Project risk management focuses on the management of various types of risks related to a project. The process of project risk management is carried out in a number of steps. Nevertheless, there are two principal phases of project risk management and they are assessment of risk and risk control.
Project risk management deals with different types of uncertainties and constraints related to a project (known as project risks). A project risk is a probable origin of variation from the plan of the project and it may have a positive or negative influence on the project. Project risks having negative characteristics are known as threats and project risks bearing positive characteristics are known as opportunities.
Efforts are always on to minimize the threats and maximize the opportunities. Project risks can be minimized with the help of eliminating or decreasing them.
There are two main phases of project risk management and they are risk assessment and control of risk.Assessment of risk may be carried out at any point of time within the duration of the project. However, the earlier it is performed, the better it is for the organization. Risk control is always dependent on a proper risk assessment. On the other hand, if risk control measures are not undertaken, there is no use of performing a risk assessment.
Process of Project Risk Management
The process of project risk management can be elaborated as follows:
Project Risk Assessment
The process of project risk assessment can be further categorized into the following:
Identification of risk: The project risks are identified by examining the whole project plan.
Analysis of risk: Risk analysis can be quantitative or qualitative in nature. In this process, the manner in which the project risks may influence the project performance in terms of expenses, time period or satisfaction of the necessity of the customer is ascertained.
Prioritization of risk: According to this process, it is determined that which risks require total elimination, which risks require continuous supervision and monitoring and which risks are not so important to supervise.
Project Risk Control
Project risk control involves the following steps:
Avoidance of risk: A plan is chalked out as to how project risks can be eliminated or avoided.
Risk transfer: In this way, risk is transferred by buying insurance policies.
Risk mitigation: A number of measures are taken beforehand for minimizing the impact of risk.
Contingency plan: For risks that are regarded as important, a contingency plan is prepared in advance before those risks occur.
Risk acceptance: Certain risks are accepted because they are regarded as small and do not influence the performance of the company to a significant degree.
Measure and control: Observing the outcomes of the risks that have been detected and handling them to a favorable or productive end.
Last Updated on : 8th July 2013