Risk Management in Project Management

A risk is an uncertain event or condition that, if it occurs, it can impact your project positively or negatively. To control them, we find the risk management that includes all processes and tools to identify, analyze, prioritizing the risks, response planning, and implement those responses.

Risks are part of the life of every project, but most of them can be avoided or mitigated. Any of these actions are much better than not taking care of a strategy to manage risks.

When you find a risk, there are four basic ways to handle it.

  1. Avoid: When you avoid the risk, it means you change your plan to eliminate the probability of the risk occurring or the effect of the risk if it does happen.
  2. Mitigate: Mitigation occurs when you proactively change the plan to minimize the impact or probability of the risk occurring. Risk mitigation does not eliminate the risk, and, as such, there will be some residual risk remaining.
  3. Transfer: Risk transference occurs when the negative impact is transferred to a third party, such as through an insurance policy or penalty clause in a contract. The risk may still occur; however, the financial impact will be somewhat displaced.
  4. Accept: This means that the risk couldn’t be avoided, mitigated, or transferred, then you have to accept it. But even when you accept the risk, you should have seen the alternatives and know what will happen if it occurs. 

The following are the components of a risk management plan:

Plan Risk Management

You create a plan to define how you will manage all risk management activities. Also, how you are going to identify the risks and how they will be categorized and analyzed.

Identify Risks

In this process, you make a list of the risks using the methods described in the risk management plan and will include:

  • Identify characteristics
  • Symptoms
  • Root causes
  • Triggers
  • Describe Impact on Project Objectives

Analyze the Risks

We can analyze risks using method qualitative or quantitative after risk identification is complete. You usually perform a qualitative risk analysis process, but a quantitative risk analysis is optional. The quantitative risk analysis process usually is most used on large and complex projects.

Later you determine the impact and probability of each risk, and then you prioritize them. After completing the qualitative risk analysis review, you move on to the quantitative risk analysis review, and finally, you obtain a risk exposition matrix. 

Plan Risk Responses

After qualifying and collecting risks, you will create the risk response plan. This plan describes all activities and actions that you should take when an identified risk occurs.

We can find risks that can be negative or positive. Positive risks are known as opportunities, and negative risks are threats. The risk response plan aims to reduce the probability or impact of negative risks and increase the chance or benefits of positive risks.

Monitor and Control Risks

We should watch and control all risks when the project starts and when they occur and record the outcome into the risk register. 

Risk management is a crucial tool to help the project manager to deliver projects on time and keep under control the deviations, when an event occurs we will know how to act according to the risk management plan. 

Risks are part of the life of every project, but most of them can be avoided or mitigated. Any of these actions are much better than not taking care of a strategy to manage risks.

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