Categorized | Risk Management

Defining risk management

As project managers, we know that risks that present threats to a projects success and objectives are common.

Risk is is represented by uncertainty from a negative outcome (“my supplier might be late delivering me the materials for my project”) through to a positive outcome (“my supplier could be early in delivering my project materials and I can start ahead of schedule).”

Definition of risk
Defining the meaning of risk within your project is important – a common definition is

“A possibility of an action or event that would negatively or positively impact the projects ability to achieve its goals.”

Risks in general are unknown events – its important to remember that they can be positive as well as negative (the word risk traditionally portrays a negative result but in true risk management it is neutral).

What is Risk Management?
Risk management involves processes, tools and methods in conducting activities to identify threats, assess them and create activities that can control the level of uncertainty that a project may be exposed to (and in particular those that impact its goals and objectives.) It will typically focus on

• Identifying what could go wrong
• Evaluating and prioritising threats
• Developing mitigation strategies so that risks are not realized
• Developing processes and tools that could be implemented if a risk is realized.

Assessing risks
Identifying risk is usually a team game and involves the whole project team. Despite the fact that a project may have many risks the likelihood of a risk being realized is a factor of the probability of occurrence and its impact. All risks are not measured equal for example if you have a risk that may cause the project $100 of consequence would you apply the same management effort to a risk that might cause $1,000,000 of consequence? Risks need to be prioritised and auctioned in accordance with their impact.

Why implement risk management?
Why should projects utilise risk management methods at all? For the simple reason that it will enable you to meet your deliverable to the agreed time, budget and quality. Projects that utilize risk management will be better prepared to deal with threats, and operate more cost effectively than those that don’t.

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