A clear understanding of risk and its active management is the key to project success. Fully understanding the factors that add risk and managing those factors are both critical to the success of any project.
Early in the process of a development most of the key stakeholders for the project should facilitate to the risk identification session. At this time, project objectives should be clearly established and aligned with the clients business requirements. Risks should be evaluated for their likelihood and impact on both schedule and cost. Project manager should work with the stakeholders to identify ways to reduce, transfer, avoid and manage those risks, and regularly update the risk register and mitigation plans as the project progresses.
Executive Vice President
PMI Colombo, Sri Lanka.
According to Project Management Institute’s (USA) PMBOK standards risk is a risk in an uncertain condition, if it occurs, has a negative or positive effect on project objectives. According to PMBOK standards effect of Risk always not negative and it can be positive too.
Mainly the project risk is effected to the project objectives including the time, scope, cost and quality known as triple constrains in a project.
Risks in a project, should they come to fruition, can mean total project failure, increased costs, and extended project duration among other things. Risk often has a negative connotation, but like the parachutist, the acceptance of the risk can also offer a reward. For the parachutist, the risk is certain death but the reward is the thrill of the activity.
For project managers, risk can mean failure, but the reward can mean a time or cost savings, as well as other benefits. Risk management is the process in which the project manager and project team identify project risks, analyze and rank them, and determine what actions, if any, need to be taken to avert these threats. Associated with this process are the costs, time, and quality concerns of the project brought about by the solutions to those risks. In addition, the reactions to risks are analyzed for any secondary risks the solutions may have created.
According to PMBOK risk management process risk management is consisted of:
- Risk management planning
- Risk identification
- Quantitative risk analysis
- Qualitative risk analysis
- Risk response planning
- Monitoring and control
According to the standard ISO 31000 “Risk management Principles and guidelines on implementation, the process of risk management consists of several steps as follows:
- Identification of risk in a selected domain of interest
- Planning the remainder of the process.
- Mapping out the following:
- the social scope of risk management
- the identity and objectives of stake holders
- the basis upon which risks will be evaluated, constraints.
- Defining a framework for the activity and an agenda for identification.
- Developing an analysis of risks involved in the process.
- Mitigation or Solution of risks using available technological, human and organizational resources.
Organizations often have a pre-defined approach to risk management. The policies can define the activities to initiate, plan, and respond to risk. The project manager must map the project risk management to these policies to conform to the organization’s requirements. Within the confines of the risk management policy, the project manager must identify any component that can hinder the success of the project.
In many organizations, there are predefined roles and responsibilities that influence risk management planning, the decisions relevant to the risks, and the involvement of the project participants.
These roles and responsibilities and the policies associated with working with these individuals should be identified and considered early in the project process to save time and frustration. In addition, the project manager should have full knowledge of the power and autonomy he has on the project. For example, a project manager may want to create plans and reactions to the risks within a project, but the policies within the performing organization limit the amount of power the project manager has to make decisions regarding risk management. Knowledge of the limit of that power can help him work with management or customers to successfully alleviate risk.
Finally success of the project Risk Management depend on the recognizing the value of the project management, individual commitment / responsibility, open & honest communication, organizational commitment, scale Risk effort to Project and how well project management process will integrate with the project management process.