Risk Management: What is it and How is it done?

1/15/2013 Carsten Howitz Project Management

risk is related to an uncertain event that may affect the project for good or for bad.

When executing a project, a project manager must be able to respond to risks that come up during the project. Is there a way to anticipate issues or risks to the project and plan in advance how to handle them? That’s what risk management is all about.

will go through the different areas of risk management and explain how each area helps the project manager handle risks to the project.

The first thing the project manager must do is risk management planning. The planning process involves planning how the five risk management processes (below) are planned.

Planning Process

After planning, the first things the project manager must do is identify which risks could impact the project and understand the nature of these risks. The output of this process is a Risk Register that lists all the risks, their causes, and possible responses to those risks. Since risks can change and evolve throughout the project, risk identification is a recurring task that happens many times during the project’s lifecycle.

The next tasks in risk management are Qualitative and Quantitative Risk Analysis. The Qualitative analysis is performed to analyze how likely the risk is going to happen and also to rank the risks, whereas the quantitative analysis seeks to assign a projected value to the risk. The value is typically specified in terms of cost or time.

Next risk management is concerned with how to respond to risks if they occur. The project manager must come up with a detailed plan for managing the risk. Many associate risks with something negative that you typically want to avoid, transfer or mitigate, but the fact is that some risks can have a positive outcome that can be exploited, shared, or enhanced. Lastly the project manager can also just accept the risk and continue with the project.

Finally risks need to be monitored and controlled. This means the project manager must ask if he or she planned properly. Did a risk occur and were we able to handle it as planned? If not, the project manager needs to reassess the risk and plan a new response. The project manager will also perform risk audits that evaluate how the risk management plan and the risk response plan are working as the project progresses and also whether the identified risks are actually occurring.

Like other knowledge areas Risk Management is an important area for the project manager to excel in. Some risks can make the project fail, and the project manager must be ready with the best response to keep the project on track.

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