Project risk management is the art and science of identifying, analyzing, and responding to risk throughout the life of a project and in the best interests of meeting project objectives. There are six major processes involved in risk management such as risk management planning, risk identification, qualitative risk analysis, quantitative risk analysis, risk response planning, risk monitoring and control.
Risk management planning involves deciding how to approach and plan the risk management activities for the project. The main output of this process is a risk management plan. Risk can be categorized in terms of market risk, financial risk, technology risk, people risk, and structure/process risk. Risk breakdown structure is useful tools that can help project managers consider potential risk in different categories.
Risk identification involves determining which risks are likely to affect a project and documenting the characteristics of each. The main output of this process is the start of a risk register. Five common information-gathering techniques include brainstorming, the Delphi Technique, interviewing, root cause analysis, and SWOT analysis (strengths, weaknesses, opportunities, and threats).
Qualitative risk analysis involves prioritizing risks based on their probability and impact of occurrence. Qualitative risk analysis can be performed by using Probability/Impact Matrixes to calculate risk factors and Top Ten Risk Item Tracking technique. The main output of this process is updates to the register.
Quantitative risk analysis involves numerically estimating the effects of risks on project objectives. Quantitative risk analysis can be performed by Decision Trees and Expected Monetary Value, Simulation (Monte Carlo analysis), and Sensitivity analysis. The main output of this process is also updates to the register.
Risk response planning involves taking steps to enhance opportunities and reduce threats to meeting project objectives. There are four response strategies for negative risks are risk avoidance, risk acceptance, risk transference, and risk mitigation. Meanwhile, four response strategies for positive risks are risk exploitation, risk sharing, risk enhancement, and risk acceptance. Using outputs from the preceding risk management processes, project teams can develop risk response strategies that often result in updates to the risk register and project management plan as well as risk-related contractual agreements.
Risk monitoring and control involves monitoring identified and residual risks, identifying new risks, carrying out risk response plans, and evaluating the effectiveness of risk strategies throughout the life of the project. Project teams sometimes use workarounds when they do not have contingency plan in place. The main outputs of this process include recommended corrective and preventive actions, requested changes, and updates to the risk register, project management plan, and organizational process assets.
Risk management planning involves deciding how to approach and plan the risk management activities for the project. The main output of this process is a risk management plan. Risk can be categorized in terms of market risk, financial risk, technology risk, people risk, and structure/process risk. Risk breakdown structure is useful tools that can help project managers consider potential risk in different categories.
Risk identification involves determining which risks are likely to affect a project and documenting the characteristics of each. The main output of this process is the start of a risk register. Five common information-gathering techniques include brainstorming, the Delphi Technique, interviewing, root cause analysis, and SWOT analysis (strengths, weaknesses, opportunities, and threats).
Qualitative risk analysis involves prioritizing risks based on their probability and impact of occurrence. Qualitative risk analysis can be performed by using Probability/Impact Matrixes to calculate risk factors and Top Ten Risk Item Tracking technique. The main output of this process is updates to the register.
Quantitative risk analysis involves numerically estimating the effects of risks on project objectives. Quantitative risk analysis can be performed by Decision Trees and Expected Monetary Value, Simulation (Monte Carlo analysis), and Sensitivity analysis. The main output of this process is also updates to the register.
Risk response planning involves taking steps to enhance opportunities and reduce threats to meeting project objectives. There are four response strategies for negative risks are risk avoidance, risk acceptance, risk transference, and risk mitigation. Meanwhile, four response strategies for positive risks are risk exploitation, risk sharing, risk enhancement, and risk acceptance. Using outputs from the preceding risk management processes, project teams can develop risk response strategies that often result in updates to the risk register and project management plan as well as risk-related contractual agreements.
Risk monitoring and control involves monitoring identified and residual risks, identifying new risks, carrying out risk response plans, and evaluating the effectiveness of risk strategies throughout the life of the project. Project teams sometimes use workarounds when they do not have contingency plan in place. The main outputs of this process include recommended corrective and preventive actions, requested changes, and updates to the risk register, project management plan, and organizational process assets.
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