Risk categorization, in project management, is the organization of risks based on their sources, areas of the affected project and other useful categories in order to determine the areas of the project that are the most exposed to the effects of risks or uncertainties.
Risk categorization can also be done by using the common root causes. This particular project management technique helps identify the work packages, project phases, project activities and roles in the project that can be used to develop an effective risk response plan.
The main goal of categorizing risk is to avoid any unpleasant surprises. It also provides a systemic and structured approach in identifying the risks to a consistent level. Another benefit is that it provides better management focus in identifying a wide range of risks. It also helps the risk assessment by conducting meetings with participants to work with a specific risk category.
It is not possible to create a one-size-fits-all risk category for all projects as different projects may be involved in different sources of risks and also processes. However, the project manager needs to create as many categories that are appropriate for labeling risks.