Project assumptions are those factors which are considered true in the absence of evidence to the contrary. They’re an integral part of your project planning phase, which will be used to guide decision-making and gauge risk during execution. However, since they are not facts, they come with inherent risks, if proven incorrect.
Consider an example of a project that’s developing a new software program. One assumption might be that the team will have access to a specific software development tool. If this assumption is proven incorrect, it may impact project timelines and costs.
2. Understanding project constraints
Project constraints are limiting factors that stand in the way of achieving project objectives. They typically fall into broad categories including: time, cost, scope, quality, risk, and resources. Going beyond these defined limits can jeopardize project success.
For instance, consider a project with a strict delivery deadline, related to market entry timing. If the project doesn’t adhere to the timeline, the product could miss the market window, which could lead to loss of competitive advantage and financial loss.
3. Risk Assessment of Assumptions and Constraints
Conducting a risk assessment on each assumption and constraint involves systematically identifying the uncertainties these presented conditions pose to the project’s objectives.
Each assumption should be scrutinized to identify any inherent risk, and similarly, each constraint should be analyzed to draw out any potential negative impact it may have.
To illustrate this, suppose an assumption has been made that the project team will have access to certain materials during the project duration. A potential risk arising from this could be a delay in delivery due to unforeseen circumstances (like a global pandemic or a sudden shortage). This risk then needs to be evaluated on factors like likelihood of occurrence and potential impact.
Similarly, a constraint such as a tight budget could present a risk in the form of inadequate resources or inability to hire skilled personnel, which could, in turn, affect quality or timeline of the project.
One methodology to conduct risk assessment is by using a Risk Assessment Matrix. This is a tool that maps the likelihood and impact of a risk, which aids in understanding the gravity of the potential risk, thus formulating respective mitigation strategies.
Consider the following Risk Assessment Matrix:
| Low Impact | Medium Impact | High Impact | |
| Low Likelihood | Low Risk | Medium Risk | High Risk |
| Medium Likelihood | Medium Risk | Medium-High Risk | Very High Risk |
| High Likelihood | High Risk | Very High Risk | Extreme Risk |
After identifying and assessing the risks, the next step is to manage them effectively. This involves devising a Risk Response Plan to proactively tackle these risks. This could involve avoiding, mitigating, transferring, or accepting the risk, based on the resources available and the potential impact on the project.
Understanding the importance of assumptions and constraints, and how to assess and manage the risks associated with them is crucial. It aids in proactive planning and increases the likelihood of project success. This amplifies its significance, especially from the standpoint of the PMI Risk Management Professional (PMI-RMP) exam, where these concepts are scrutinized thoroughly.
Practice Test
True or False: Identifying assumptions and constraints is a crucial step of risk identification.
Answer: True
Explanation: Assumptions and constraints are an integral part of project planning and their identification aids in risk identification, helping to provide a clear picture of potential project risks.
What does a risk register primarily contain?
- a) A list of identified risks
- b) Assigned risk level
- c) Assigned risk responses
- d) All of the above
Answer: d) All of the above
Explanation: A risk register typically includes identified risks, an assessment of their impact, probabilistic data, a prioritization ranking, and assigned responses to mitigate the risks.
True or False: Constraints and assumptions always increase the project risk.
Answer: False
Explanation: Constraints and assumptions don’t necessarily always increase the project risk. They may create potential risks if they prove to be incorrect or if they change or are not met, but they might also impose boundaries that reduce risk.
Which of the following is NOT considered an assumption in project management?
- a) Resources will be available as planned
- b) A specific vendor will be used
- c) Existing technology can be used
- d) The project will be completed on time
Answer: d) The project will be completed on time
Explanation: Though the completion of the project is essential, it is the intended outcome and not an assumption per se. The other options describe situations that are taken as given or presume certain outcomes and thus, are categorized as assumptions.
Depending on its nature, a constraint can be:
- a) A resource constraint
- b) A scheduling constraint
- c) A budget constraint
- d) All of the above
Answer: d) All of the above
Explanation: A constraint might be any factor that restricts or dictates the actions of the project team. Constraints can be related to resources, scheduling, budget, or various other aspects of project planning and execution.
Risk assessment includes:
- a) Risk identification
- b) Risk quantification
- c) Risk response development
- d) All of the above
Answer: d) All of the above
Explanation: Risk assessment involves identifying potential risks, quantifying and prioritizing them, and developing appropriate responses or mitigation strategies.
In project management, an assumption is:
- a) Always based on evidence
- b) Never based on evidence
- c) Sometimes based on evidence
- d) Never assumed
Answer: c) Sometimes based on evidence
Explanation: Assumptions can be fact-based and evidence-supported, but they still carry inherent uncertainty as they predict future outcomes.
True or False: The likelihood of a risk occurring should be assessed during risk analysis.
Answer: True
Explanation: During risk analysis, potential risks are identified, and their impact and likelihood of occurrence are assessed in order to determine the overall risk level.
Constraints often limit:
- a) The project’s budget
- b) The project’s resources
- c) The project’s timeline
- d) All of the above
Answer: d) All of the above
Explanation: Constraints establish limits on the project and can affect the project’s resources, timeline, or budget.
True or False: The assessment of risks associated with each assumption and/or constraint should be done once at the beginning of the project.
Answer: False
Explanation: Risk assessment is an ongoing process and should be done throughout the project lifecycle as assumptions may change or new risks might emerge.
Interview Questions
What is the first step in risk identification in project risk management?
The first step in risk identification is to recognize the existence of uncertainty and the possibility of negative or positive outcomes.
What are the key elements to consider while assessing the risks associated with each assumption?
Key elements include the likelihood of the risk event, the potential impact of that event, and the point in time when the risk could occur.
What is an assumption in the context of project risk management?
An assumption in project management is a fact, event, or condition that is thought to be true during the project’s life cycle. The project plan is developed based on these assumptions.
How are constraints related to risk in project management?
Constraints, such as budget, timeline, technology, and resources, can restrict various options during the project and hence, increase the probability of risks. Each of these constraints may present various levels of risk to the project’s timeline, cost, and quality objectives.
How does risk tolerance impact the risk assessment process?
Risk tolerance or appetite is the level of uncertainty an organization is willing to accept. It guides how risks should be managed and what actions are required. Higher risk tolerance allows for riskier assumptions, while lower risk tolerance may mean more conservative assumptions and constraints.
What tool can be used to assess and prioritize risks associated with project assumptions and constraints?
A Risk matrix or risk ranking tool can be used to assess and prioritize risks.
What does it mean to ‘mitigate’ a risk?
Risk mitigation refers to reducing the probability and/or impact of a risk to an acceptable level. Actions might involve developing an alternative strategy or undertaking activities to reduce either the likelihood or the potential impact.
Why is it important to regularly update the risk register?
Risk is not a static concept – it can change as the project progresses. Regular updates to the risk register ensure that new risks are identified and assessed, obsolete risks are removed, and risk responses remain appropriate at various stages of the project.
What role do project sponsors or stakeholders play in risk management processes?
Sponsors and stakeholders influence the project’s risk tolerance level, fund risk management activities, and play a vital role in developing effective risk response strategies. They also provide the strategic perspective necessary to balance all risk factors.
What is the outcome of a thorough risk assessment process?
The outcome of a thorough risk assessment process is all about making informed decisions on how to deal with acknowledged risks. This might involve updating the project plan to mitigate identified risks, or accepting risks with appropriate contingencies in place.
What is the difference between ‘Risk Auditing’ and ‘Risk Reviewing’?
Risk auditing investigates the effectiveness of risk responses while risk reviewing evaluates the effectiveness of the risk management process throughout the lifecycle of the project.
What does the term “known-unknown” risk refer to in the context of risk management?
Known-unknown risks refer to those risks which the project team is aware could occur, but the specifics, such as when it might occur, exact cost, or its impact, is unknown.
How can peer reviews contribute to the risk management process in project management?
Peer reviews can provide a fresh and unbiased perspective on project assumptions, constraints, and risk management processes, thus potentially highlighting unrecognized or underestimated risks.
Why should assumptions be validated during the project lifecycle?
Assumptions should be validated as projects progress to ensure they continue to hold true, as false or unchecked assumptions can lead to unforeseen risks and issues.
Can a risk ever become an opportunity? If yes, how?
Yes, a risk can become an opportunity if it’s managed correctly. For example, a new technology – though considered a risk due to unfamiliarity – can lead to improved efficiency or cost savings if successfully implemented. This is referred to as a positive risk or opportunity.
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