Project Risk Management

What is Project Risk Management?

There is an art and science relation to determining risk management. By identifying, analyzing and responding to risk throughout the life of a project it will be in the best interest to the objective of the project. It is an often overlooked element of project management but if implemented it can often result in significant improvements leading to a successful outcome. When risk management is working at its finest it should assist the project by decreasing potential problems, or assisting to overcome the problems that already exist.

When speaking in terms of risk, most people tend to think negative, however; there can also be a positive aspect to taking risks. Negative risk management is undertaken to lessen the potential impact of adverse effects. It is best to think of positive risk management as in investment into possible opportunities. It is essential to maintain a balance so that risk won't exceed the potential benefits. A developed risk management plan will assist you in managing risk throughout a project.

Knowing your stakeholders and their tolerance for risk is an important element for keeping the project moving along without doubtfulness and unwarranted stress on the stakeholders. There are 3 gauges for determining the amount of risk individuals can tolerate.

• Risk-averse - having a low tolerance for risk


• Risk-neutral - a balance between risk and payoff


• Risk-seeking - having a high tolerance for risk

There are 6 major processes involved in risk management, they are:

1. Risk Management Planning
2. Risk Identification
3. Qualitative Risk Analysis
4. Quantitative Risk Analysis
5. Risk Response Planning
6. Risk Monitoring & Control

Creating charts, tables and graphs to assist in determining the level of risk and how to maneuver around and within those risks are a great aid to all projects. An example of a risk breakdown structure is seen below. It is based on a hierarchy of potential risk categories for a project.

Applying risk management to the other elements of project management is essential for all projects. It can relate to the scope, time, cost & quality of the project. The table below shows how each of these elements ties into the risk management sector.

In project management it is always best to go in prepared. Developing a risk response plan prior to a potential crisis is a principal best followed. Brainstorming, graphs, charting, as well as the basic response strategies for negative and positive risks will all help to reinforce a strong & thriving project.

Reflection

Personally, I’m not much of a risk taker. I do have some smaller financial investments in world markets, North American markets and Canadian markets but I prefer the stability of GIC investments. There isn't much of a return on the investment, but there is no chance of losing my money. I think the older I get the more I tend to be the risk-averse type. I don’t like to lose money and at this point in my life, if I do, I feel that I may be too old to make it back. I prefer the stability of GIC's because I want to retire when I’m still healthy and able to enjoy it.

One example of when I took a risk is when I invested in a board game. At the time it seemed like a sure thing, with orders pending from Canada, the USA & Europe. However, due to a conflict that was not resolved between the 2 major shareholders production ceased and I lost all monies invested. Since then I have been leery of investments because the fear of losing what I currently have outweighs the risk of making money.