Categorized | Risk Management

Project Risks– What They Are And What To Do About Them

The first thing everyone learns in project management is simple: each and every project has risks. True, they are not always negative– few project risks can be positive and a directly resulting in or from the success of a project– unfortunately those types far outweigh the negative risks. As managers, the key task is to manage project risks: minimize them and the likelihood of their occurrence, as well as their impact should they occur.

Defining Risk

In terms of project management, risks are often defined as an uncertainty, possibility or event that will have great impact on the fulfillment of a project’s objectives– specific possible events in the different scenarios that may likely occur in the lifespan of a project. This does not include ALL events– only those that would drastically influence results, such as deadlines, costs, and other results.

What Risks Are Not

First and foremost, risks are not problems. A problem, by definition, is concrete and has already occurred, or at least, about to occur. A risk, on the other hand, is still a possibility. Risk management, done properly, can prevent or forestall these risks– or if unpreventable, have their impact on the project and its objectives greatly minimized.

The Need For Risk Management

The most obvious effect of not managing risks, of course, is non-completion of projects. Other adverse effects are overshooting budgets, major delays and of course, loss and failure. In many cases, non-completion may not even be the worst-case scenario resulting from poor risk management. In many cases, especially when projects are prerequisites of subsequent, bigger ones– failure to manage risks from one project will adversely affect all the projects down the line causing a complete shutdown for a company, business, or organization.

How Risks Are Managed

Different project management teams have different styles of addressing and implementing processes of risk management. While these styles may differ per organization, there are basic components.

1. Identifying risks: the most exhaustive part of the project, it requires brainstorming, checking different possible scenarios, and corresponding resultant events. At this level, internal factors such as human and material resources as well as external factors including corporate strategy changes, management directions, technology and the environment.

2. Evaluating the risks: this should include a thorough analysis of the probability or likelihood of possible risks as well as the impact their occurrences would have on the projects should they occur. This evaluation must be weighted against each other– some risks may have low probabilities, but drastic impact – such as death and natural disasters.

3. Prioritizing risks: If the evaluation process is done correctly using a risk quotient that weights probability against impact against duration of impact, potential risks can now be classifiable into high, moderate and low risks. This allows the project management team to focus clearly on which risks should be addressed first – which can be controlled, which ones cannot be controlled but have their impact minimized, and which must be accepted.
4. Designing countermeasures. Countermeasures are designed based on what the risk levels are– whether they are meant for control, mitigation or acceptance, and what other measures can be taken alongside them. The good thing about countermeasures is that often, some countermeasures can be effective against several specific risks, including ones that are unforeseen. .

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