What Are Resource Risks in Project Management & How to Mitigate Them?
What Are Resource Risks in Project Management & How to Mitigate Them?
Blog Article
Resource risk refers to the potential issues or uncertainties that arise due to limitations, inadequacies, or mismanagement of resources required for a project. These resources include people, equipment, materials, finances, and time. If not properly managed, resource risks can negatively impact critical project elements such as timeline, quality, or budget.
Now, let’s understand the significance of risk management in driving projects to success.
Why is Resource Risk Mitigation Critical in Project Management?
As projects rely on various types of resources, like human, non-human, and financial assets, to achieve their objectives and goals, organizations must manage associated risks effectively. Failing to do so will jeopardize vital project parameters, such as scope, timelines, budgets, and final deliverables.
By identifying potential resource risks early, managers can develop contingency plans to mitigate the impact of unforeseen events and reduce the likelihood of project failure. It allows them to allocate resources more efficiently across various project activities, reducing wastage and enhancing team productivity.
Besides, resource risk management enables managers to recognize existing skill gaps within the workforce and address them through appropriate training or hiring measures. This helps ensure the project has the necessary competencies for initiation and execution. Lastly, managers can establish credibility and trust among stakeholders by managing resource constraints effectively, leading to improved satisfaction and project success.
With an understanding of the significance of resource risk mitigation, let’s move on to the next steps.
Steps to Assess Project Resource Risk
Enlisted below are the necessary steps project managers need to take to create a proper risk management framework:
Risk Identification
Before project initiation, managers must assess the type, number, roles, timelines, and charge-out rates of resources needed. This insight allows firms to remain vigilant and anticipate potential resource risks such as shortages, scheduling conflicts, sudden ramp-down, unplanned absenteeism, sub-optimal utilization, critical dependencies on key individuals, etc.
Risk Assessment
Once the risks have been identified, managers must thoroughly assess each resource risk’s likelihood of occurrence, priority level, and severity. To structure and evaluate the various risks, they can use methodologies such as risk registers, SWOT analysis, brainstorming, and the Delphi technique.
Risk Response Planning
Once the assessment is done, project managers must shift focus toward risk response planning to handle each resource risk effectively when they arise. This step ensures the team knows exactly how to act if the identified risks materialize, reducing downtime and minimizing disruptions.
Monitor & Control Risk
This process involves regularly tracking, reviewing, and optimizing the risk plan. It evaluates the effectiveness of the risk response and contingency plans throughout the project lifecycle, ensuring no risk is overlooked. Simultaneously, managers must regularly monitor the budget allocated to address potential resource risks and take corrective action to ensure no cost escalations or fund deficits.
Read More: Enterprise Risk Management: 8 Core Components
Knowing the steps in assessing the resource risks in projects, let’s look at some resource risk examples.
Resource Risk Examples
Some common resource-related risks include:
Lack of Resources
Organizations usually have projects in the pipeline. However, due to the persistent use of legacy systems, managers don’t have complete visibility into these projects and their workforce requirements. Thus, it makes it difficult for them to ensure the resource availability for timely project initiations. Ultimately, this leads to last-minute firefighting for competent resources or costly hiring.
Sub-Optimal Workforce Utilization
When managers do not have visibility into resource bookings, capacity, and availability, it can lead to under/overloading. In case resources are underutilized, it will cause disengagement and low morale. Conversely, in case of over-utilization, the employees may feel stressed, burnt out, etc. Therefore, sub-optimal workforce utilization will lead to low productivity, unplanned attrition, and disruption in project workflow.
Employee Burnout and Unplanned Attrition
When resources are consistently assigned tasks exceeding their skills, knowledge, or capacity for an extended period, it can result in work-related stress. If the situation persists, it may lead to employee burnout. This impacts their ability to perform daily tasks optimally or meet deadlines. Additionally, employees might take frequent leave to avoid work, resulting in absenteeism and, ultimately, unplanned attrition.
Skill Obsolescence
Due to rapid technological advancements and changing skill demands, resources’ current competencies can quickly become obsolete, resulting in skill gaps. This may render them unprepared to take on new or advanced projects, potentially leading to missed business opportunities. Moreover, skill obsolescence can hinder ongoing project workflows, causing client dissatisfaction and reputational damage.
Scheduling conflicts
Within a matrix organization structure, where resources work across different departments, teams, or locations, gaining real-time visibility into their calendars becomes challenging. This lack of insight can lead to scheduling conflicts, such as double bookings. If these issues aren’t addressed on time, it results in resource unavailability, under/overallocation, and project schedule/budget overruns.
Dependency on Critical Resources
Due to scarcity and high-cost rates of niche-skilled resources, organizations possess only a limited number at a given time. However, when there is a sudden surge in demand for these critical resources, project priorities may compete with one another. This dependency on critical resources can result in them working beyond their capacity, hampering their productivity and work quality.
Lowered Productivity
Employees struggle with lower productivity due to various factors, such as excessive workload, unrealistic deadlines, skill mismatches, low morale, etc. Moreover, work stagnation can contribute to lower morale and sub-par performance. When managers fail to address these issues, employees experience disengagement and burnout. In the long run, it may lead to attrition, reducing the company’s internal talent pool.
Read more: How Can You Implement Workforce Optimization to Improve Productivity?
Outsourcing Risk
Outsourcing poses more than a quarter of resource risks. The search for the right resources for a project contributes to project delay. Another risk, especially with offshore contractors, is replacing staff with new resources at the eleventh hour. This requires extra efforts in terms of training, knowledge transfer, and relationship building, which impacts the project’s timeline and cost.
Increase in Bench Size
When the major activities or tasks of the execution phase are completed, non-critical resources are frequently rolled off. This sudden ramp-down of resources leads to an increase in bench size. Moreover, there are other reasons that can lead to this, including last-minute project cancellations or a project being struck due to budgetary constraints. If this happens, the firm risks losing its talent and profit margins.
Absence of Succession Planning
“As per Gartner, it is critical to have a quality bench of leaders and a solid succession management process.”
When critical or senior resources suddenly leave the company, it can create a knowledge vacuum. Furthermore, without proper succession planning, organizations may struggle to fill the vacant roles, resulting in skill shortages. This can increase work pressure on existing employees and disrupt project workflows. Report this page