Application of risk management

Risk management

Risk management is essential to the success of a project. It is a process that helps identify potential early on, so that the action plans can be implemented to prevent them from turning into real problems or issues later in the lifecycle of the project.

Risk management process

Essentially, there are 5 stages of the risk management process:
* Planning
* Identify
* Assessment
* Handling
* Monitoring and reporting

HS of rap following para describes a bit on each step.

Planning

Planning phase sets stage on the project is going to manage project risks. To do this, in developing a project risk management plan. This plan will identify risk management team, defining their roles and responsibilities and documenting the risk evaluation criteria that will be used to assess the risks identified. In addition, it will describe the plan teams on how to monitor them and report the risks.

Identification

The second step is the identification of risks. This is where gets team to determine the potential risks of the project and documenting in exposed project registry. Risks can come from many different areas such as the manufacturing process, use of the instrument, staffing, project plan, budget and schedule. Risks may also arise from the experience and lessons learned from other projects as well. Hold a meeting of brainstorming, as a group, is a good way to identify risks. It gets people thinking and allows people to build on each other thoughts and experience. It is important to remember that the identification of risks does not stop in a meeting. New and different risks comes as project moves through its lifecycle of the project.

In the definition of a risk, it is useful to use an "If" type "Then" statement as shown below.

If the condition, then the result will occur.

Using such a statement helps to clearly define and describe the risk and standardizes the way we talk about risk.

Evaluation

The third step is evaluation of the risks identified. Using the evaluation criteria defined in the risk management Plan risk must be assessed according to the likelihood of risks happening and consequence if the risk to occur. It is important to evaluate the result of cost, schedule and technical risk and choose the level of consequences that could have the highest impact. For example when assessing a risk of cost stand point it would not be too high, but from an annex stand point it would be higher then the top level of consequence for the calendar should be selected.

Handling

The following step in the process of risk manages risks. There are 4 ways to manage the risks:
* Mitigation - who develops action plans to reduce the likelihood and consequence of risk.
* Avoidance - changing something completely avoid the risk (i.e. change of design to completely avoid risk)
* Transfer-transferring the risk to another party (i.e. purchase insurance).
* Acceptance – this allows the risk of potentially occur without the implementation of any mitigation plan. This may be due to the cost of the mitigation plan is that if the risk materializes.

Mitigation plans are the common way to reduce the overall risk level. Mitigation plans should be reviewed to no new risks have been introduced to the mitigation plan. If any new risks have been developed by the mitigation plan that they must be added to the register risk assessment team.

Monitoring and reporting

The fifth step is the monitoring and reporting. This step is to ensure that management plans implemented effectively work to reduce the likelihood and consequence of risk. The risk must be reviewed and reassessed to determine the likelihood and consequence of the risk that the steps described in the action plans are completed. Although the risk cannot be completely eliminated should be reduced to an acceptable level with minimal residual risk. Even low risk should be monitored to ensure that they remain low risk.

Risks on a project must be reported within a risk management report. The report will display a list of identified risks, management plans to reduce risks and a matrix of risks to show how risks fall into the category of the high, medium and low.

Benefits of risk management

Risk management is an important activity that can prove beneficial for project success if started early in the lifecycle of the project. It can be a powerful tool to identify weaknesses early so that the team can bring action plans to manage risk and prevent them from turning into a problem later. It saves to turn time and money as you proactively respond to a problem rather than react to a problem or a question in the future.

Jim Hardin
http://www.jimyjack.com