Every project comes with risks that, if not dealt with proactively, can prevent you from delivering on the objectives of your project. In this final topic for this Learning Path, we’ll cover risk management and the processes you can use to implement it correctly. We’ll also deal with the benefits of risk management, and end with a word on contingency.
But before all that, what is risk management anyway? Well, the APM define it as:
‘A process that allows individual risk events and overall risk to be understood and managed proactively, optimising success by minimising threats and maximising opportunities.’
Simple enough, and we need to talk more about risk events in a moment, but first, a note on risk context.
The risk context
Every organisation works in a unique space and faces different risks. Over time, organisations tend to develop different attitudes towards risks, based on their context.
As a project manager, you’ll need to understand your organisations attitude towards risk, so that you can make sure that your plans for risk management are in line with the general expectations of your organisation.
While risk attitudes are largely on a spectrum, there are, broadly speaking, three distinct attitudes towards risk.
Figure 1: Risk management levels
Risk-averse organisations generally look to avoid risks whenever possible. Risk-neutral organisations look for a more balanced approached to risk. Finally, risk-seeking organisations actively pursue risks. Being risk averse means that project outcomes can largely be foreseen, while risk-seeking organisations look for potential opportunities to embrace risk.
The risk event
Due to their unique and uncertain nature, all projects contain an element of risk that may result in a positive (opportunity) or negative (threat) impact on one or more project objectives. Before we discuss the detailed process project risk analysis and management, there is a simple three-step process you can use to understand the risk events in your project.
First, identify the cause of the risk event. This is the trigger (or source) of the risk. Next, identify the event itself. This is the area where the uncertainty lies. Finally, the effect. This is the impact that the risk may have on the project. It’s also worth noting that the risk may have a different degree of impact on one or more of the project's objectives.
So, that’s the basics of risk and risk management. Next up, we’ll break down the project risk analysis and management (PRAM) process in detail, which will give you the tools you need to manage risk effectively.
When you’re ready, select Next to continue.
In this Course, you’ll further explore risk management, including attitudes to risk, and roles and responsibilities.