What is Risk Management?

Learn how to manage project risks

An important domain of project management is risk management. Every project has its risks, and in order to successfully achieve your project objectives, you must plan for the unexpected.  Before you can properly identify and manage risks, it’s important to understand risk management. So what is risk management and why is it important for any good project. 

Defining risk management

You can’t look at the basics of risk management without first providing a few definitions. The Project Management Institute (PMI) refers to project risk management as “the processes of conducting risk management planning, identification, analysis, response planning, response implementation, and monitoring of risks on a project” (PMBOK Guide 6th Edition, glossary).

ProjectManager.com defines it as: “Project risk management is the process of identifying, analyzing and then responding to any risk that arises over the life cycle of a project to help the project remain on track and meet its goal. Risk management isn’t reactive only; it should be part of the planning process to figure out the risks that might happen in the project and how to control that risk if it in fact occurs.”

The Prince 2 manual states that “The purpose of the Risk theme is to identify, assess and control uncertainty, and, as a result, improve the ability of the project to succeed.”

Here’s another take on the definition: “Project risk management covers all the activities and processes of planning for risk management, identification, and analysis of project risks, response planning, and implementation, and risk monitoring on a project. Effective risk management requires a conducive company culture, as well as the necessary risk management processes, structures and budget to identify, assess and address potential opportunities and adverse effects.” (OTC – www.ownerteamconsult.com)

So, all of the definitions are fairly aligned with one another and point in the same direction. That is at least a good start. Let me sum it up as I personally view this work: Having the right framework, processes and tools to support the uncertainties and opportunities brought about by the progressive elaboration of a project within an organization from inception to closing.

Common risk management frameworks

Project risk management is supported by a framework, processes, and tools which are specific to its delivery within the project methodology. Without these elements, we would not have project risk management at all. These might vary slightly from organization to organization, but at a basic level, they are much the same. A key success factor for any framework is that it needs to be adjustable or “tailorable” to each project but still remain the same for the organization. This will help in its adoption and understanding as it will not change but simply be flexible to the size or complexity of the project at hand.

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