One always defines risk as any event that threatens a project’s success. But it is not so. Risk refers to any uncertain event which, if occurs, can have either a positive or negative effect on your project. There is no project that is not associated with risk. No matter how small or big, every project has a risk factor associated with it.
Always when responding to any risk, a project team should aim at maximizing positive effects and minimizing the negative or adverse effects on project objectives. Risk management is a systematic approach to identify, analyze and respond to such risks.
Risk management is an approach that follows certain defined steps:
- Identifying Risk: To identify risks that can threaten the success of projects and the documentation of such risks.
- Analyzing Risk: To analyze the quantitative and qualitative effects of the identified risks on project objectives.
- Risk Management Planning: To set an approach and plan to be followed whenever a risk occurs, enhance the positive effects and undermine the negative effects.
- Monitoring and Controlling: To monitor existing risks, identify new risks and control them throughout the project.
And as we know, risks are of two types- Known Risks that can be identified at an early stage and also plans can be made to respond to such risks. The other is Unknown Risks that cannot be identified unless and until they occur, and so cannot be planned beforehand. However, every project manager is required to respond to such risks whenever they occur, based on one’s past experience.