Risk management is one of very important part of project management. Risk management is included in the ten knowledge areas of PMBOK. Risk is defined as an uncertain event/condition risks may occur at any time during life cycle of the project. If risk occurs during the life cycle of the project, risks have positive or negative impact on a project success. Risk Management defines the process of identification, impact analysis of risks and provide risk mitigation techniques. Efficient risk management provides control over potential risks/events, which is proactive approach rather than reactive approach. Risk break down structure breaks bigger risk into smaller risk, which is quite easy to manage.
Following are 5 approaches to manage risk.
- Risk Identification or Risk Acceptance
Risk acceptance means that risk is identified and logged into risk management register, risk is acknowledged and no action taken by project manager. This strategy is applicable for smaller risks; risks which have lesser impact on the project if they occur, and could easily dealt with risks if they arise. Due to their lesser impact they are not considered for action.
- Risk Avoidance
Risk avoidance is very important technique which suggest that you make a plan that the risk does not occur means that risk is avoided. This is very efficient strategy the risks which have potentially large impact on the project. For example, if in January when your organization finance team is full busy in the corporate accounts, setting a training course for them in January in order to learn the new processes is not a great idea. The risk is there that the finance team wouldn’t participate in the training. It will be very useful to set the training program after January so that finance team fully participate and learn new processes to enhance their performance. Slight changes in the project plan results in avoiding risk.
- Transfer the Risk
Transfer of risk is a risk management strategy which is not used very often in projects where single organization is undertaking the project, it is more common in those projects where there are multiple organizations/departments involved. In this approach one department/organization pass on risk to other department/organization. For example, if you contracted the third party to write software code, you can pass on the risk that there are bugs in the code over to them. Then the contracted party is responsible for managing this risk (removing bugs).
- Mitigate the Risk
Most commonly used risk management technique is risk mitigation. It is very easy to understand and implementation of it. Mitigation means that you limit the degree of impact of the risk, so that if it occurs, the lesser the damage is, and it is also easier to fix. For example, a mitigation strategy for the situation is to provide marketing training to the Sales team. There is still a chance that some team members cannot understand the functionality/properties of the product, or may some of them miss the training, or maybe they are not experts in the washing machines, but due to training the impact of the risk will be lesser as maximum members of the team will be able to explain the features of new machine effectively.
- Exploit the Risk
All the above techniques are used when the risk has adverse impact on the project. But what will happen if the risk has a positive impact on the project? Positive impact of risk mean opportunities. For example, the risk is that the new product like washing machines gains higher market share and we don’t have sufficient sales staff for the demonstrations? This is a positive risk, something that have some benefit to the project. In this type of cases, we want that the risk happens, not stop their happening or transferring the benefits to someone else! Risk exploitation strategy is used in these cases.
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