Risk management is an important area of project management, so asking the question like what is project risk management is very logical. If the risks are not properly identified and then managed, the project can’t be successful ever. So understanding the types of risk, the causes of the risks, the strategies and methods to manage those risks is an important part of the job of a project manager.
There are various reasons of project risks which we’re going to discuss below, but one important element is lack of proper change management throughout the project. We have already discussed project change management in our last post, so you may refer that post to better understand the affects of change management on the project and project risks.
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So What is Project Risk Management?
Risk management basically involves anticipating, understanding, logging, tracking, managing or mitigating all uncertain events and situations which can negatively affect a project and its progress. A project manager should be well versed in risk management. It is an important part of a project manager’s job to identify all such risks and then manage those properly. If not managed well, the project can fail fast. So as a project manager never under estimate the importance of project risk management. A project manager needs to clear about what is project risk management.
What is Risk?
Before answering the question of what is project risk management, we need to answer what is risk itself? Without understanding the risk, we won’t be able to manage it well. Risk is the uncertainty of the outcome of an activity. It is also known as the possibility of something bad happening as a result of an activity or caused by external sources. It can be the chance of the outcome to be different from expected, mostly in a negative way. Risk is an important factor in project management.
Importance of Risk Management?
The objective of project management is to meet stakeholder expectations and goals. The risks cause potential threats to the successful completion of projects. If risks are not managed properly a project can fail. That’s why risk management is considered the most important factor of project management. Just answering the question what is project management is not enough, we also need to answer the question why the risk management is important.
Principles of Risk Management
- Plan, manage and track risks properly
- Create & Follow Risk Management Plan
- Continuous risk identification & tracking
- Commit to risk management throughout the project
- Prioritize risks & focus on what can be controlled
Once you’re clear about what is project risk management, you’ll be able to easily figure out the principles behind risk management.
What Can be the Causes of Risk?
- Changing requirements
- Changing project environment
- Size & complexity of the project
- Business & external factors
- Incorrect assumptions & constraints
- Technology & financial issues
What are the Strategies to Respond to Risk?
- Accept where no action is required, or risk can’t be controlled in any way
- Avoid tries to eliminate the risk or its impact
- Mitigate helps lessen the possibility or impact of the risk
- Transfer the risk responsibility to third party
What are the Tools for Risk Management?
The following tools are used in risk management.
- Risk Management Plan
- Risk Response Plan
- Risk Assessment Template
- Probability & Impact Matrix of Risk
- Risk Log & Assessment
- Root Cause Analysis
What is Included in the Risk Management Plan?
Risk Management Plan includes the following:
- Risk Management Approach
- Risk Identification Approach
- Risk Prioritization Approach
- Risk Monitoring Process
- Risk Response Strategies
Along with the all the above items, a project management plan also contains the answer to the question what is project risk management in an elaborate way.
So after going through the above post have you started questioning yourself about project risk management? Would you like to answer the question what is project risk management in the comments? We’ll be happy to hear.