As a project manager or staff member, you handle risk each day; it’s one of the crucial vital things you do. For those who discover ways to apply a systematic risk administration process, and put into action the core 5 risk administration steps, then your projects will run more smoothly and be a positive experience for everyone involved.
A standard definition of risk is an unsure event that, if it occurs, can have a positive or negative effect on a project’s goals. The potential for a risk to have a positive or negative effect is a vital concept. Why? Because it is natural to fall into the trap of thinking that risks have inherently negative effects. If you are also open to these risks that create positive opportunities, you’ll be able to make your project streamlined, smarter and more profitable. Think of the adage – “Accept the inevitable and turn it to your advantage.” That’s what you do while you mine project risks to create opportunities.
Uncertainty is at the heart of risk. You might be unsure if an event is likely to happen or not. Additionally, it’s possible you’ll be unsure what its penalties would be if it did occur. Likelihood – the probability of an occasion occurring, and consequence – the impact or final result of an event, are the 2 components that characterize the magnitude of the risk.
All risk administration processes observe the same 5 fundamental steps, though sometimes completely different jargon is used to explain these steps. Collectively these risk management steps mix to deliver a easy and effective risk administration process.
Step 1: Identify. You and your workforce uncover, recognise and describe risks which may affect your project or its outcomes. There are a number of strategies you need to use to find project risks. Throughout this step you start to prepare your Project Risk Register.
Step 2: Analyze. As soon as risks are recognized you identify the likelihood and consequence of each risk. You develop an understanding of the nature of the risk and its potential to affect project goals. This information can also be enter to your Project Risk Register.
Step three: Evaluate or Rank. You consider or rank the risk by figuring out the risk magnitude, which is the combination of likelihood and consequence. You make choices about whether or not the risk is acceptable or whether it is serious enough to warrant treatment. These risk rankings are also added to your Project Risk Register.
Step four: Treat. This can also be called Risk Response Planning. During this step you assess your highest ranked risks and set out a plan to treat or change them to achieve settle forable risk levels. How will you decrease the probability of the negative risks as well as enhancing the opportunities? You create mitigation strategies, preventive plans and contingency plans in this step. And you add the remedy measures for the highest ranking or most critical risks to the Project Risk Register.
Step 5: Monitor and Review. This is the step the place you take your Project Risk Register and use it to check, track and evaluate risks.
Risk is about uncertainty. Should you put a framework around that uncertainty, you then effectively de-risk your project. And which means you can move much more confidently to achieve your project goals. By figuring out and managing a complete list of project risks, disagreeable surprises and obstacles will be reduced and golden opportunities discovered. The risk management process also helps to resolve problems when they happen, because these problems have been envisaged and plans to deal with them have already been developed and agreed. You avoid impulsive reactions and going into “fire-combating” mode to rectify problems that might have been anticipated. This makes for happier, less burdened project teams and stakeholders. The tip result is that you simply decrease the impacts of project threats and seize the opportunities that occur.
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