Risk Management PROJECT MANAGEMENT

review

A risk is a possible future event that may affect

your project either positively or negatively.

that a future occurrence may cause harm or losses, while

noting that risk also may provide possible opportunities.

order to balance potential gains against potential losses and avoid

expensive mistakes.
Risk management is best used as a preventive measure rather than as a reactive measure.

and enact measures to control or prevent, losses within a

company.
The risk-management process involves identifying exposures to potential losses, measuring these exposures, and deciding how to protect the company from harm given the nature of the risks and the company's goals and resources.
While companies face a host of different risks, some are more important than others. Risk managers determine their importance and ability to be affected while identifying and measuring exposures.

on the character of effects: dynamic (pure) and (static) speculative;
Depending

on the sphere: industrial, commercial, financial, insurance, trade ;
Other: country, currency, tax, credit, portfolio, organizational…
Another classification: external risk (political, ecological, currency, macroeconomic) and internal (project risk)

portfolio;
Depending on the possibility of the diversification: diversified, non-diversified;
Depending on

the influence on the price: essential, inessential;
Depending on the possibility of the insurance: insured, non-insured;
Depending on the possibility to manage them: uncontrollable and controllable.

systematic design, implementation and monitoring of actions to identify, prioritize

and analyze project risks and to devise, select and implement responses to optimize these risks.

systematic design, implementation and monitoring of actions to identify, prioritize

and analyze project risks and to devise, select and implement responses to optimize these risks.

definition are explained below:
• Systematic: project risk management is a

structured method to deal with risks, including clear responsibilities, priorities and tasks. This contrasts with an ad hoc approach that relies on luck to succeed.
• Action: performing tasks is central to risk management. In essence, it is about head, hands and eyes: to think up tasks, carry them out and monitor if they materialize .

project risks that may be present. What risks form an

opportunity or threat to the project?
Prioritize: Sorting the risks in order of importance. This enables the project team to deal with the largest risks first
Analyze: an understanding of risks is a precondition for taking effective measures. Analysis looks at the characteristics of individual risks and the relationship that exist between risks. Analysis can be qualitative or quantitative
Responses: a perfect analysis is beautiful, but it only adds value if it results in workable responses that change a project’s risk profile.

the risk management.
2. Risks identification.
3. Evaluation and analysis.
4. Risk elimination.
5.

Risk monitoring.

1. Sphere where the risks appeared.
2. Type of the risks.
3.

Interested parts and its expectations.
4. Quantitative risk characteristics.
5. Risk management, control.
6. Recommendations.
7. Strategic changes.

review is a project team effort. While you may be

a very good team/project leader, it is always better to have three or four heads working together. Here is a simple process to follow:
1. Generate a list of risks/problems that can impact your project
2. Assign a probability and impact rating
3. Prioritize the risks with those most serious at the beginning of your list
4. Develop strategies to minimize or eliminate the risks

to change-out a plant process control system. As a team,

and by brainstorming, we have generated the following potential problems: (Note that these are not yet prioritized)

start-up the new system
Vendor may be late in delivering

the system
The plant manager may change the plant “outage” date, thereby shifting our implementation schedule
Our internal engineering resources are working on multiple projects and may not be available when needed
The reorganization at corporate headquarters may affect our project funding

external problems to deal with. With our list now generated,

it is necessary to assign probabilities and impacts. In this case we want to determine the probability that the event may occur (High, Medium or Low); and, if so, the impact (High, Medium or Low). We have taken the above list and put into a table format as follows: (Note that these have now been prioritized based on risk probabilities/impacts)

eliminated because it was a Low-Low. There is no point

in developing strategies for risks that have a low probability of occurring and a low impact even if they do. We have chosen to accept this risk. Always develop more than one strategy for each risk.
Also, this type of risk review is a qualitative review because we have not developed a cost impact for each risk. A quantitative risk review would require the project team to have a strong grasp of cost impacts and also takes much longer to conduct.

done on a continuous basis throughout a project. This is

because new risks will evolve as your project unfolds.
Typically, you should perform a risk review at the following times:
? At the beginning of a project
? When the project goes through a shift from concept to planning to implementation to close
? Anytime you have a “gate” review scheduled
? Anytime a major risks event that you have identified is triggered

strategies developed for the above hypothetical project, it may be

necessary to adjust the schedule or increase the contingency funding.
It may be that one should add schedule “milestones” to reflect vendor progress or to be more proactive in resource planning.
Remember, the purpose of a risk review is to provide insight about potential project problems and direct where you should spend extra time and effort in preventing them.

EV
2) the standard deviation (represented by the Greek letter sigma,

σ)