Risk Management and Project Risk

When we undertake a project, risk is inevitable, as the projects allow for change – and if it changes, then it is uncertainty and thus poses a risk.

The risk of an uncertain event has an impact on the project. These uncertain events can be positive, in this case, it is called Opportunity when it is called Negative. Both have their insecurity.

The purpose of risk management is to reduce the likelihood and impact of threats, increase the likelihood and / or the positive impact of opportunities. It is useful to consider that risk is "an event that may not be possible in the future, but if it does, it will have an impact on the objectives of the project."

The business case will include project costs and risk against business benefits. Simply put, the overall project risk is worth the benefit. If so, then Business Case will remain viable, desirable, and accessible. This fact highlights the importance of proper risk management. When a new risk is identified, the existing risk changes its characteristics, identifies the problem, or at important control points, for example in the end-stage evaluations – the business case must be checked for viability – this includes all the risks

Effective risk management includes the unambiguous identification of each risk, its likelihood and impact assessment, and the adoption of appropriate measures and ensuring that such actions have the desired effect and will continue to exist. Prior to the detailed disclosure of the risks, a project must define a risk management strategy that describes how risk management will be used and implemented within the project. The risk management strategy should cover, inter alia:

– the tools and techniques to be used

– responsibility for risk management measures

– a risk management process such as Identify, Assess, Countermeasures / actions, Implementation and Communication.

– scales for calibration and probability and impact estimation

– reporting and scheduling risk management activities, such as at the end of each project phase

– the risk categories, categories of action, risk proximity and risk indicators to be defined.

– for contingency or retrograde measures, the risk budget must also be agreed. This budget pays for any such risk action, if necessary.

– When using the management as an exception, risk tolerance or "risk appetite" between the project manager and the project table must be agreed upon.

It is a good idea to know the last bullet in detail:

Tolerance is typically a permissible version of time and cost that a project manager will use to allow small deviations and estimates of errors. If the project or stage is likely to exceed this tolerance at any point, the project manager must step up the situation to the next level of leadership – who should decide what to do.

However, tolerance tolerance can be tolerated. In such cases, negotiations between the project leader and the project leader should be negotiated on how much risk can be tolerated ("risk appetite"). Factors such as individual risk impacts that grow beyond a given value or are likely to grow in the same way. It is possible that a particular category, such as the risks to corporate image, may be escalation events.

Risk inventory should be established at an early stage of the project and use each and every detail of the status of each identified risk. The project manager is responsible for ensuring that the risks are properly managed, but any risk is needed for risk owners and these owners may be participants in the project. The best person to choose is to keep the risk in mind. Owners may be the person required to perform the risk action or "bypass" to report the risk status to the project manager

. The first step in the risk management process is to identify risks and this is usually a risk workshop. An other useful source of identifying possible risks is an overview of the lessons learned from previous projects. There are more sources of organizational risk checklists or industry checklists or tables.

Many people make a mistake about the name of the risk, for example "there is a risk that the project may be late" – but this is a mistake because the statement does not call itself the risk, but its effect. This is where the "fish bone" or the Ishikawa diagram can be useful for the separation of the risk event and its effect (risk effect)

It is useful that the source of the risk is called a risk (potential trigger points for each risk) event describes the uncertainty area and the risk effect that describes the risk to the project's objectives

The next step is to estimate and evaluate each risk and to use different estimation techniques:

Probable trees. These are schematic representations of potential risk events that appear as correlated rectangles, each with probabilities and effects. When connected, the aggregate value of project risk can be determined. They help decision-makers determine the possible results and ensure that appropriate measures are taken.

Expected value. This technique multiplies the cost of the risk factors with the likelihood of the risk. For example, if the risk is 10,000 pounds, the probability is 40% then the expected value is 4000 pounds. Summing up the total expected value together with the projected overall cash exposure of the project. This is useful in determining the potential risk budget.

Pareto Analysis. This is often referred to as the 80/20 rule, with the observation that 20% of the risks will affect the project and allow management to focus their attention on managing and controlling the risks. Provides the best "risk return"

The probability effect grid. This is a table whose vertical axis is scaled with probability and the horizontal axis is dimensioned for a pulse. Appropriate scale ratios are defined, typically 10% probability, ranging from very low to 70-90%. The collision usually ranges from very low to very high. The network is used to assess the severity of the risk, enabling risk grading to prioritize management efforts.

The Summary Risk Profile. This is again about the collision probability grid, but instead of measuring the severity of each risk (probability time effects), it compares each risk to a large number of numbers as a spreadsheet, so the risk spread and severity are directly visible. For example, any risk that has a very high impact and likelihood can be considered as serious threats and will allow it to determine the appropriate measures or countermeasures.

The next step is to design the right answers for both threats and opportunities. There are many ways to describe such actions but are most commonly used:

For Dangers:

Avoid. A project is planned for the project to do something else, so the threat or no longer affects the project and / or its probability is zero.

reduced. They plan or reduce the likelihood of the risk and / or reduce the impact of the event if this occurs.

Returns (often the precaution). An action is planned, but only when the associated risk occurs.

transfer. A plan is planned to reduce the financial impact of the threat. Generally, action is in a form of insurance or through a proper clause in a contract to cause the other party to have financial pain.

I Accept. This is the "take no action" option. The threat must be checked continually to ensure that it remains tolerable. This activity is often chosen because the risk is low in probability and / or has a low impact or that the costs and efforts of any activity exceed the severity of the threat.

Threat or Opportunity:

Sharing. It is often performed under contracts with third parties where the pain / gain formula is the same if the threat or opportunity occurs


Exploit. Take steps to ensure that the opportunity takes place and that the positive effect is achieved.

Enhance it. Take proactive steps that either increase the probability and / or impact of the event.


Collecting and entering these actions in the risk register and project or stage plans contain the above activities and resources

The proximity of each risk may be useful. This is the time of a risk event to this day. This can be useful in focusing resources on risk-related activities in the near future. But it can also help in determining the occurrence of some risk events as this will affect the severity of the effect.

During a project, new risks can be identified and existing risks can change their status. therefore, risk management should be seen as a continuous activity throughout the project. It should also be recalled that, when the problems arise, they themselves may have an impact on existing risks or new risks.

At the end of each section of the project, the overall risk situation must be counted, and the management data should make a sound decision about whether to continue the project or not. At the end of the project, as part of the closure, any outstanding risks affecting the life of the final product must be found by a new owner to continue to manage and direct such risks.

Source by sbobet

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