Understanding and Managing Risk in Your Project

1 of 9 in Series: The Essentials of Managing Risk in Your Project

To manage projects effectively you need to be able to recognize and manage risk. Risk is the possibility that you may not achieve your product, schedule, or resource targets because something unexpected occurs or something planned doesn’t occur. All projects have some degree of risk because predicting the future with certainty is impossible. However, project risk is greater

  • The longer your project lasts

  • The longer the time is between preparing your project plan and starting the work

  • The less experience you, your organization, or your team members have with similar projects

  • The newer your project’s technology is

In other words, anything that can cause you either to fall short of or to exceed your established project targets, if it occurs, is considered a risk. While some approaches for analyzing and responding to both types of risks are similar, this chapter presents approaches for identifying, evaluating, and managing negative risks. In this chapter, the term risk always refers to a negative risk or threat, unless otherwise noted.

Risk management is the process of identifying possible risks, assessing their potential consequences, and then developing and implementing plans for minimizing any negative effects. Risk management can’t eliminate risks, but it offers the best chance for successfully accomplishing your project despite the uncertainties of a changing environment.

So how can you address your project’s risks? Take the following steps to determine, evaluate, and manage the risks that may affect your project:

  1. Identify risks.

    Determine which aspects of your plan or project environment may change.

  2. Assess the potential effects of those risks on your project.

    Consider what can happen if those aspects don’t work out the way you envision.

  3. Develop plans for mitigating the effects of the risks.

    Decide how you can protect your project from the consequences of risks.

  4. Monitor the status of your project’s risks throughout performance.

    Determine whether existing risks are still present, whether the likelihood of these risks is increasing or decreasing, and whether new risks are arising.

  5. Inform key audiences of all risks involved with your project.

    Explain the status and potential effect of all project risks — from the initial concept to the project’s completion.

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The Essentials of Managing Risk in Your Project

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