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Risk Management

What

Risk Management is the Process of managing risks at both the Enterprise and project level.

Risk Management is sometimes known as "Risk Analysis".

By their nature, all projects have risks associate with them.

Risk is good. The point to Risk Management is to manage it, not to eliminate it, otherwise, there would not be any reward. The goal is to maximise the gains from the risks that you take. Risk Management should focus on the source of the risk.

All managers are expected to both take risks and manage these risks. Thus, risk taking needs to be considered very carefully.

There is an Australian standard covering risk: AS/NZ 4360 of 1995.

Risk is the "glue" that balances the gap between Senior Management's Expectations and the Project Team members practical abilities regarding the project's Levers of Control.

Process Diagram

Risk Management consists of the following major Procedures:

Risk Identification

Risk Assessment

Risk Filtering and Selection

Risk Avoidance and Mitigation

Contingency Planning

Risk Monitoring

Risk Status Reporting

The full Risk Management process is iterative and ongoing throughout the life of a project.

Why

Risks are inheritant in all projects and many business activities. Understanding the Risks and then managing them effectively can reduce their impact on a project. Risk Management needs to be performed on a cost-effective basis.

Risk taking is encouraged... you just need to ensure you are in Control (ie, understand the Risk and its consequences).

By practicing Risk Management, you can expect to achieve improved cost estimations, greater effectiveness and efficiency, improved project control and ultimately, higher profitability.

When and Where

This technique is used throughout the whole project lifecycle and is not limited to any specific project lifecycle phase.

How

The process of Risk Management is not to achieve an "answer" but to learn more about risks and how to manage them.

Many organisations are extremely averse to risk. Individuals and the Corporate Culture all dictate that a very conservative business approach should be taken.

Follow the above process to manage Risks.

Subcontractors, vendors and suppliers should also perform Risk Management in the same manner.

The following Techniques also assist in reducing risks to a project:

The Risk Management Plan is used to define how you will manage risks on your project. The Risks Register is a component of the Risk Management Plan and contains a list of all identified Risks.

Scaling

Be very careful to Avoid Analysis Paralysis. Spend proportionately less time on smaller project managing risk than on large projects.

Also See

Risk Management is one of the significant Processes that exist throughout PMMentor (PMM). To print a "Handout Pack" on this Process, create and print a title page and then click on the "Print" button (to print this topic to act as a Table of Contents) and then click on each of the following topics in turn. When the topic is displayed, click on the "Print" button, then click on the "Back" button to return to this topic and choose the next topic to print.

Acquisition Signposts of Danger (SOD)

Development Signposts of Danger (SOD)

Disaster Recovery Planning (DRP)

Due Diligence

Enterprise Risk Maturity

General Signposts of Danger (SOD)

Identify and Manage Project Risks