Is Your Project At Risk?: 27 Types of Risks on Projects With Examples

by Shiv Shenoy

Check if your is project at risk. Use this 27 risk types checklist.

In the 1970s, American scientists were studying atomic particles and their collision. They needed a suitable location to build the testing facilities.

After a nationwide search that spanned many years for the perfect site, a place was chosen in November 1988 in the vicinity of Waxahachie, Texas. Soon the Superconducting Super Collider (SSC) nicknamed ‘the desertron‘, a particle accelerator complex project began construction.

This was designed to be the world’s largest and most energetic particle accelerator.

A board expressing regret about the abandoned Super Collider project in one of the project buildings in 1997. (Louis DeLuca / 108249). Courtesy, dallasnews.com

In 1989, Roy Schwitters, professor emeritus of Physics at the University of Texas at Austin was appointed the project’s director.

The particle accelerator’s planned ring circumference was 87.1 kilometers (54.1 mi) with an energy of 20 TeV of collision energy per proton. It was a dream project for any project manager or director to take up.

After 22.5 km (14 miles) of the tunnel had been bored, the project was canceled.

What was the reason?

Take a pause and make a guess.

Could it be the lack of availability of brilliant scientists (resource issue)?
This was a high-tech project. Could it be technology issues?
Or could it be something else?

Well, here’s what happened.

From 1987 to 1993, the project’s estimated budget went up from about $4.4 billion to as much as $12 billion.

The 22.5 km (14 miles) of the tunnel cost about 2 billion USD!

DallaNews.com article attributes the cause to be the tensions between Japan and the U.S. over the automobile industry. Kiichi Miyazawa, the then Prime Minister of Japan decided to wait until after the 1992 U.S. presidential election, in order to decide on funding this Super Collider project. “And after the election, the Clinton administration did not give much support to the project”, it reports.

“The House of Representatives rejected the project’s funding on October 19, 1993, and Senate negotiators failed to restore it.”, the history bit is logged in Wikipedia.

The funding.

This goes to prove that a project can very much fail for reasons beyond the control of the project or project manager. Reasons well outside of the project environment.

And probably no one saw it coming. It wasn’t conceivable that such a prestigious project for the country’s scientific development and the country’s standing in the scientific world would be shut down by its own government.

Projects are unique, and so are the forces that impact their environment.

Hence risk management is one of the most critical aspects of the project for a project manager.

Risks can materialize in unexpected ways and when least expected. Thus as a project manager, you have to be as proactive as possible.

How can you be proactive in identifying risks on your project?

While there are multiple ways, one way is to use the types of risks as a lens to look at your project through.

Treat the risk types almost like a checklist and consider all aspects of your project.

Look for symptoms.

Look for signals.

Look for signs.

This article covers 27 common types of risks that can happen in projects, along with examples to help you understand them better.

Assess your potential risks against each of these and decide whether you want to pull any in your risk register.

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27 Types of Risks on Projects With Examples

Most of these are evident by their name. But understanding at which stage in your project they can materialize is the first step towards identifying specific risks.

1. Budget Risk

This refers to not having the financial resources to complete the project.

The Super Collider project we saw earlier was hit by this risk.

Now the trigger for it could be very much part of the project itself! The project budget is decided based on estimates. If the estimation itself was not done correctly and the project keeps falling short of the budget, at some point in time the sponsors or funding sources may decide to pull out.

2. Scope Creep Risk

Let us understand what is scope creep.

A simple, seemingly harmless change that was agreed upon without authorization (and so no changes to baselines) snowballs into a big change that impacts project constraints resulting in scope creep. They come in subtly and can cause havoc on project constraints.

This is the act of adding additional tasks or features to a project that was not originally planned.

Example: Customer asks the team to change the label of a button. The project manager accepts this as a small change (although it is outside of the agreed scope) without estimating the additional effort or cost. And in the process of implementation, the team has to make changes to several files and the work ends up being a substantial scope change.

3. Schedule Risk

This is the risk of not completing the project within the estimated time.

Example: A project team fails to meet the deadline due to unanticipated delays by the vendor in supplying the raw material required for manufacturing.

4. Quality Risk

This is the risk of delivering a project that does not meet the agreed-upon quality standards.

Example: A project team delivers a product that does not meet the customer’s expectations of performance, and this results in a penalty for the team.

5. Cost Risk

This is the risk that the project incurs more costs than originally planned.

Example: A project delivery is slowing down and to avoid delay the project manager asks for more developers from the PMO. This increases the project cost for that particular project phase.

6. Resource Risk

This results when you discover not having enough resources to complete the project.

Example: A project team estimates a certain number of architects, designers, developers, and testing engineers, but the hiring team fails to hire them in time to start the project as planned.

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7. Dependency Risk

This risk occurs by relying on external factors or people to complete the project. This could be due to hard dependency or soft dependency.

Example: A project team works with an external vendor’s team to implement the payment module for an e-commerce project. The vendor team delays delivery of the payment module thus delaying the completion of a critical task and that team fails to deliver.

8. Process Risk

This refers to the risk of not following the proper processes for the project. your-project-at-risk-27-risk-types-checklist-s

Example: A project team fails to follow the established change management process and introduces a critical bug in the product.

9. Integration Risk

This is the risk of not being able to integrate the various components of the project.

Example: A software product development project team fails to properly integrate the payment module from the vendor’s team because the API signature was never documented, and the product is now not functional.

10. Security Risk

This risk happens due to not having the proper security measures in place.

Example: A banking product development project team fails to properly secure the code and sensitive data is exposed due to a hacking attempt on the banking servers.

11. Technology Risk

This happens due to not having the right technology to complete the project.

Example: A project team had a consultant architect designing the system using cutting-edge technology. Now the company fails to acquire that technology and cannot complete the project.

12. Stakeholder Risk

This is the risk of not properly managing stakeholder expectations.

Example: The IT project manager has not identified that the Accounts-VP is an important stakeholder in the internal accounting product development project, and thus the team has not taken his input while specifying project requirements. Thus upon delivery, the product has been rejected due to ‘missing’ requirements (which were not captured in the first place).

13. Data Risk

This happens by not protecting data from unauthorized access.

Example: A project team has used a database solution of the beta version and fails to protect customer data from unauthorized access and a data breach occurs.

14. Regulatory Risk

This risk happens when not complying with applicable regulations.

Example: A project team fails to comply with environmental regulations and the vigilance team has sent a notice asking the project to be shut down.

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15. Reputational Risk

This is the risk of damaging the reputation of the organization.

Example: Various project team members have been giving contradictory information to the stakeholders on the customer’s side, and it causes a negative perception of the organization.

16. Human Resource Risk

This happens by not having the right personnel to complete the project.

Example: A project’s resource estimation assumes a senior architect but the team has not been able to hire one for the job, thus it cannot start the project on time risking project delay.

17. Cultural Risk

This happens due to not understanding the cultural and social environment of the project.

Example: A project team member fails to understand the cultural environment and acts irresponsibly causing communication issues, and the team fails to submit the proposal for the next phase on time.

18. Political Risk

This is the risk of not understanding the political environment of the project.

Example: A project manager fails to understand the political environment of the project and makes a remark against someone from the unofficial power center. This impact her ability to acquire resources for the project, causing schedule delays.

19. Legal Risk

This happens due to not understanding the legal environment of the project.

Example: A project team violates certain laws related to raw material, and ends up using a banned substance, attracting financial penalties.

20. Environmental Risk

This happens due to not understanding the environmental impact of the project.

Example: A project team fails to procure environmental clearance for the dam project on time, thus delaying the start of the project.

21. Financial Risk

This happens when the team fails to procure finances for the project.

Example: A project sponsor fails to attract the right funding partners and the project fails.

22. Communications Risk

This probably is the most common risk and happens by not properly communicating with stakeholders.

Example: A project team fails to properly understand the communication needs of the key stakeholders. When the VP-Projects does not get an important update on project delivery and ends up committing to an unrealistic delivery date.

23. Outsourcing Risk

This happens when the team fails make-or-buy analysis and misses out on outsourcing important parts of the project.

Example: A project team fails to understand that they do not have the capabilities of implementing the API to interact with the currency trading platform, which they should have outsourced to an expert team.

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24. Contract Risk

This happens by not properly managing contracts.

Example: A project team does not fail to understand that contracts are of a legally binding nature, and forms a vendor contract without complete know-how. Now it risks financial penalties if things go wrong with the vendor.

25. Procurement Risk

This occurs by not having the right materials or services for the project.

Example: A multi-specialty medical institute process setup project team fails to identify all the required materials and the project suffers multiple delays.

26. Market Risk

This happens by not understanding the market environment of the project.

Example: A project team has failed to understand the market environment of their AI product, and before release, it finds that a competitor has already released the exact same solution with advanced features.

27. Risk of Disruption

This happens due to not being able to complete the project due to disruptive events.

Example: A project team is unable to complete roads in the interiors of rainforest due to a natural disaster.

Conclusion

Projects are inherently risky and there is no way to reliably eliminate all risks.

However, by proactively assessing and managing the risks associated with your project, you can minimize the chances of your project going off the rails.

While there are many different types of risks on projects, the 27 outlined in this post should be considered the most common. By knowing which risks to watch out for in your project, you can better plan and manage your project to ensure its success.

Good luck!

Shiv Shenoy, PMP