Risk has its own connotation of potential danger or something that ought to be better avoided. But we know too well that the road to success is full of risks associated with new opportunities yielding better results. The entire project management task is full of uncertainties and risks. Uncertainty is something that cannot be managed easily, while risk management is one of the necessities for successful project undertakings. So, What is the importance of risk management in project management? What challenges present themselves in risk management, and how can these be handled? These are issues that will be looked into in this article.
What is project risk managment ?
Project risk management concerns a theory by PMI, whereby risks being events or conditions should assign by occurrence, either positive or adverse, their planets of consequence to project objectives. Risks to any project generally pertain to the project scope, budget, time, resources, technology, and any unpredicted situations that would be deemed insured against by nobody. Also worth noting here is that a risk involves uncertainty, but one is able to predict its consequences and may factor them in should the anticipated situation occur. Should it occur, the event can't be avoided but managed through reducing the adverse effect of the event. Hence, the great necessity of taking a purposeful view of project risk management.
As defined by the PMBOK guide, "Project risk management includes the processes of conducting risk management planning, identification, analysis, response planning, and controlling risk on a project. The objectives of project risk management are to increase the likelihood and impact of positive events, and decrease the likelihood and impact of negative events in the project."Learn the project risk management course from british academy for training and development for having a grip in this career.
The Importance Of Risk Management In Project Success
Risk management is crucial to project management and the successful outcome of any project. It involves the identification, assessment, and prioritization of uncertainties that can affect the project objectives, followed by the planned response of the project either to mitigate or avoid the risks.
One of the basic advantages of risk management is that it permits the project managers to anticipate and prepare for potential problems even before they happen. Through risk identification and analysis at the beginning of the project, such risk management allows project managers to take risk mitigation or avoidance actions in an early way so that untimely delays, cost overruns, and other impacts can be avoided.
Risk management promotes the ability of project managers to make informed decisions. In doing so, while they judiciously measure their choices, they consider the risks involved and their possible consequences, orienting their ability to judge the pros and cons of the various options they select towards that action most likely to lead to success in the project.
Risk management, on the other hand, guarantees timely delivery by the project and achievement of its objectives. It allows project managers to consider improvements that ensure the project is on course by proper identification and management of risks.
Thus, risk management generally integrates into project management, and it is a crucial success factor for any project. Most projects remain on course and achieve their objectives due to risk identification, assessment, and management done by the project manager, who minimizes adverse effects while maximizing chances of success.
What about a career in risk management?
Indeed, risk management is a very satisfying profession, particularly for people who seem really interested in helping other organizations identify, evaluate, and manage potential risks.
A career in risk management could be quite an eye-opener in terms of varied job types such as finance, insurance, health, manufacturing, or government. In house risk managers could scout from specific organizations; however, risk management professionals could also work as consultants.
Here are some examples of roles within risk management:
Identifying possible risks to operations or the financial performance of the organisationEvaluating the probability and potential impact Of that risk Strategies for mitigating or avoiding those risks Communicating risk information to stakeholders and senior management Monitoring and reporting effectiveness of risk management strategies keeping abreast of industry movements and regulation updates
The job market for professional risk managers is expected to rise within years. As per the Bureau of Labor Statistics, the employment of risk management professionals is expected to grow at 7% between the years from 2019 to 2029, which is faster than other occupations.
Strategies for Risk Management
Risk management strategies
Risk management strategies can best be defined as a method of identifying, assessing, and managing possible risks that may impact the operations, financial performance, and reputation of an organisation. There are several risk management strategies that an organization can adopt, such as the following:
This strategy eliminates the risk by avoiding activities or situations that carry a potential risk.Identifying risks and taking steps to lessen the chances of them occurring or minimize the effect that occurs if they do.Transferring risk, it may be the act of transferring a potential impact posed by a risk to another party e.g. buying an insurance policy.The possible impact of a risk event must be accepted with this strategy as taking no step to prevent or avert it.Sharing potential risk by another party; this may be done through a joint venture or partnership.Taking steps to reduce the occurrence of a risk event or minimizing the impact an event would have if it occurs risks mitigation strategy. Mortar Implementation would include safety or security measures or the development of a continuity plan.The main steps of the risk management process
The risk management process is composed of numerous stages.
1. Risk Identification: In the task of identifying possible threats to the project, the project manager communicates with stakeholders as well as team members and draws from the assessment of prior experience. The risk identification must be documented in the risk register, an official document that describes potential project risks and includes priority, impact, owners, and other necessary information.
2. Risk assessment: Assess the risk matrix assigned for every risk in terms of probability and impact. Consultations with the stakeholders and team members may provide for more accurate and effective analysis.
3. Risk prioritisation: The project risks are now assessed for the probabilities and severities, so rank the risks accordingly. The ones with the maximum probability and maximum impact on project flow shall become the top priority ones that shall receive focused attention.
4. Risk monitoring: Assign risk owners to every risk identified. This person will be accountable for observing risk triggers, thus needing to record or take action. Note that it is a forward looking and continuous process.
5. Risk response: For any risk, should an event occur, responding appropriately is warranted. On the other hand, a risk management plan already developed in the project planning stage and a risk register will assist in making the proper response to that risk.