Project Risk: Project risk is an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project objective.
Risk Management: Risk management is the systematic process of planning for, identifying, analyzing, responding to, and monitoring project risks. It employs processes, tools, and techniques to maximize the probability and consequences of positive events while minimizing the probability and consequences of adverse events. Effective risk management should start early in the project and continue throughout its lifecycle project.
Note: Cerri Project does not include the management of positive risks.
Project Risk Management Process: The project risk management process aids project sponsors and teams in making informed decisions about project alternatives. Risk management encourages appropriate measures to minimize:
- Adverse impacts to project scope, cost, and schedule.
- Crisis-driven management.
Risk identification: This involves determining potential project risks and documenting their characteristics. Risk identification output: The project risk list.
Qualitative Risk Analysis: This step assesses the importance of identified risks and prioritizes them for further analysis or direct mitigation. The team evaluates the probability and impact of each identified risk on project objectives. Team members review the qualitative risk during the project’s lifecycle. Repeated qualitative analysis for individual risks may reveal trends that indicate the need for adjustments in risk management actions or risk mitigation plans.
Risk Response Planning: Focuses on high-risk items from qualitative risk analysis and assigns parties to take responsibility for each response action. This process ensures every risk requiring a response has an owner. The project leader identifies the best strategy for each risk, and designs specific actions to implement it. Strategies include:
- Avoidance. Altering the project plan to eliminate the risk or protect project objectives. Example: The team might adjust scope, timelines, or resources.
- Mitigation. Reducing the likelihood or impact of a risk to an acceptable level through targeted actions. Though potentially costly and time consuming, mitigation phases may be preferred over allowing the risk to persist.
- Acceptance. Acknowledging and agreeing to address certain risks only if and when they occur without changing the project plan or identifying any response strategy.
Risk monitoring and control: Keeps track of identified, residual, and new risks. Ensures execution and evaluates the effectiveness of risk response plans. Risk monitoring and control continues throughout the project life cycle and includes the following activities:
- Periodic project risk reviews repeat the tasks of identification, analysis, and response planning (see previous tasks).
- Reassessment of risks with changes in circumstances: project maturity, new risk development, or the disappearance of anticipated risks.
- Adjustment of risk ratings and prioritizations.
Risk control includes:
- Choosing alternative response strategies.
- Implementing contingency plans.
- Taking corrective actions.
- Re-planning the project.