Risk Management Part 2

Risk philosophy is an important aspect in managing risk; behaviors and attitude are key contributors to improving risk awareness and risk management. All team members and stakeholders are exposed to risk in their everyday activities and future planning’s. What is risk? Risk is an uncertainty that matters and is linked to the objectives we are trying to achieve; hence a risk may delay the time or increase the cost of achieving the objective. However risk opportunities maybe also identified that increase the objectives delivery time and reduce the cost. Thus if mindsets are functioning towards a risk culture, positive and negative risks can be identified, reduced, mitigated and planned response put into place should the risk trigger and escalate (Lester, 2007; Williams, 2006). Qualitative assessment identifies and categories the risk, and is a must to be conducted; however Quantitative analysis is the optional path that exposes the risks impact in terms of time and cost. Risk analysis models such as Monte Carlo, offer scenario simulations, such as “what if” by analyzing frequency over time and testing many options (Sanghera, 2010).

Risks are inherent, emergent and developing over project time, risk links uncertainty to the objectives, and risk is a continuous assessment and review over the project lifecycle, and not a onetime application (Norris, Perry & Simon, 2000). Furthermore risk categorization has many forms such as organizational, operational political and financial etc. hence the uncertainty is linked to any objective i.e. organizational risk will affect organizational objectives, financial risk will affect financial objectives (Kerzner, 2010). Risk models are adaptable to the size of the objective and can be scaled accordingly to the amount of data detail that is gathered and actions taken.

Risks are measured during risk assessment against their probability and impact using a PI Matrix, however further to the risk management model and reducing risk through various means of mitigation, contingency and response plans. What is left after reducing risk? Risk residual, this is the remaining risk that needs to be monitored and managed (PMBOK, 2008). In addition and in some circumstances residual or secondary risk is unavoidable and counter measures need to be in place to manage risks once triggered. Continuous monitoring and controlling of high and low priority risks and monitoring triggers that activate residual risk are key indicators. Reverse analysis is a good tool that will indicate the remaining contingency or budget allowed to manage risks and should be monitored and reviewed periodically and reported regularly to key stakeholders (PMBOK, 2008).

Include risk philosophy planning into your risk models because more things may happen in the future than anticipated. With a risk culture embedded and mindsets changed towards risk awareness, objectives can be delivered in time and within budget, and reputations improved through continuous quality performances.   

References

Kerzner, H. (2010) Project management best practices: achieving global excellence. 2nd ed. Hoboken, NJ: John Wiley.

Lester, A. (2007) Project management, planning and control: managing engineering, construction and manufacturing projects to PMI, APM and BSI standards. 5th ed. Oxford: Butterworth-Heinemann.

Norris, C. Perry, J. & Simon, P. (2000) Project Risk Analysis and Management, APM Guide [Online]. Available from:  http://www.fep.up.pt/disciplinas/PGI914/Ref_topico3/ProjectRAM_APM.pdf (Accessed: 29 May 2013)

Project Management Institute. (2008) A guide to the project management body of knowledge (PMBOK® guide). 4th ed. Newton Square (PA): Author.

Sanghera, P. (2010) PMP® in depth: project management professional study guide for the PMP® exam. 2^nd  ed. Boston: Course Technology/Cengage Learning.

Williams, M. (2006) Mastering leadership. University of Liverpool Online Library [Online]. Available from:

http://site.ebrary.com.ezproxy.liv.ac.uk/lib/liverpool/docDetail.action?docID=10141072 (Accessed: 29 May 2013).