Risk Management is about anticipating risks and having a plan in place that will resolve it when it occurs. Risk management saves time, money and efforts. It reduces unnecessary stress on the project team. Risk management helps prevent many problems and helps make other problems less likely. Risk Management activities are integral to a project manager's daily work. Through risk management, the project changes from being in control of the project manager to the project manager being in control of the project.
Risk management includes risk management planning, risk identification, the qualitative and quantitative analysis of risks, risk response planning, monitoring and controlling the risk responses. Risk management helps in increasing the possibility of positive events on the project and effectively reduces the possibility of negative events on the project.
Threats And Opportunities
Threats are events when occurred can negatively impact the project, whereas opportunities are events when occurred can positively impact the project.
Upto 90% of threats identified and investigated in risk management process can be eliminated.
Lack of knowledge about an event that may occur and reduce confidence in the conclusions drawn from the data is termed as uncertainty.
Risks can have various factors such as:
The impact of the risk
When will the risk occur during the course of this project?
How many times will this risk occur?
An individual who avoids risk and thus, does not want to take risks is known as Risk Averse.
Risk Tolerances And Thresholds
The degree or level of risk that is acceptable is known as Risk Tolerance. The specific point where risk becomes unacceptable is known as Risk Thresholds.
The Risk Management Process
In processes where risk management is effectively carried out, we see:
Risk response planning is very robust. Hence, even if risks occur, they are eliminated.
An agenda is set to discuss risk items in every meeting.
There is always a plan to deal with any risk events.
This results in getting additional time for the project manager to perform other critical activities related to his project.
We will be studying six management processes, namely:
Plan Risk Management
Perform Qualitative Risk
Perform Quantitative Risk
Plan Risk Responses
Monitor and Control Risks