Risk management, as the term implies, focuses on managing the risk. While the approach deals with all kinds and levels of risk, specific attention is logically devoted towards management and mitigation of risk arising from uncertainty embedded in the project. This is accomplished via a host of established strategies, deployed in a sequential manner. Risk management is an overall term, which is often sub-divided by various organisations and departments to ensure respective suitability. Examples could be a financial risk or say a legal risk. However, the term has a wider perspective and while it is not practical to cover it all here, this article follows a controlled approach and thus highlights upon the nitty-gritty of project risk management.
The Process of Project Risk Management
Risk management and thus project risk management is a comprehensive process aimed at risk identification, planning stages post risk identification, defining the essential activities to be undertaken, and therefore lessening of the recognised risks. While relating particularly to the project risk management perspective, activities begin by planning the risk aspect in relevance to the project under consideration. The plan is comprehensively defined to include even the most basic of tasks, essential for project completion. The idea is to plan risk management for the project. The next stage focuses on project risk identification.
Risk identification is a task responsible for recognising the potential risks and naming them. A risk manager could be appointed at this stage, who would be responsible for identification, input compilation and appropriate documentation for further stages. While identifying the project risks, risks can be divided into two categories: generic risks, which are almost universally applicable; other risks, which are the specific project risks. The other crucial tasks, which ought to be conferred due attention at this stage, relate to narrowing down to the precise cause of identified risks, and working out the possible impact the defined risks would pose.
Risk Management refers to the practice of identifying potential risks in advance, analyzing them and taking precautionary steps to reduce and mitigate the risk.
What follows in the process of project risk management is the requirement to quantify the risks and the associated impact. Tools like probability, sampling and other statistical methodologies can be deployed to get precise results. Risks with these techniques can be classified in various categories, for example: impact, those requiring immediate attention, unavoidable, etc. The course to follow would vary with the categorisation.
Once the risks have been identified and quantified, it is now about working out the response. Project risk management aims at deriving reasonable solutions, which could be reworking the subtasks confronted with risk and thus avoiding the risk or perhaps eliminating the risk cause. Accepting and thus providing scope for the risk is also an option.
A proactive approach would be to control the risk element. This is enabled by closely understanding the requirements of the project. If the requirements are well understood, chances of incorrect objective statement and related threats can be suitably controlled. To ensure specific understanding it is essential to make room for the customer’s requirements as well. The requirements of the project ought to be quantifiable and realistically defined. Also they must be in line with the company’s overall purpose of existence. And then of course, the most important aspect is to be ready with an alternate course in case of severe threats.
Risk management and therefore project risk management is a continuous process, which begins with the project and continues throughout. It takes a careful examination of understanding whether there has been enough precaution or if more needs to be done to prevent harm occurring. All companies should have a project risk management program in place to prepare them for all eventualities.