Risk Identification: Definition, Purpose & Examples

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  • 0:03 What Is Risk Identification?
  • 1:26 Purpose
  • 2:15 Example
  • 3:15 Lesson Summary
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Lesson Transcript
Instructor
Olga Bugajenko

Olga is a registered PRINCE2 Practitioner and has a master's degree in project management.

Expert Contributor
Wendy Kwong

Wendy has an Honors Bachelor of Commerce degree from Laurentian University in Canada. She has over 10 years of teaching and accounting experience.

Risk management begins with risk identification. In this lesson, we'll introduce the risk identification process and its purpose, using the example of a digital development project.

What Is Risk Identification?

Imagine yourself as a project manager working on a new website for your company. Even though the project is quite small, it's necessary for you to carry out a thorough risk management analysis to ensure that the website is delivered by an agreed deadline and at an agreed cost. Risk management will ensure that the core functionalities of the website will be delivered and that the design standards will not be compromised.

The risk management process on a project consists of four steps:

  • Risk identification
  • Risk assessment
  • Risk response development, and
  • Risk response control

Risk identification is the process of listing potential project risks and their characteristics.

The results of risk identification are normally documented in a risk register, which includes a list of identified risks along with their sources, potential risk responses, and risk categories. This information is used for risk analysis, which in turn will support creating risk responses. Identified risks can also be represented in a risk breakdown structure, a hierarchical structure used to categorize potential project risks by source.

Though the major work on risk identification is usually done in the beginning of a project, it's important to remember that risk identification is an iterative process; new risks can be identified throughout the project life cycle as the result of internal or external changes to a project.

Purpose

The objective of the risk identification process is to ensure that all potential project risks are identified. The strategies for dealing with these risks will be devised during later risk management steps.

The ultimate purpose of risk identification is to minimize the negative impact of project hiccups and threats and to maximize the positive impact of project opportunities. Only by identifying risks first will a project manager be able to control the impact of a risk on a project. Awareness of potential project risks reduces the number of surprises during the project delivery and, thus, improves the chances of project success, allowing the team to meet the time, schedule, and quality objectives of the project.

Finally, the purpose of risk identification is to provide information for the next step of the risk management process: risk analysis.

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Additional Activities

Solutions:

Discussion Question Solution:

Given a key team member has fallen ill, there may be a resource availability risk if there is no one available or capable of replacing that person. There may also be a cost increase risk from trying to source out a replacement on short notice or having existing team members work overtime in an effort to complete project deliverables on time. Next steps to be taken should include revisiting the risk identification process since internal changes have arisen halfway through the project.

Journal Solution 1:

The identified risks can be depicted in a risk breakdown structure or documented in a risk register. The former would show a hierarchical structure categorizing risks according to their source, while the latter would include a listing of risks according to risk sources, responses, and categories.

Journal Solution 2:

It appears as though risk identification was only done at the beginning of the last project. Since risk identification is an iterative process, the process should be revisited as changes arise during the project. To ensure the success of the next project, you could brainstorm and consult with different team members. It would be worthwhile to have a discussion with members who were involved in the previous project to ascertain prior obstacles encountered and identify current project risks. It would also be beneficial to consider any available existing risk checklists and lessons learned from completed projects.

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