Why Is Risk Management Important to Project Success?

Individual and team performances are critical factors in the success of a project. Risk management processes consider at least four other risk factors as critical to a project's success: Regulatory, capital availability, customer expectations and operational risk.

Regulatory Risk

Regulatory risk can come in many shapes and sizes and may include compliance with state and federal laws. Projects may also be subject to other regulatory requirements such as privacy laws, for example the Health Insurance Portability and Accountability Act, or HIPAA, and employment practices regulated by the Equal Employment Opportunity Commission, or EEOC.

Capital Availability

Financial markets and funding typically are critical factors. Many projects focused on the development of real estate, for example, fail because of the unavailability of funding, which sometimes is the result of financial market activity.

Operational Risk

Successful operation at project completion is another key factor in defining project success.

Customer Expectations

The success of a project will be defined by the customer. Consideration of customer expectations needs to be factored into the overall project plan and monitored regularly.

Conclusion

Risk management processes go hand in hand with good project management. Loss of reputation is the ultimate risk in the failure to appropriately manage both the internal and external risks inherent in a project.

References

• Redman Advisors LLC

Resources

• Strengthening Enterprise Risk Management for Strategic Advantage