Project Risk Management

Project risk management can be defined as “the systematic execution and monitoring of tasks to detect, analyze and optimize project risks.” Project risk management is also a method of finding risks, classifying risks and mitigating risks. It involves both quantitative & qualitative methods of ranking risks according to their potential to create problems.

Quantitative risk analysis provides a numeric value for the severity of a risk. A risk register is a useful tool for assessing risks. The risk register lists many possible risks, including several factors that include the likelihood of the risk occurring and the impact of the risk if it does occur. These two values are assigned numbers and multiplied together, providing another number as a measure of the severity of the risk.

Risk is any uncertain event that can have an impact on the success of a project. Schedule slippage is a risk, even if it's caused by bad estimating. Another example would be a change in the Project’s scope or requirements.

Also, of equal importance are the qualitative traits of the risk. The Project assigned risk manager writes out a business scenario describing how the risk occurs, including the likely consequences and how the organization would deal with the problem after it happens. A Project Manager with expert knowledge can also provide insight into qualitative risks.

You will clearly understand that there are 4 ways to handle a Risk:

• Accept the Risk - take the chance of negative impact.
  
  
• Avoid the Risk - change plans to circumvent the problem.
  
  
• Mitigate the Risk  - lessen the impact through intermediate steps.
  
  
• Transfer the Risk - outsource the risk to third party that can manage the outcome.

You will learn that Risk mitigation is an essential part of project risk management. The risk manager creates several methods of mitigating each risk. Mitigation methods are ranked by their traits, such as cost, time to implement and effectiveness. The organization then implements the mitigation method with the completion of a Project Risk Plan. Once it is complete, the risk may be considered closed if the mitigation successfully reduces the severity below a predefined threshold that the risk manager and project team stakeholders define and accept.

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