Risk Management In simpleterms, anything that might delay or hamper the advancement of a project can betermed as a risk to that project. A risk is a problem in future, one that mayor may not happen. Risk management is an important task for any projectmanager. He or she has to always be on the lookout for potential problems, andonce such risk is identified, proper steps should be taken to mitigate therisk.
The success or failure of a project is, thus, dependent on how well theproject manager can take care of the risks. A good project manager can avoidnegative risks and grasp positive risks, as and when the situations arise. The mostcommon risks of a project are usually associated with the technology used, theenvironment, the team members and their interpersonal relationships, theworkplace, etc.
The first step in risk management is properly identifying andcategorizing the risk. Most risks can be categorized into four broad divisions,namely: · Technical, quality, or performance risks: Theseare risks associated with the technology used, the quality expected, and thefinal performance. · Project management risks: These risks resultfrom poor management of the project resources and time. · Organizational risks: The concernedorganization’s environment, funding, competition, etc.
can also posesignificant risks to the project. · External risks: These are risks not associatedwith the project directly, but they can also significantly affect the project.Examples would be labour issues, legal issues, etc. The next step is planning the risk management. It is done bydeciding what steps should be taken when or if a risk comes into being. After thatcomes the stage of risk monitoring and tracking. A project is not a stillobject.
It is not always possible to visualise all possible risks whilebeginning the project. As it advances, some risks may become obsolete and newrisks may even come into being. For that reason, it is important toperiodically re-evaluate the risks associated with the project and themanagement processes of such risks. If any new risks are identified, thepossible action plans for mitigating those risks must also be devised.Mitigation plans are generally devised in such a way that if a risk goes over acertain limit, the relative mitigation plan is activated.
Mostmitigation plans consist of a risk response for each possible risk. Every riskis unique and the response must be created after taking into account allpossible variables and scenarios. It should be planned in such a way that thenegative effects of the risk are minimized. For that, it is very important toproperly assess the risks. The various responses that can be put forth to arisk are: · Avoidance: Avoiding the risk by changing thefactors associated. · Transference: The responsibility can also beshifted to a third party.
· Mitigation: The risk can be mitigated by takingan appropriate action plan. · Acceptance: Accepting the responsibility of therisk generally means that there are no plausible ways to avoid, transfer, ormitigate the risk, so the concerned party must bear the costs. Thus, as the above discussion shows, risk management is anintegral part of any project. An efficient project manager must go through allthe requisite steps of risk identification, risk categorization, planning riskmonitoring, risk mitigation, and risk response. Essentially, risk management isnothing but developing backup plans for scenarios where one or more of therisks might happen.
Without such plans, chaos might descend on the project inthe face of any adversity. That is why the level of success of any project ishugely dependent on the actions of the project manager and his or her riskmanagement capabilities.