Managing Risks in Project Management

What is risk management in projects?
Project risk management is the process of identifying, analyzing, and responding to any risks that arise during the life cycle of a project in order to keep the project on track and achieve its goal. Risk management is not only reactive; It should be part of the planning process to find out what risks may arise in the project and how that risk can be managed if it does occur.

A risk is anything that can potentially affect your project schedule, performance, or budget. Risks are opportunities and, in a project management context, when they become reality, they are classified as “issues” that need to be addressed. Risk management is therefore the process of identifying, categorizing, prioritizing and planning risks before they become problems.

Risk management can mean different things for different types of projects. In large-scale projects, risk management strategies can include extensive detailed planning for each risk to ensure mitigation strategies are applied when problems arise. For smaller projects, risk management can mean a simple, prioritized list of high, medium, and low priority risks.

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Risk is defined as the uncertainty that an event or condition may occur and will have an impact on one or more of the project’s objectives; size, schedule, cost or quality (Soliman, 2018). Risk management is becoming increasingly important as companies launch larger and more complex projects with aggressive schedules, budgets and commitments to remain competitive in the dynamic business environment. Risks are inherent to any project and can be influenced by internal and external sources over which the team may have no control. When teams attempt to manage risk, it is critical to manage the source of the risk, if possible, rather than the risk itself. A detailed understanding of the root cause is critical before teams move forward with a solution. By addressing one source of risk, the team gains the strength to resolve the root of the risk, allowing more than one risk to be addressed at the same time (Tiendung et al., 2009). If the root cause is not fully addressed, there is a risk that the solution will not fully address the risk or that the solution will create risks in the process. In physics there is an answer to every action. This is no different in project management, so it is important to take the right action to ensure that the response is positive. Organizations that understand this and take the time to develop and use robust risk management processes are much more likely to successfully complete a project on time and on budget (Baharuddin & Yusof, 2018). Without a risk management process, companies run the risk of failure.

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Risk management planning
Risk management should be a mainstay of all project management, as should a schedule and budget. It is something that should be used in all projects, no matter how big or small the project is. Project risks can have widespread and multidimensional consequences outside the company, which can include community safety, as well as social and environmental issues (Arami & Ownagh, 2017). For example, between 2018 and 2019, the Boeing 737 Max had incidents that resulted in the death of 346 people and it is estimated that they cost Boeing $ 4.9 billion. Engineering projects involve engineers, technicians, suppliers, and subcontractors, creating complex project management. This means that all parties must be involved to try to save money, time, increase quality and optimize production, all of which come with new risks that must be discussed and understood. (Moser, et al., 2016) While Boeing lobbied to certify the aircraft to make commitments to a robust risk management plan, a detailed analysis may have provided stakeholders with information that could have altered the decisions made. Those who lost their lives could still be alive if the risks were fully understood. The corners that were cut due to the risk of the company not meeting its commitment may have saved millions early on, but that doesn’t count toward the cost of their actions.

This situation emphasizes the fact that risk management is not an activity that is only needed at the beginning of a project, but is a dynamic task that must be periodically reassessed throughout the project. As requirements change and projects evolve, so do the risks associated with the project. With many unknowns in the project initiation phase, it would be impossible to identify all the risks that will arise during a project. Teams that adapt to project risk project development can avoid deliverable failures and budget overruns through scheduling slides, additional resources, and potential financial penalties for missing deliverables (Gosnik, 2011). When new risks are identified, it is important that these risks are shared with all stakeholders and the direction of the project is evaluated.

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