Project Risk Management

July 4, 2008

All projects are essential and every project has its own risk elements. Commencing from initiation to post completion of the project, the degree of risk grows within, as does the haze of uncertainty, thus proper project risk management can make a difference.

Project Management Calls For Proper Planning Project management is a very important part of companies and involves the organizing and managing the company's resources Project Management - Scheduling Simple Projects Projects which involve only a few people with a few tasks over a short period of time are "simple projects" and are usually... The Waterfall Model: IT Project Management Solutions The waterfall model is an information technology system development type model..

Risk inevitably comes with any project. It resides in the project as a contrary and hinders as an adversary. Enclosed within, the compound constraint of time, budget, workforce and multiple quantifiable and non-quantifiable determinants; a project marches towards its success and the risk factors follow until project execution.

To be precise, "risk" in a project management is the threat or possibility that an action or occurrence will unfavorably affect a project's potentiality to achieve its objectives. Any counter event and adverse causes that can become an obstacle are risk factors.

However, inside the project management line of attack is the term "risk" this term is considered as a negative component resembling an occurrence that will adversely affect the goal of the project. Nevertheless, in the optimistic and neo project management approach, "risk" can be considered as a prospective occurrence or a productive event; if handled and executed properly it may lead to achieve enhanced objectives, improved and advanced.

Project risk management is the procedure of determining or evaluating risk and developing strategies to manage it, and is concerned with identifying risk and putting in place policies to eliminate or reduce these perils.

Project risk analysis is the detection and quantification of these probabilities and collisions of events that may harm the project. The risk analysis process identifies risk in advance, and the risk management process established methods of avoiding these risks thus reducing the impacts that may occur.

Risk Detection

Risk detection is an initial step in the risk management course. As these potential hazards occur causing problems in its kinetics there needs to be a plan for identification. To identify these concealed threats at their origin before their occurrences whether they are quantifiable or non-quantifiable is the foremost groundwork; this groundwork is the risk identification course of action.

Risk detection starts with tracing risk sources as a root cause, and its source branches including internal to external and primary to secondary.

Some of the most common risk detection methods in project risk management are as follows;

1. Objective Oriented Risk Detection

2. Scenario Oriented Risk Detection

3. Taxonomy Oriented Risk Detection

4. Regular Risk Inspection

Risk Evaluation in Project Risk Management

Once the risk detection process is concluded, then they must be evaluated for their latent severity for loss, and its likelihood for hazards. In project risk management, each risk should be exploited independently as they vary from simple to complex results.

Generally, plain risk can easily be quantified, while those risks of probabilities are unfeasible to enumerate; thus in the evaluation process it is significant to take a finer presumption to accurately accentuate the implementation of the risk management remedy. Moreover, the primary problem in risk evaluation is lack of statistical information and scientific evidences for determining the pace of risk events that may occur.

Conversely, gauging risk is often quite a complicated process, although numerous formulae are being followed; a popular yet simple formula is;

Project Risk = Accident X (Probability X Impact)

Or

Project Risk = Accident Probability X Accident Impact

Here, risk is directly equivalent to "probability of accident" multiplied by the "impact of accident". In opposition, project risk management is less reliant only on the type of formula pursued, but more reliant on the risk occurrence and on how risk management is employed.

However, in general a systematic tactical plan that should be prearranged for risk management is as follows:

1. Risk: Description of the Actual Risk

2. Impact: Impact on the Project if the Risk Occurs

3. Possibility: Possibility of Loss if Risk Occurs

4. Action: Action Remedy to Reduce the Impact

5. Cost: Cost if the Risk Occurs

Once risk is identified and evaluated, there are four major practices that need to be followed to prevent a failed remedy, they are:

1. Risk Evasion: Avoidance of the Risk Altogether

2. Risk Diminution: Reducing the Degree of Risk through Precaution Measures

3. Risk Retention: Accepting the Degree of Risk with Loss

4. Risk Relocating: Transferring the Risk to Another Party

Six Sigma Project Management Employing Six Sigma for the business environment is for achieving well-defined goals. The project selected for deploying Six Sigma is not self-sustaining and can develop... Project Management Software Guide Gone are the days when project management used to be a task confined to doing up and down in front of the project manager, noting down the assigned work of the day on papers... Project Management Basics If you have ever had responsibility for managing a project, regardless of how little or how big, you will understand the many nuances and special considerations that have to be taken...

Hence, in the combat of project risk management etiquette, a precedence procedure should be tracked, whereby risks with the maximum loss and the maximum probability of evils should be handled first; vice versa to those with minimum risk.

Project risk management is the tactic of methodically applying lucrative action for diminishing the effect of hazard to the project. Risks are never fully avoidable due to exterior elements and limitation of financial and practical margins. However, with the acceptance of a certain degree of risk and the arrangements of its counter to tackle it, the risk at hand can be recompensed.

All risks can never be fully avoided or mitigated, therefore all projects have to accept some level of residual risks, but if the risk is handled with mythological and proficient approach referring to statistically and scientific information then risk rewards.

Project risk management is one single process to manipulate, exploit, and extinct risk.

Want the latest news & helpful tips? Get Your Free Subscription
to Project Management Newsletter HERE

More Project Management Articles & Resources

Basic Considerations in Buying Project Management Software The cost range of project management software is huge. From under $50 to over $20,000. Extensive reviews.... Project Management - You Give Me The Feature Creeps The caliber of the project management you have unified into your operation or department can mean... Introduction to Project Management for Entrepreneurs One of the greatest benefits of projects in an organizational context is their ability and effectiveness in the achievement...

Author: Bharat Bista - Edited by Web Publicitee (Bruce Cullen) Resource and References:Project Risk Management - IT Project Management Solutions - IT Project Management Tools