Understanding Project Risk Management

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Projects are important in any industry for the sake of evolving a company and stepping up its products and services. However, projects can be hindered by issues which can harm them or prevent them from achieving the company’s goals. These issues are the risks which project managers and companies dread and try to counter at the initial stages of the project.

The method which companies follow to counter or reduce the effects of risks is detailed in the following steps:

Step # 1) Risk Identification

Identifying risks is the first and most important aspect in risk management. However, according to research, this step is taken very lightly if at all by project managers. Therefore, the success chances of those projects are usually low.

If project managers want their projects to succeed, they should make sure of discovering risks during the planning stage. This is done by going over planning documents such as the business case and the project’s budget. However, the manager should make sure of taking the opinion of his or her team members because they may have completed similar projects and learned a few things from them. Project stakeholder should also be interviewed to discuss probably risks.

After this phase, the project manager should write down all the risks mentioned and prioritize them before analyzing them in the next step.

Step # 2) Risk Analysis

The project manager and his or her team need to understand the risks, assess their impact and define their scope. Certain factors, such as the number of times a certain risk is bound to occur, may be assigned numeric values, which is one of the best practices followed by risk management professionals. During this phase, risks can also be grouped depending on certain criteria such as team skills or customer requirements.

Step # 3) Planning Action

After risks are understood and analyzed, responses to them need to be planned. Regardless of the type of project at hand, professionals choose one of three responses: avoidance, mitigation or acceptance. The first two are usually preferred in cases where risks may harm the project. Therefore, certain resources are allocated for those responses. On the other hand, because some risks can have positive impacts on the project or be of negligible danger, acceptance is the best way to go.

Step # 4) Monitoring Risks

Risks can evolve to the better or worse during the project, which makes managing risks and reviewing them regularly a very important task. Some professionals prefer using risk management worksheets to track the progress of a risk and help plan a new response.

With these steps, companies will be able to reduce the cost and time required for completing their projects. Therefore, they will gain more from implementing project risk management rather than skipping it altogether.

Further reading: Corporate Governance | Audit | Performance Improvement

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