Project Risk Management

Topics: Risk management, Project management, Risk Pages: 9 (3078 words) Published: June 21, 2013
Project Risk and Procurement

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Risk Management
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Dr. Kevin Kane
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Assignment 2

Hanson Ifeatu Nnadi

@00345526

Submission: 8th March 2013
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Total number of pages: 12

Word count without references: 2664

ABSTRACT
The aim of this paper is to investigate risk management as a basic stage in project management. The concept of risk is also examined how it is defined in today’s businesses. We will consider the traditional method of approaching risk and study Long-Term Capital Management (LTCM), Heathrow terminal 5 and Wembley stadium case examples to observe where risk management has been a success and a failure. Further more, we study the human factors that must be considered by decision makers and risk managers while dealing with risk to successfully achieve organization’s goals.

INTRODUCTION
Ask anyone in the street if they understand what risk and you’ll find out they have a very good understanding of it. If you ask for a definition you will get an answer stating risk as a possibility that anything could go wrong. Unless you happen to be a thrill-seeker, risk has a distinctly negative aspect that people would rather avoid. Mostly, we would feel more positively inclined towards risk if we could see a bright side. People are always in arguments about what could happen in future events but to be practical it is all a matter opinion because the future is unknown. Like it or not we are surrounded by risks in our everyday lives and we have accepted risk as part of it as well. We may decide to minimize risk by tackling the particular ones we see but then the ones we don’t see we just ignore and get on with life. Wouldn’t be more rewarding if we could perceive all possible risk before they could eventually occur? Businesses face risks in the same way we as individuals face them in that risks are accepted as part of normal trading. According to Webb (2003), trying to eliminate al of these risks would be impractical and eventually lead to the demise of the organization. Organizations must understand the whole concept of risk. They must look from past examples of where risk has poorly managed to point out where and what has gone wrong even though this practice is still not enough to properly manage risk. They must embrace the systematically designed approach of identifying risks before they can be mitigated and controlled and consider the fact that human factors in regards to psychology and sociology are also of equal importance. Risk cannot be avoided for the world is in a state of constant change and to survive, businesses must adapt to the changing world. There must be always a possibility for every business that by deciding to make an adaptive change to something that is out of its control, that decision might end up being the wrong one.

RISK
The definition of risk differs in organizations depending on the nature of its business. Probability, unexpected events and uncertainty are usually the basis for these definitions. Risk is concerned with unpredictable events that may occur in the future whose exact likelihood and outcome is uncertain but could possibly affect the organization’s interests and objectives in some way (Loosemore et al, 1993). There is an emphasis on uncertainty here. There is much debate about the usefulness of the distinction between uncertainty and risk and it is often drawn in risk management literature. It has been argued that the vast majority of risk that a business faces cannot be correctly quantified because most, if not all, organisation’s decisions are made with the benefit of statistical data to enable an exact calculation of the impact of an event on an organisation’s objectives. It is expected that in almost every business...

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