RISK MANAGEMENT IN PROJECTS
What Is Risk Management?
Risk Management is the process of identifying, analyzing and responding to risk factors throughout the life of a project and in the best interests of its objectives. Proper risk management implies control of possible future events and is proactive rather than reactive. Proper risk management will reduce not only the likelihood of an event occurring, but also the magnitude of its impact.
Risks can be mainly divided between two types, negative impact risk and positive impact risk. Not all the time would project managers be facing negative impact risks as there are positive impact risks too. Positive risk can include; some events (like ...view middle of the document...
Poor control of customer changes
Poor understanding of the project manager's job
Wrong person assigned as project manager
No integrated planning and control
Organization's resources are overcommitted
Unrealistic planning and scheduling
No project cost accounting ability
Conflicting project priorities
Poorly organized project office
• External sources
Unforeseen regulatory requirements
Vandalism, sabotage or unpredicted side effects
Market or operational risk
Currency rate fluctuations
Risks stemming from design process
Violating trademarks and licenses
Sued for breach of contract
Labour or workplace problem
Litigation due to tort law
Rules of Project Risk Management
Rule 1: Make Risk Management Part of Your Project; this is essential to the success of project risk management. If you don't truly embed risk management in your project, you cannot reap the full benefits of this approach. You can encounter a number of faulty approaches in companies. Some projects use no approach whatsoever to risk management. They are either ignorant, running their first project or they are somehow confident that no risks will occur in their project (which of course will happen). Professional companies make risk management part of their day to day operations and include it in project meetings and the training of staff.
Rule 2: Identify Risks Early in Your Project; the first step in project risk management is to identify the risks that are present in your project. This requires an open mind set that focuses on future scenarios that may occur. Two main sources exist to identify risks, people and paper. People are your team members that each bring along their personal experiences and expertise. Other people to talk to are experts outside your project that have a track record with the type of project or work you are facing. They can reveal some booby traps you will encounter or some golden opportunities that may not have crossed your mind. Interviews and team sessions (risk brainstorming) are the common methods to discover the risks people know. Paper is a different story. Projects tend to generate a significant number of (electronic) documents that contain project risks. They may not always have that name, but someone who reads carefully (between the lines) will find them. The project plan, business case and resource planning are good starters. Other categories are old project plans, your company Intranet and specialized websites.
Rule 3: Communicate About Risks; failed projects show that project managers in such projects were frequently unaware of the big hammer that was about to hit them. A good approach is to consistently include risk communication in the tasks you carry out. If you have a team meeting, make project risks part...