For each potential risk event, estimate its impact on the time, cost and scope of the project.
Bear in mind that a single risk could have multiple effects. For example, the late delivery of key component could cause schedule delays, cost overruns and a lower quality product.
Focus on risks with high impact. These are critical risks that you can do something about. For example, in construction projects equipment breakdowns will be one such risk, the impact is great because construction will stop if there is no functioning equipment. Some project managers find it useful to prioritise risks on a chart. This can help analyse risks more clearly.
The risk management process has been divided into the following headings to make them easier to understand and tackle.
Define objectives: Define the context of your work and your plan for success. This defines what you have to achieve to be successful and establishes a basis for dealing with the risk.
Identify risk: Identify areas of risk, uncertainity and constraints, which may impact your project, limit or prevent you achieving your objectives.
Quantify risk: Evaluate the risks and prioritise the level of risk and uncertainty, and quantify their frequency of occurence and impact.
Develop response: Define how you are going to respond to the identified risks.
Risk control: This implements the risk management plan. It may involve training team members and communicating to all stake holders. It is essential to continually monitor and review the level of risk.
Remember that it is the project manager who is responsible for project risk. However, responsibility is usually delegated through the project manangement structure with the aim to ensure functional managers are responsible for their own departmental risk. The managers would then be responsible for developing the appropriate risk management plan for their scope of work.
Excerpts from The University of Sunderland BA (Honours) Business Management, courtesy Resource Development International (RDI) Jamaica. www.rdijamaica.com
Last updated: July 23, 2008
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