Project Risk Planning and Identifying Risks
Project risk management can be stated as any project that is subject to risks. Failing to manage projects properly will eventually find itself in a state of continual crisis (The Elements of Project Risk Management, 1996). Projects that do fail are characterized by “the inability to decide what to do, when to do it, and whether enough has been done” (Project Risk Management Principles, 1996). Project Risk Management can further be characterized as using “basic techniques of analysis and measurements to ensure that risks are properly identified, classified, and managed (PRMP, 1996).
Managing risks have to be identified by first understanding what a risk is. According to Tusler (1996, PRMP), the official definition provided by his Professor James Garven, from the American Risk and Insurance Association as follows: “Risk management is the systematic process of managing an organization's risk exposures to achieve its objectives in a manner consistent with public interest, human safety, environmental factors, and the law. It consists of the planning, organizing, leading, coordinating, and controlling activities undertaken with the intent of providing an efficient pre-loss plan that minimizes the adverse impact of risk on the organization's resources, earnings, and cash flows”.
Prior to project risk, there is project selection and this is a significant factor since selecting a project can be risky. Project selection and project risk are hence linked together (Kendrick, 2009, p. 19). Project management usually begins with project assumptions and many of these tend to be extracted from the project charters, datasheets, and other important documents that have previous risk assessments from previous project. Stakeholders risk management usually begins with their registering and determining their positions on specific project outcomes and guidelines. What usually follows is a set of other documents that need more in-depth information in order to continue such as project planning information, templates and metrics, planning processes, project tools, and other important documents that will help in assisting towards better risk management.
Project Risk Management usually again begins with “summarizing risk management approach, methodologies and processes, roles of people involved, risk definitions and standards, frequency and agenda for periodic reviews, reports, requirement for status collection and other tracking” (Kendrick, 2009, p. 30). Besides tracking the different areas of potential risk, risk management is also great in identifying project opportunities that can come out of uncertainties.
According to PMBOK Guide (2008, p. 273), risk management is usually approached by including the following: “the processes of conducting risk management planning, identification, analysis, response planning, and monitoring and control on a project”. The whole goal and objective to Project Risk Management is directing and controlling projects towards positive events while effectively avoiding negative events as much as one can, unless opportunities arise by entertaining negative risk events (PMBOK Guide, 2008, p. 273).
Risk planning more often than not changes as any project progressives forward and therefore should be monitored very closely since surprises often do occur catching some of us off guard and this can pose a future threat and may have multiple impacts (Heldman, 2009, p. 232). Should risks occur unexpectedly, it is always best to minimize them by thoroughly investigating in detail by reviewing every bit of information at a team’s disposal. This will help to minimize the impact that could result in a catastrophe if not handled well. Heldman (2009, p. 232) discusses that “as you get close to a risk event, that’s the time to reassess your original assumptions about the risk and your plans to deal with the risk and to...