Risk is inherent to all aspects of our lives. Whether we are walking on the road or eating out at a restaurant, we are surrounded by risks. Projects have a number of associated risks as well and Project Managers need to proactively manage these before they turn to issues.The goal of Risk Management is to identify project risks and develop strategies that either significantly reduce the risks or that provide guidelines in avoiding the risk.
Risk is an uncertainty that can positively or negatively impact at least one Project objective (Time / Cost / Scope / Quality). Positive uncertainties are also called Opportunities or Good Risks.
Risk Management aids in identification of potential problems before they occur so that the risk-handling activities can be planned.
Risk Management enables Project Managers to:
- Identify possible problems before they occur
- Take informed business decisions between the risk exposure and the associated benefits
- Save time and money
- Reduce rework
Risk Containment Strategies
Risk can be managed through:
Avoidance:
–Risk avoidance is changing the plan to completely eliminate the risk to safeguard the project objectives
Transference:
–Risk transference does not eliminate the risk, but transfers ownership of response of a risk to a third party
Mitigation:
–Mitigation aims at reducing the probability and/or consequence of an adverse risk event to an acceptable threshold. Cost of implementing mitigation plans should be less than the financial impact of risk event if it occurs.
Acceptance:
–This strategy indicates that team has decided against taking any action to avoid, transfer or mitigate the risk. This strategy will not be suitable for risks that have a high risk exposure or high risk score.
In such scenarios, the concerned risk should be monitored closely to evaluate change in probability and impact.
–This strategy is useful when all mitigation strategies have failed and the risk results in an issue
Exploitation:
– This strategy aims at enhancing the occurrence of positive risks or opportunities to yield positive results in terms of revenue, time and quality.
Risk management can be done effectively with the use of right risk management tools.
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