Prioritizing risks based on impact and urgency is an effective approach to refining your risk management strategy. It empowers you to address risks in order of their significance and urgency, thereby optimally allocating your organization’s resources. For individuals preparing for the PMI Risk Management Professional (PMI-RMP) exam, understanding and being able to apply this principle is vital.
Understanding Risk Impact and Urgency
Risk Impact refers to the potential effect a risk event could have on a project’s objectives if it occurs. Impact can be related to project scope, schedule, cost, quality, or any other project objective.
On the other hand, Risk Urgency refers to the need for immediate attention to a risk event. Some risks may become problems more quickly than others. Therefore, prioritizing risks that are imminent in nature can help manage the project more effectively.
Prioritizing Risks Based on Impact and Urgency
The intersection of impact and urgency provides a spectrum of risk priority. By understanding both elements, managers can make informed decisions about which risks require immediate attention.
- High Impact, High Urgency: These are your highest priority risks. They have the potential to profoundly affect your objectives and need to be addressed immediately.
- High Impact, Low Urgency: These risks, while potentially detrimental to your project, may not need immediate attention. It is still important to keep them at the forefront and monitor their development.
- Low Impact, High Urgency: These risks may disrupt day-to-day operations but won’t necessarily derail your project’s success. They should be addressed swiftly to limit their complications.
- Low Impact, Low Urgency: These are your lowest priority risks. While they should not be ignored, they can generally be monitored and addressed as needed without disrupting other operations.
The Prioritization Matrix, also known as the Impact/Urgency Matrix, is a useful tool to visualize these categories.
| High Impact | Low Impact | |
| High Urgency | High Priority | Medium Priority |
| Low Urgency | Medium Priority | Low Priority |
Considerations for Prioritizing Risks
Certain factors influence risk prioritization:
- Stakeholder risk tolerance: This is the threshold of the perceived acceptable level of risk. Different stakeholders may have varying risk tolerances. Therefore, risks are managed in line with the stakeholder having the least risk tolerance regarding that particular risk.
- Organizational Risk Appetite: This refers to the level of risk that an organization is willing to take. It affects how risks need prioritizing.
- Resources Available: The ability to mitigate risk also influences its priority. If resources are limited, high-impact, high-urgency risks would be addressed first, followed by the others in descending order of priority.
An Example
Consider a construction project where you’ve identified four key risks.
- Risk of delay due to delayed supplies (High Impact, High Urgency): This risk could seriously delay your project timeline and should be addressed immediately.
- Risk of regulatory fines due to non-compliance (High Impact, Low Urgency): This is a serious risk, but you’re currently in compliance, so while it needs to be monitored and planned for, it doesn’t require immediate action.
- Risk of minor injuries on site (Low Impact, High Urgency): This risk could disrupt daily operations and worker morale, so procedures should be enforced quickly to prevent occurrences, but it’s unlikely to blow the project off course.
- Risk of minor cost overruns due to market fluctuations (Low Impact, Low Urgency): This risk needs to be monitored and addressed if it worsens, but isn’t urgent or impactful under current conditions.
By identifying and ranking these risks based on their impact and urgency, the project manager can create an effective risk response strategy that prioritizes resources and actions where they are needed most. Such an approach is core to obtaining PMI-RMP certification and successfully managing risk in any project.
Practice Test
True/false: Impact and urgency are the two main factors to consider when prioritizing risk.
- True
- False
Answer: True
Explanation: The process of risk prioritization is highly dependent on the perceived impact of the risk event and the timeframe (urgency) within which the risk event is predicted to occur.
Multiple select question: Which of the following components are integral to prioritizing risk?
- A) Impact
- B) Urgency
- C) Probability
- D) Magnitude
Answer: A, B, C, D
Explanation: All selections are important factors when prioritizing risk. Implicit in the concept of ‘risk’ is the inherent uncertainty, hence the importance of considering probability.
Single select question: Which is used as a technique to prioritize risk?
- A) Scrum
- B) Risk matrix
- C) Hybrid cloud
- D) DevOps
Answer: B, Risk matrix
Explanation: The risk matrix is a tool that combines the impact and likelihood of a potential risk, helping to prioritize different risks.
True/False: All risk events need to be responded to immediately regardless of their potential impact and urgency.
- True
- False
Answer: False
Explanation: Not all risks need an immediate response. The response should be based on the potential impact and urgency of the risk event.
Multiple select question: According to PMI, which of the following are primary risk ranking methods?
- A) Probability and Impact Matrix
- B) Urgency Assessment
- C) Risk Data Quality Assessment
- D) Technical Performance Measurement
Answer: A, B, C
Explanation: According to PMI, Probability and Impact Matrix, Urgency Assessment, and Risk Data Quality are primary risk ranking methods.
Single select question: The__________ helps to determine if a risk needs immediate attention.
- A) Risk urgency assessment
- B) Risk data quality assessment
- C) Risk probability assessment
- D) Risk impact assessment
Answer: A, Risk urgency assessment
Explanation: The risk urgency assessment helps determine if a risk needs rapid or immediate responses.
True/False: Prioritizing risks based on their impact will always elevate those with the highest cost to the top.
- True
- False
Answer: False
Explanation: While cost is an aspect of impact, it is not the only factor. Impacts to schedule, scope, and quality are also considered.
Multiple select: What modes of risk impact are evaluated in prioritization?
- A) Cost
- B) Schedule
- C) Quality
- D) Resources
Answer: A, B, C, D
Explanation: All the given types of risk impact are evaluated during risk prioritization.
Single select question: Which of the following tools is used for determining risk urgency?
- A) PERT
- B) Pareto chart
- C) Monte Carlo simulation
- D) Project management software
Answer: B, Pareto chart
Explanation: Pareto chart is a tool effectively used to prioritize different types of risks based on the principle that not all risks are of equal urgency.
True/False: Risk prioritization never needs to be revisited once initially determined.
- True
- False
Answer: False
Explanation: Risk prioritization is not a one-time only process. It should be revisited throughout the life of the project as risks may change in their urgency or impact.
Interview Questions
What are the two main factors to consider when prioritizing risks based on impact and urgency?
The two main factors to consider are the potential impact of the risk on the project’s objectives and the urgency of addressing the risk.
What is the primary purpose of classifying risks based on their impact and urgency?
The primary purpose of this classification is to allow project managers to allocate resources and plan risk responses more effectively, by focusing first on the risks with the highest combination of impact and urgency.
What is typically used in the process of prioritizing risks according to their impact and urgency?
The Probability and Impact Matrix is a common tool used in the prioritization process. It involves plotting each risk based on its individual probability and impact level to help prioritize it.
What does high impact, high urgency risk mean to a project?
High impact, high urgency risks are the most critical risks that could potentially cause severe damage to the project outcomes if not addressed immediately.
Why is it important to consider urgency in risk prioritization?
Urgency provides insight into how quickly an action needs to be taken to mitigate a risk. An urgent risk might demand immediate attention, even if its impact is not very high.
What is a risk rating in the context of risk management?
Risk rating is derived from the combination of risk impact and likelihood. Risks with the highest ratings are generally considered the top priorities.
What tool can be used to prioritize risks that have been identified?
A common tool used for prioritizing risks is the Risk Urgency Assessment.
How does the PMI suggest dealing with high impact, high urgency risks?
PMI suggests the need for aggressive risk response planning and strategies for risks that are both high impact and high urgency.
What is Risk Attitude and how can it affect the prioritization of risks?
Risk Attitude refers to the organization’s or stakeholders’ like or dislike of risk. Different stakeholders may have differing views on the tolerance of certain risks, which can influence how risks are prioritized.
What types of risks would be considered low priority?
Low priority risks are usually those with low impact and low urgency. These are risks that have minimal effect on the project and require less immediate action.
Does the prioritization of risks remain the same throughout the project?
No, risk prioritization can change throughout the project as the environment changes. Regularly reassessing the risks is necessary to keep the prioritization up-to-date.
How does a project manager decide which risks to address first?
Using the concept of impact and urgency, risks with high impact and high urgency are usually addressed first as they pose the greatest threat to project success.
What happens if a risk is prioritized incorrectly?
If a risk is incorrectly prioritized, it could lead to a waste of resources, project delays, or even project failure. Prioritizing lower impact risks over higher ones is a common error in risk management.
Are all risks negative?
No, risks can also be positive. Positive risks or opportunities can be exploited to benefit the project, and may also need to be prioritized.
Is a quantitative risk analysis necessary for risk prioritization?
While it is not always necessary, performing a quantitative risk analysis can provide a more detailed and objective understanding of the potential impact and urgency of risks, helping in more accurate risk prioritization.
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