What is Project Risk?

Is it Important to understand Correct Definition of Project Risk?

project risk

Yes! It is extremely important to understand correct definition of Project Risk. It is not only important to understand correct definition of Project Risk but also to use it in the correct manner.

In fact, let me go a step forward – it is important to understand the correct definition of all the Project Management terms. I am sure PMP® aspirants would agree with this statement since PMP® Exam is all about correct understanding of PMBOK® Guide terminology.

Let us move away from PMP® Exam and concentrate on Project Risk. I have observed that the term “Project Risk” is often used very loosely. In my experience the incorrect usage of Project Risk (or any other Project Management term) leads to immense confusion.

Projects are done by the Project team. If the Project team members have different understanding of different Project Management term(s) then precious hours are wasted is resolving confusion arising due to miscommunication & misunderstanding. A good Project Manager should always avoid the confusion and improve productive hours.

What is Risk?

exposure to the chance of injury or loss; a hazard or dangerous chance


the possibility that something bad or unpleasant (such as an injury or a loss) will happen


A situation involving exposure to danger

Oxford Dictionaries

It is quiet apparent from the English Definitions that Risk involves Chance or Possibility. If an event has already happened or will definitely happen then it cannot be categorized as a Risk – it is a Problem.

Let me share a little anecdote with you.

I provide Project Management Advisory to an Information Technology (IT) Products company. Few months ago, as a part of my assignment, we started setting up a Project Management Office (PMO). To begin with we started holding project review meetings on a weekly basis.

As part of the endeavor, all the Project Managers started preparing weekly status reports of their respective projects. The project managers highlighted pertinent Project Risks in the weekly status reports.

Now, there is a Project Manager who always reports Problems as Risks. And whenever I have tried to reason with him, his standard response is “How does it matter? Whether you call an Event a Risk or a Problem; the situation has to be resolved”.

I believe there are many important reasons why Project Risks and Problems should be reported separately. Some of the main reasons for reporting them separately are:

– The Management should know where they should focus their energy.

– Most of the problems should be solved but only prioritized Project Risks should be resolved. There are 4 strategies each for resolving Threats and Opportunities.

– A separate Risk and Problem Database has a better utility for future projects.

Life is going on but this Project Manager still reports Problems as Risks.

What is Project Risk?

An uncertain event or condition that, if it occurs, has a positive or negative effect on one or more project objectives.

PMBOK® Guide 5th Edition

Looking closely at the definition, it is quite apparent that there are 2 main components of Project Risk – Uncertainty (Probability) and Effect (Impact). An Event can be termed as Risk if it is likely to occur and it effects at least one of the Project Objectives. If an Event has already occurred then it is no longer a Risk.

A Project Risk with a negative impact is called a Threat while a Project Risk with a positive impact is called an Opportunity.

A negative Project Risk that has occurred is considered as an Issue or a Problem whereas a positive Project Risk that has occurred can be considered as a Windfall.

You should also read about 4 strategies to resolve Threats and Opportunities.
You can refer to Max Wideman Glossary to read some other standard definitions of Project Risk.
Is your definition of Project Risk different? Please leave a comment.
Praveen Malik, PMP is a certified Project Management Professional (PMP®) with a rich 20+ years of experience. He is a leading Project Management Instructor and Consultant. He regularly conducts Project Management workshops in India & abroad.

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