Differences Between Risk and Issue in Project Management

Have you ever felt overwhelmed by the seemingly endless stream of differences between risk and issue encountered in your projects? As a project manager for over 5 years, I've certainly been there. It's easy to confuse these terms, but understanding the key differences is crucial for successful planning and execution. This blog aims to demystify the world of risk and issues, providing clear explanations and practical examples to help you navigate projects with confidence.

At the beginning of my career, I had to launch an important software project. I trusted our team and our plan, but we encountered some unforeseen challenges. A key developer left abruptly, which caused delays and raised doubts about completing the project. This was a very stressful situation, but it also taught me a valuable lesson about issue versus risk. An issue is an existing problem that needs immediate resolution, while a risk is a potential future event that could affect your project negatively. I learned that it is crucial to both deal with issues effectively and anticipate and manage risks proactively. Understanding the differences between risk and issue helped me to prioritize my actions and mitigate the uncertainties that could affect the project outcomes.

Imagine you're planning a picnic with your family. The weather forecast is sunny, so you don't bother taking an umbrella. However, as you're setting up, a sudden downpour hits, ruining your plans. This unexpected change in weather represents a risk, a potential event that could have a negative impact on your project (the picnic). But the downpour itself is an issue, a real and present problem demanding immediate attention. By differentiating between risk and issue, you can decide whether to cancel the picnic, move to a sheltered location, or wait for the rain to stop.

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What is a Risk?

Think of a risk as a potential storm cloud on the horizon. It's an uncertain event that could occur in the future, with a positive or negative impact on your project. It's like the possibility of rain affecting your picnic. While you can't be sure if it will rain or how bad it will be, you can take steps to prepare for it (like taking an umbrella). By understanding the differences between risk and issue, you can choose how to deal with a risk, depending on how likely and how severe it is. For example, you can avoid the risk of rain by choosing a different day for your picnic, reduce the risk by checking the weather forecast, transfer the risk by buying insurance, or accept the risk by taking an umbrella.

What is an Issue?

An issue is the actual downpour that has already begun. It's a real and present problem that needs to be addressed immediately. It's the disruption to your picnic caused by the rain. Issues require immediate attention and resolution to minimize their impact. By understanding the differences between risk and issue, you can decide how to handle an issue, depending on its urgency and severity. For example, you can resolve the issue by moving to a sheltered location, escalate the issue by calling for help, or defer the issue by waiting for the rain to stop. If you want to learn more about this topic, you can check out some project management courses for beginners that can help you improve your skills and knowledge in project management courses for beginners

Difference between Risk and Issues: Head-to-head Comparison

Before moving to the core differences, let’s take a look at the comparisons between examples of risk and issues through the following chart:

Parameter	Risk	Issue
Timeline	Future	Present
Certainty	Uncertain	Certain
Impact	Potential	Actual
Management	Proactive	Reactive
Focus	Mitigation	Resolution
Planning	Detailed plans for mitigation	Adapting existing plans for resolution

First of all, let’s look at the high-level difference between “Issues” & Risks”:

Risk vs Issue: Detailed Comparison

Difference Between Risk and Issues

• Risk vs Issues: Timeline

One of the key concepts is issue vs risk in project management. Risks reside in the future, while issues dwell in the present. We anticipate risks during planning, identifying potential challenges before they arise. Conversely, we react to issues as they occur, addressing the immediate problems hindering progress.

Consider planning a construction project. A risk could be a potential delay in receiving building permits. While the exact date of the delay is uncertain, it could potentially occur in the future, impacting the project's timeline. If you want to learn more about how to manage issues and risks effectively, you can enroll in an online PMP course that can help you prepare for the Project Management Professional certification. On the other hand, imagine a sudden outbreak of bad weather during construction, causing actual work stoppages. This issue is happening in the present and directly impacting the project's progress, forcing adjustments to the schedule.

• Risk vs Issues: Certainty

Risks are veiled in uncertainty. We may assess their likelihood and impact, but we can't be sure if they will materialize. Issues, on the other hand, are certain. They are tangible obstacles that have already occurred and demand action.

The possibility of a competitor launching a similar product before yours is a risk in your product launch plan. While you can analyze market trends and competitor strategies to estimate the likelihood, you cannot be certain if or when it will happen. A key concept in issue vs risk project management is to distinguish between a risk and an issue. However, if a critical error is discovered in your product during testing, it becomes an immediate issue. This problem is already present and requires immediate resolution before launch, unlike the uncertain risk of competitor action.

• Risk vs Issues: Impact

The impact of a risk remains potential. While it can range from minor inconvenience to project failure, the true consequences are unknown until the event occurs. An issue, however, has an actual impact that is already affecting your project's progress, timeline, budget, or quality. To learn how to handle risks and issues effectively, you can take a PRINCE2 course online that can teach you the principles and practices of project management.

A potential risk in your budget plan could be an unexpected increase in material costs. While the impact of this rise is uncertain, it could potentially lead to budget overruns if it materializes. Conversely, if you encounter unexpected hidden costs during construction, it becomes an actual issue. This issue has a direct and immediate impact on the project budget, requiring adjustments and potentially impacting other aspects of the project. By understanding the differences between risk and issue, you can plan for contingencies and allocate a reserve fund to cover unexpected expenses.

• Risk vs Issues: Management

Managing risks is a proactive endeavor. We develop strategies to mitigate them, reducing the likelihood of occurrence or severity of their impact. This could involve identifying alternative suppliers, implementing contingency plans, or building buffer time into the schedule.

To mitigate the risk of key personnel leaving the project, you can develop a succession plan and identify potential replacements. These proactive steps aim to reduce the likelihood of the risk occurring and minimize its impact. However, if a key team member does unexpectedly resign, it becomes an issue requiring immediate action. You may need to rearrange assignments, hire replacements, or adjust the project plan to address the resulting gap in expertise.

• Risk vs Issues: Focus

Risk management focuses on prevention. We aim to implement measures to prevent risks from becoming issues in the first place. This includes creating a risk register, identifying potential threats, and actively monitoring for early warning signs.

To prevent potential delays in software development, you can implement agile development practices and conduct regular testing throughout the process. These proactive measures focus on preventing the risk of delays from materializing in the first place. In contrast, if a critical bug is discovered during software testing, it becomes an issue requiring resolution. The focus shifts to fixing the bug as quickly as possible to minimize its impact on the project's timeline and functionality. If you want to learn more about how to apply agile principles and practices to your projects, you can check out some knowledgehut project management courses online [AM1] that can help you enhance your skills and knowledge.

• Risk vs Issues: Planning

Risk management involves detailed planning for mitigation. We create contingency plans and implement strategies to address potential issues. Issue management, while requiring swift action, often involves adapting existing plans to address the specific problem at hand.

What are the types of risks in Project Management?

Risks in projects are inclusive of both internal risks that are associated with the successful completion of each project as well as the risks that are beyond the project team’s control. The following are a few of the most common project risks:

1. Cost risk:

This refers to the escalation of project costs as a result of poor cost estimating accuracy and scope creep.

2. Schedule risk:

This refers to the risk of activities taking longer than expected. Drifting away from the schedule typically increases costs which leads to a delay in receiving project benefits and possible loss of competitive advantage.

3. Performance risk:

This refers to the risk of failure to produce consistent results with project specifications.

There are some other risks that result in cost, schedule, or performance problems and create other types of adverse consequences for the organization. They are as follows:

4. Governance risk:

This risk relates to the board and management performance with regard to ethics, community stewardship, and company reputation.

5. Strategic risks:

These risks are the result of the errors in strategy like choosing a technology that can’t be made to work.

6. Operational risk:

These risks comprise of risks from poor implementation and process problems like production, procurement, and distribution.

7. Market risks:

These risks comprise of risks related to foreign exchange, competition, interest rate, and commodity markets. This also includes liquidity and credit risks.

8. Legal risks:

These risks arise because of legal and regulatory obligations which include contract risks and litigation brought against the organization.

9. External hazards risks:

These risks are incurred due to storms, floods, and earthquakes. Other than these, vandalism, sabotage, terrorism, labor strikes, and civil unrest are responsible for such types of risks.

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What is the importance of risk identification?

The most important step in risk management is identifying risks. It involves generating a comprehensive list of threats and opportunities which are based on events that might prevent, enhance, accelerate, degrade, or delay the achievement of your objectives. You can’t manage risk without identifying it.

But how to identify risks?

One of the key steps in a proactive risk management process is to identify risks. You must look at the following sources in order to identify your project risk:

Sources	Description
Risk registers and risk reports	Provide a foundation for the evaluation of existing risks and their potential risk to an objective.
Issues log	It comprises of the issues and the actions considered to resolve them. Analyze the issues that were formally identified as risks.
Audit reports	These are the independent view of adherence to regulatory guidelines which include a review of compliance preparations, access controls, security policies, and risk management.
Business Impact Analysis (BIA)	It is a detailed risk analysis that is done in order to examine the nature and extent of disruptions and the likelihood of resulting consequences.
Internal & external reviews	These reviews are undertaken in order to evaluate the adequacy, suitability, and effectiveness of the department’s systems, and to plan for the scope of improvement.

Perspectives for Risk Management

It is important to realize the perspectives for risk management and evaluate them during a program’s life continuously in order to anticipate risks at an early stage and tackle issues appropriately. A few of the risk management perspectives are as follows:

Strategic level:

The interdependencies of the program with other initiatives, its outcomes, and benefits realization are affected by the strategic level changes.

These changes are driven by:

• External factors like political, economic, social, legislative, environmental, and technical
• Internal political pressure
• Inter-program dependencies
• Working with third-party suppliers along with other cross-organizational initiatives can be grouped under this level.

Program level:

The focus of a program is to deliver benefits to an organization that positively or negatively affects both internal and external stakeholders. Risk Management for a program must be designed to work across organizational boundaries to ensure effective engagement of stakeholders and accommodation of different interests. The principal areas of risk and issues within a program are driven by:

• Aggregating project threats
• Lack of direction from the group of leaders
• Lack of clarity about expected benefits and buy-in from stakeholders
• Complexity of outcomes
• You should also consider the compilations associated with working across the organisational boundaries as another factor
• Availability of resource
• Lack of certainty about funding
• This also includes unrealistic timelines that increase program delivery risks.

Project level:

Project outputs help in delivering the outcomes and benefits within a program.

• Focusing on the risk and issue management on project perspective is important
• Areas leading to the rise of project risks and issues, resource constraints, scheduling issues, and scope creep
• It may lead to issues and risks if the project is unsure of what it is delivering.

Operational level:

The transition of a project to new ways of working and new systems can lead to further sources of risk as projects deliver the outputs.

The following areas can be included in the operational level perspectives:

• The quality of the benefit-enabling outputs from projects within program
• Cultural and organisational issues
• Output transfer to operations and the ability to cope with new ways of working
• The risks can further be identified in stakeholder support
• Industrial relations
• Availability of resources to support changes.

Early warning indicators for risks in project management

The early warning indicators for project management can be defined as follows:

• In order to anticipate potential problems, there needs to be proactive risk management. These indicators offer advance warning about trends or events that can affect the outcomes of the program adversely.
• The sensitive risks can be tracked with the help of these indicators.
• Few of the early warning indicators are delays in delivery of expected or planned benefits, requests to change key program information, increase in aggregated risks, changes to organisational services, structure, and processes.
• Further, these indicators should be able to measure valid indicators, reviewed on a regular basis, and they should use accurate information. This ensures the effective functioning of the early warning indicators.

The other methods which can be deployed to evaluate risks are as follows:

• Record the weighted average of the anticipated impact through the calculation of estimated monetary value.
• Calculate the accepted discount rate through the net present value calculation.
• Aggregate the risks together using a simulation technique through risk model.

How Risk and Issues are Similar?

While distinct, risks and issues share some commonalities. Both can significantly impact project success, requiring careful analysis and attention. Both demand effective communication and collaboration to manage effectively. Additionally, both can serve as valuable learning experiences, helping to refine project processes and improve future outcomes.

1. Both Demand Your Attention:

Whether a potential storm cloud brewing on the horizon (risk) or a sudden downpour disrupting our picnic (issue), both require our attention and action. Ignoring either can lead to detrimental consequences for our projects. Just like we wouldn't ignore the possibility of rain, we shouldn't ignore potential risks that could derail our progress.

2. Both Require Analysis and Communication:

Managing issues vs risks is a vital skill for any project manager. Whether assessing the likelihood of a competitor launching a similar product (risk) or analyzing the cause of a critical software bug (issue), both necessitate careful analysis to understand their root causes and potential impacts. Additionally, clear communication is essential to keep stakeholders informed and ensure everyone is aligned on the best course of action.

3. Both Can Teach Us Valuable Lessons:

Every project is a learning experience, and both risks and issues offer valuable lessons to help us improve future endeavors. The proactive approach of risk mitigation helps us identify and address potential challenges before they arise, while the reactive nature of issue resolution teaches us to adapt and overcome unforeseen obstacles. By understanding the difference between project risk vs issue, we can better manage the uncertainties and ensure the project’s success.

4. Both Can Be Opportunities in Disguise:

While risks often evoke negativity, they can also present opportunities. For example, a potential delay in equipment delivery (risk) could push us to explore alternative suppliers, leading to a more reliable partnership. Similarly, an unexpected budget overrun (issue) could force us to re-evaluate our spending and discover new areas for cost optimization.

What Should You Choose Between Risk and Issues?

The answer is simple: you don't choose! Both risks and issues are integral parts of project management. Effective project management requires understanding the differences between them and implementing appropriate strategies for each.

Risk management vs issue management is a key concept in project management that helps you deal with uncertainties and problems. Here's the crucial takeaway: you don't choose between risk and issue. Both are integral components of project management, and understanding their unique characteristics is vital for developing effective strategies.

Think of it like this:

• Risk Management: Equipping yourself with an umbrella before the storm (proactive approach).
• Issue Management: Dealing with the downpour once it starts (reactive approach).

Both are critical aspects of navigating the ever-changing landscape of project management. By embracing both risks and issues and implementing appropriate strategies, we can ensure our projects reach their full potential.

To Conclude

An experienced and certified project manager knows that every project involves identifying and managing project risks and project issues. Further, they are aware of the fact these risks and issues can be responsible for knocking a project off its track and divert the focus of the team away from fulfilling their responsibilities and goal achievements.

This blog will help you to know the differences between risk and issue in project management along with the key steps for identifying the risks. You will also understand the importance of risk identification and the perspectives of risk management. The blog also throws light on the early warning indicators to realise the risks in project management. This information will surely help you to realise the upcoming risk and avoid it for a smooth continuation of your project.