Introduction to Project Risk Management - ENGINEERING MANAGEMENT

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Introduction:  Life is uncertain, and projects are unique, complex in nature, based on assumptions and done by people. Projects are ...

Introduction to Project Risk Management

Introduction to Project Risk Management

Introduction: 
Life is uncertain, and projects are unique, complex in nature, based on assumptions and done by people. Projects are therefore subject to a plethora of uncertainties, i.e. risks and opportunities, that can affect the project and business objectives. 

Although the activity is normally referred to as project risk management, it covers both risk and opportunity management. Potential positive and negative outcomes deserve equal attention.

Therefore, the objectives of project risk management are to increase the probability and/or impact of opportunities and to decrease the probability and/or impact of risks, to improve the likelihood of project success. 

Risks and opportunities represent two sides of the same coin, but with a very different impact. The definitions of risks and opportunities should emphasize the differences and similarities, as follows:
  • Risks are defined as uncertain future events or conditions that, if it occurs, could negatively influence the achievement of business, or project, objectives. 
  • Opportunities are defined as uncertain future events or conditions that, if it occurs, could positively influence the achievement of business, or project, objectives.
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Project risk management overview:
The seven steps are as follows:
  • Step 1 – Plan Risk Management: The involves finalising the methodology to be used for risk management on a project. Details can differ from project to project; 
  • Step 2 – Identify risks and opportunities: The process of identifying individual project risks and opportunities in a manner which makes analysis possible; 
  • Step 3 – Perform qualitative risk analysis: The process of assessing and prioritising individual project risks and opportunities for further analysis or action, based on their probability of occurrence and potential consequences; 
  • Step 4 – Perform quantitative risk analysis: The process of performing numerical analysis to determine the most likely outcome of identified high priority risks and opportunities; Step 
  • 5 – Plan risk responses: The development of risk reduction options, strategy selection, and agreement on preventive and contingency actions to reduce overall project risk exposure; 
  • Step 6 – Implement risk responses: The process of implementing agreed-upon risk response plans by the risk owner, according to the agreed upon timeline; and 
  • Step 7 – Monitor risks: Monitoring the progress with the implementation of agreed-upon risk response plans, identifying and analysing new risks, and evaluating risk process effectiveness throughout the project.
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