Project Management: Risk Management

As all project managers know, the best project planning can never deliver a project in which all outcomes are known in advance of their occurrence.  As the saying goes; we hope for the best, but plan for the worst.  Project risk management is just that -- planning for the unknown.  And it is not an optional activity -- it is essential to successful project management.  

Project risk is any uncertain event or condition that, if it occurs, has a posiitve or negative effect on the project's objectives.

Project risk management includes the processes concerned with conducting risk identification, risk analysis, risk response and risk monitoring and control on a project.  Risk Management aims to identify and prioritize risks in advance of their occurrence, and provide action-oriented steps to increase the probability and impact of positive events during the course of the project, and to decrease the probability and impact of negative events during the course of the project. 

The general criteria for successful risk management during the course of a project are:

• Recognize the value of risk management - the management of risk must be recognized as a valuable discipline that provides a positive return on investment for the time and effort taken to assess risk
• Individual committment and responsibility - all resources on the project must take part in the risk management process
• Organizational committment - risk management must be in line with the overall goals and values of the organization
• Open and honest communication - potential project risk must be communicated early and often
• Risk effort scaled to project - the cost of project risk management must be in direct proportion to the value it will deliver on the project
• Integration with the other project management processes - risk management does not exist in the vaccum.  It must take place within the overall project management context

Project risk management includes the following steps:

• Plan risk management - defines the scope and objectives of the risk management process
• Identify risks
• Perform qualitative risk analysis - prioritize/rank the identified risks
• Perform quantitative risk analysis - evaluate the effect of risk on project outcomes
• Plan risk responses - identify response strategies and actions for all identified risks
• Monitor and control risk - implement agreed upon risk responses and assess overall effectivness of risk management plan throughout the life of the project