RISK MANAGEMENT

'No amount of planning can overcome risk, or the inability to control chance events. In projects, risks can have a postive or negative impact on the project goals' (Gray and Larson, 2014).

Risk is one of the most dynamic forces of project management. A proper risk analysis and control is indispensable for the project. As a Project manager, risk management is a key skill in the portfolio. The section below describes what steps should be taken in a project.

Identification Of Risks

As a project manager, 'Critical Thinking' is essential to identify risks. To begin, the risk attitudes of the organisation and stakeholders can be classified into three themes (PMBOK 2013):

1. Risk Appetite: The degree of uncertainity an entity is willing to take on anticiaption of reward.

2. Risk Tolerance: The degree of risk that an entity is willing to take

3. Risk Threshold : A measure above which the entity will no longer take the risk.

On this basis the risks can be identified using tools below:

1. Risk Breakdown Structure (RBS) :

The structure gives a high level risk identification and then decomposes into subparts like a WBS. This ensures all the aspects of RBS are covered. A sample RBS is shown below ( Gray and Larson, 2014)

2. Risk Profile -

This is a tool which contains a set of question that need to be answereThe questions are usually drawn from previous projects and the uncertainity element is addressed.

3. SWOT Analysis-

Many organisation perform a Strengths, Weakness, Threats and Opportunities analysis to identify risks in the project. As the risks can be positive or negative (opportunities or threats), this is a useful tool.

4. Cause Effect analysis- This can be done through tools like Fishbone diagram or Ishikawa diagram

Risk assessment

Risk analysis is essential to understand the impact of different risks on the projects. A scenario analysis is done for the same.

This divides the risks on the basis of likelihood of occurence and impact of occurrence.

A matrix called Risk Severity Matrix is created with three different zones ( Gray & Larson, 2007) :

Green: Low impact/ Low likelihood
Yellow: Moderate impact/ Moderate impact
Red: High impact/ High likelihood

Impact X ProbabilityX Detection = Risk Value

Risk Response Development

This mainly deals with developing a strategy to reduce the possible damage and make contingency plans ( Gray & Larson, 2014).

Strategy for risks with negative impact-

1. Transfer

2. Mitigate

3. Avoid

4. Accept

Strategy for risks with positive impact-

1. Exploit

2. Enhance

3. Share