What are 5 Key Characteristics of Risk?


Share this Article:

Our content and product recommendations are editorially independent. We may make money when you click links to our partners. Learn more in our Editorial & Advertising Policy.

1. Situational

Changes in a situation can result in new risks. Such changes include replacing a team member, undergoing a reorganization, changing the scope of the project.

2. Time-based

In this case, the probability of the risk occurring at the beginning of the project is very high (due to the unknown factor), and diminishes along as the project progresses. In contrast, the impact (cost) from a risk occurring is low at the beginning and higher at the end.

3. Interdependence

Within a project, many tasks and deliverables are interdependent on each other. These delays in these tasks will have a cascading effect on the other related tasks, and the result could be a domino effect.

4. Magnitude Dependent

The relationship between probability and impact is not linear in this case, and the magnitude of the risk makes a lot of difference. For example, consider the risk of spending $1 for a 50/50 chance to win $5 versus the risk of spending $1000 for a 50/50 chance of winning $5000. Since the probability of loss is the same in both cases (50%), the opportunity cost of losing is much greater in the latter case.

5. Value-Based

The risk may be affected by personal, corporate or cultural values. For example, completing a project on schedule may be dependent on the time of the year and the nationalities or religious beliefs of the work team. Projects being done in international locations where multiple cultures are involved may have a higher risk than those done in a single location with a similar kind of workforce.

About Abhilash Gopi In his own words

I got smitten by the Project Management bug when I was working under K.U. Harsha, my first Project Manager and have been lucky since then to work under democratic managers (Purushottam Sitla, Rekha Varma). I could learn on-job from these wonderful managers and has been equally successful in applying these principles.

I am currently working as a Senior Test Manager with Cordiant Technologies, Kochi, India. Cordiant (www.cordiant.com) is an Offshore Development Services provider for ISVs and Web Startups and its innovation is spearheaded by our President & CEO, Dennis Paul.

To learn more about Project Management, check out TechRepublic Academy.

Sign up for our emails and be the first to see helpful how-tos, insider tips & tricks, and a collection of templates & tools. Subscribe Now

Featured Partners

Subscribe to Project Management Insider for best practices, reviews and resources.

Project-Management.com Avatar

Get the Newsletter

Subscribe to Project Management Insider for best practices, reviews and resources.