Risk Management

The effective management of project risks is an integral part of best practice project management. A formal risk management process is intended to introduce rigour, objectivity and consistency into what is typically a subjective process.

Initially, a brief risk assessment is done when proposing a new project for approval. Any identified high risk factors should be analysed to determine whether actions can be undertaken to eliminate, reduce or constrain the risk before the project commences. This may require adjustments to the proposed project's scope, objectives, timelines or resources.

Once a project is approved, a Risk Management Plan should be developed for all risk factors that were not eliminated during the project proposal process. This should include a description of the risk, the impact of the risk on the project, what actions can be taken to assist in reducing the risk and, if necessary, a contingency plan. The Project Manager and team must seek the assistance of the Project Sponsor and stakeholders in the proactive reduction of risk.

Reduction of risk in a project is a 'win-win' situation with all project people gaining from the increased possibility of project success. However it often transpires that a project is exposed to risks that are beyond the Project Manager and his or her organisation to resolve. Dependence on outside organisations is one such risk factor.

There is an important relationship between project risk and the appropriate project development strategy. Risk can change as the project progresses. It is possible for a project initially assessed as low risk to quickly escalate into a high risk project. Any alteration of project risk factors must be subject to the standard change control mechanism.

It is also essential to understand that as risk assessment is subjective, different people will perceive risks differently. Risk assessment should record all views democratically with the majority view being accepted as the guide. Should a split decision result from the democratic process then the higher risk factor should be used - it pays to be paranoid!