3.3 How Team Members Perceive Risk

The role of the project management team is to understand the types and severity of risks on the project, and then develop and implement plans in response to these risks. The type and severity of risk vary by industry, project complexity, and project phase. The human tolerance for risk varies significantly from one person or organization to another. Due to this, it can be difficult for project team members to reach a consensus on the riskiness of an activity and overall project. Understanding the risk tolerance of a project’s stakeholders is a critical success factor in risk management.

The role team members play in a project can hugely affect their perception of risk. According to David Hillson, a consultant and author of many books on risk, a project sponsor (upper management or the customer) and the project manager perceive things very differently:

The project manager is accountable for delivery of the project objectives, and therefore needs to be aware of any risks that could affect that delivery, either positively or negatively. Her scope of interest is focused on specific sources of uncertainty within the project. These sources are likely to be particular future events or sets of circumstances or conditions which are uncertain to a greater or lesser extent, and which would have some degree of impact on the project if they occurred. The project manager asks, “What are the risks in my project?”….

The project sponsor, on the other hand, is interested in risk at a different level. He is less interested in specific risks within the project, and more in the overall picture. Their question is “How risky is my project?”…. Instead of wanting to know about specific risks, the project sponsor is concerned about the overall risk of the project. This represents her exposure to the effects of uncertainty across the project as a whole.

These two different perspectives reveal an important dichotomy in the nature of risk in the context of projects. A project manager is interested in “risks” while the sponsor wants to know about “risk.” While the project manager looks at the risks in the project, the project sponsor looks at the risk of the project (Hillson 2009, 17-18).

Even when you think you understand a particular stakeholder’s attitude toward risk that person’s risk tolerance can change. For example, a high-level manager’s tolerance for risk when your organization is doing well financially might be profoundly different from the same manager’s tolerance for risk in an economic downturn. Take care to monitor the risk tolerance of all project stakeholders—including yourself. Recognize that everyone’s risk tolerances can change throughout the life of the project based on a wide range of factors.