Project Risk Management

Project Risk Management - Definition, Processes, Templates

project risk managementYou find the definition and the processes involved in Project Risk Management (PMBOK®) as well as free downloadable templates further down on this page.

The Project Risk Management Plan is a component of the Project Management Plan that describes how risk management activities will be structured and performed.

Project Risk Management Definition (PMI)

Project Risk Management includes the processes of conducting risk management planning, identification, analysis, response planning, and controlling risk on a project. The objectives of project risk management are to increase the likelihood and impact of positive events, and decrease the likelihood and impact of negative events in the project. (PMBOK® Guide)

Project Risk Management Processes (PMI)

Plan Risk Management

Plan risk management is the process of defining how to conduct risk management activities for a project.

Identify Risks

Identify risks is the process of identifying individual project risks as well as overall sources of project risk, and documenting their characteristics.

Perform Qualitative Risk Analysis

Perform qualitative risk analysis is the process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics.

Perform Quantitative Risk Analysis

Perform quantitative risk analysis is the process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives.

Plan Risk Responses

Plan risk responses is the process of developing options, selecting strategies, and agreeing on actions to address overall project risk exposure, as well as to treat individual project risks.

Implement Risk Responses

Implement risk responses is the process of applying agreed-upon risk response plans.

Monitor Risks

Monitor risks is the process of monitoring the implementation of agreed-upon risk response plans, tracking identified risks, identifying and analyzing new risks, and evaluating risk process effectiveness throughout the project.

Download Area Project Risk Management Templates

Project Risk Management

Source: Wikipedia

Project Risk Management is an important aspect of Project Management. According to the Project Management Institute's PMBOK, Project Risk Management is one of the ten knowledge areas in which a project manager must be competent. Project risk is defined by PMI as, "an uncertain event or condition that, if it occurs, has a positive or negative effect on a project’s objectives.

Project Risk Management remains a relatively undeveloped discipline, distinct from the Risk Management used by operational, financial and underwriters' risk management. This gulf is due to several factors: Risk Aversion, especially public understanding and risk in social activities, confusion in the application of risk management to projects, and the additional sophistication of probability mechanics above those of accounting, finance and engineering.

With the above disciplines of operational, financial and underwriting risk management, the concepts of risk, risk management and individual risks are nearly interchangeable; being either personnel or monetary impacts respectively. Impacts in Project Risk Management are more diverse, overlapping monetary, schedule, capability, quality and engineering disciplines. For this reason, in Project Risk Management, it is necessary to specify the differences (paraphrased from the "Department of Defense Risk, Issue, and Opportunity Management Guide for Defense Acquisition Programs"):

  • Risk Management: organizational policy for optimizing investments and (individual) risks to minimize the possibility of failure.
  • Risk: the likelihood that a project will fail to meet its objectives.
  • A risk: a single action, event or hardware component that contributes to an effort's "Risk."

An improvement on the PMBOK definition of Project Risk Management is to add a future date to the definition of a risk. Mathematically, this is expressed as a probability multiplied by an impact, with the inclusion of a future impact date and critical dates. This addition of future dates allows predictive approaches.

Good Project Risk Management depends on supporting organizational factors, having clear roles and responsibilities, and technical analysis.

Chronologically, Project Risk Management may begin in recognizing a threat, or by examining an opportunity. For example, these may be competitor developments or novel products. Due to lack of definition, this is frequently performed qualitatively, or semi-quantitatively, using product or averaging models. This approach is used to prioritize possible solutions, where necessary.

In some instances it is possible to begin an analysis of alternatives, generating cost and development estimates for potential solutions.

Once an approach is selected, more familiar risk management tools and a general project risk management process may be used for the new projects:

Project Risk Management

Project Risk Management Processes

Plan Risk Management
Plan risk management is the process of defining how to conduct risk management activities for a project.
Identify Risks
Identify risks is the process of identifying individual project risks as well as overall sources of project risk, and documenting their characteristics.
Perform Qualitative Risk Analysis
Perform qualitative risk analysis is the process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics.
Perform Quantitative Risk Analysis
Perform quantitative risk analysis is the process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives.
Plan Risk Responses
Plan risk responses is the process of developing options, selecting strategies, and agreeing on actions to address overall project risk exposure, as well as to treat individual project risks.
Implement Risk Responses
Implement risk responses is the process of applying agreed-upon risk response plans.
Monitor Risks
Monitor risks is the process of monitoring the implementation of agreed-upon risk response plans, tracking identified risks, identifying and analyzing new risks, and evaluating risk process effectiveness throughout the project.

Finally, risks must be integrated to provide a complete picture, so projects should be integrated into enterprise wide risk management, to seize opportunities related to the achievement of their objectives.

Project Risk Management Tools

In order to make project management effective, the managers use risk management tools. It is necessary to assume the measures referring to the same risk of the project and accomplishing its objectives.

The Project Risk Management system should be based on the competences of the employees willing to use them to achieve the project’s goal. The system should track down all the processes and their exposure which occur in the project, as well as the circumstances that generate risk and determine their effects. Nowadays, the Big Data (BD) analysis appears an emerging method to create knowledge from the data being generated by different sources in production processes. According to Górecki, the big data seems to be the adequate tool for Project Risk Management.

15 Comments

  1. I would really appreciate if you could have a guide on how to use the risk register template. any chance?

  2. Marc, how do I use the description area under the risk status report? the drop down list for total number of entries in category is not working.

  3. Very great set of templates.
    Thank you very much for sharing this and allowing us to customize it to our need and taste.
    Cheers

  4. I know thіs site offers quality depending articles and adɗitional material,
    is there ɑny other web page which offers these kinds of data in quality?

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.