Uncertainties either leads to threat or opportunity, this is one of project management’s core concept. If a company cannot manage risk it can ultimately lead to failure in delivery of desired objectives and may be a delay in project delivery, or complete failure to delivery, benefit realization. Every business project has potential risks that might cause things to go horribly wrong. Company need to be aware about the nature of the risk and should have contingency plans to avoid the project being a complete failure.
All successful companies follow the same principle, and we also follow the same principle in general life like we all follow this cycle when crossing a road. Effective risk management also follows the same natural cycle of responses based on past experience, evolved over millions of years in natural systems.
This cycle includes Identify risk, assess risk, Plan response for risk, Select and Implement plan response and finally ensure that monitoring mechanisms are in place to adjust to any change in risk status.
Identify Risk
Risk management is the heart and soul of whole project management, and if a particular company fails to practice it can have bad effects on the company project. I cannot tackle the risk until it will not clearly identify and define the risk.
There are two steps, identify the context of the risk and then identify the risks to the project. This phase ensure a company that risks to the particular project are catalogued early in the project life cycle. Through the use of different techniques such as PESTLE analysis, SWOT analysis and RIPL (Risk Identification Prompt List ) the ‘unknown’ uncertainties can be uncovered by the company. Another best way to identify the risk is to read the reports of older, similar projects. Analyze where older project went wrong, and learn from them.
Assess the Risk
A company can assess the risk normally in 3 key areas. First of all company can assess the risk in terms of ‘Probability’, the likelihood of occurrence. Secondly a company can analyze the risk in terms of impact to Project (Project Scope, its Cost, required or deadline Time, Quality, Benefits and Resourcing). Finally it is important for a company to look at these individually as different projects have different kind of risk.
Plan Responses
When a company starts project planning and take the form of considering multiple responses to a single risk reveals. The best responses should include some proactive measure undertaken to reduce probability and soften impact or both. Removing the risk entirely may often refer to as ‘Avoid’ this could involve cancelling the project or de-scoping it if the risk impact is too high. Other responsive plan such as ‘transferring risk’ through supplier contract liability or by the help of insurance and the use of contingency plans (Fallback) can be most effective and often prudent.
Select and implement
After planning the response in this final phase company need to select the best plan and implement it practically. No risk management will be consider complete or effective without careful monitoring so, company also need to monitor the implemented plan, measure progress and make changes if required.