Are you ready for Risk?

Risk is a contributing factor to all projects and can have devastating effect on project outcomes. We need to understand the risk of any project and the consequence of such risks eventuating, the action required to minimise the risk, and the most feasible option for the project.

Risk Management essentially can be broken up into Risk Identification, Risk Quantification, Risk Response Development and Risk response Control as outlined in the International Project Management Body of Knowledge (PMBOK).

Project Risk Management is the procedure used to manage risk throughout a project. It is a systematic approach to provide the basis for ensuring the factors which may adversely affect the outcome of the project are both understood and then controlled.

When projects are to be completed in demanding time frames or to tight budgets, risk can be a threat to the project. It is essential to have a process for identifying risks, categorising them and understanding their impact on the project. Then the decision needs to be made whether to:

• Plan for that risk
• Avoid that risk
• Mitigate the risk by offsetting it
• Accept the risk and develop a contingency plan

In order to develop a risk management plan there are 4 major processes which need to be considered (as mentioned above).

It is beneficial and advantageous to identify risks to a project at the earliest possible stage. Risk Identification is the analysis of what risks are likely to arise. It is the attempt to realise the known and unknown risks that may hinder project outcomes.

Team meetings, brainstorming sessions and historical data are all of importance in realising risk to a project. A comprehensive listing of risk should then be established from consideration of these.

In order to do this we need to list our risks in terms of constraints or assumptions.
A constraint is something that can limit the project team’s options or limit the outcome, whereas an assumption is a factor that will be considered fixed or “given”.

Risk is often seen as a negative impact on a project, but it can also be seen as a positive outcome for projects in that it can create a benefit or opportunity.

Risk quantification is also known as risk assessment or risk analysis. This stage of the risk management plan is to evaluate each risk identified in terms of likelihood and the consequence of each.

This stage groups the risks in terms of what is acceptable/unacceptable and major/minor risks.

The method of calculating can be both qualitative and quantitative dependent on the requirements of the project.

Once again there is the opportunity to draw on past projects for experience, experience of staff members. A risk rating can then be achieved for each risk and be documented in a matrix for further evaluation.

Risk Response:

Risk response generally falls into 3 categories:

1. Avoidance - Eliminate the risk by assessing other feasible options. Although care should be taken not to create other risks for the purpose of eliminating the primary one.

2. Mitigation – Reduce the impact of the risk by transfer to another party that has greater control over the risk situation. This is generally achieved through a contractual agreement. Another method is by means of insurance or similar arrangement that offers coverage of the risk.

3. Acceptance – Accept the risk and develop and implement a contingency plan. The contingency plan is a series of steps to be implemented if a particular risk eventuates.

Risk Response Control:

Monitoring and control is critical for the risk management plan. Without such attention, risk can develop and create issues on a project.

The risk management plan can be informal or formal as required for the project and is best managed and updated by a person who has these proven abilities in monitoring and control.

Related Information

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