project life cycle.
Common questions when creating the project communication plan:

• What are you trying to communicate?

• When must it be done (end of year, etc.)?
• How will the communication be accomplished (e-mail,
formal letter with original signature, meeting)?
• How often must the communication occur?
• Who owns the communication (makes sure that it
happens)?
• To whom is the communication addressed?
• Project risk management should
begin early in the process and
continue through the life cycle. A
key to success in dealing with risk is
to start early and lay the foundation
for risk management; be proactive,
not reactive; manage risks formally
with a process; and be flexible.
• Coordination points must be identified and analyzed in the
multi-project risk environment.

• The risk register can be an effective tool for organizing and

prioritizing threats to the project.

• Create an e-mail protocol; include your team for buy-in.

• Develop your project communication plan; it is as

important asany other project process.
Thank you 