Risk Management Foundation

In this chapter, we are going to cover the foundational concepts of Risk Management.

Let us start with the official definition of the term “Risk” - A Risk is an uncertain event or condition that, if it occurs, has a positive or negative effect on a project’s objectives. The term uncertain means we are not sure whether the event will happen. There is a likelihood that the event will happen and if it does, there will be consequences.

The practice standard for risk management says that – Dealing with threats and opportunities together typically leads to a gain of synergies and efficiencies.

While handling project risks we typically use two terms:

Individual Risk – A risk that may have an impact on project objectives
Overall Risk – Reflects the overall uncertainty of the project as a whole

During the course of the chapters on the PMI RMP Exam series, I have said this numerous times and since the concept is so important, I don’t mind saying it again. Risk Management is an iterative activity and must start at the early stages of a Project Lifecycle.

Who is Responsible for Risk Management?

This is a million dollar question which you already know the answer, don’t you?

Everyone

Yes, everyone in the project including all the stakeholders are responsible collectively to manage the risks in the project. But, the key people who drive the risk management effort for the whole project are the Risk Manager and the Project Manager. It would be a god idea to have a Risk Manager for every project but, in most cases there is no dedicated risk manager for a team and the Project Manager doubles over as the risk manager as well.

Common Risk Management Mistakes

As said in the previous section, without a collective effort from everyone in the team, risk management could fail very easily. But, this isn’t the only problem in most projects. Some of the common mistakes that people do in projects are:

• Conducting no risk management activities at all
• Even if risk management activities are conducted, it is done by one or a select few people only
Responsibilities of the Project Manager & Risk Manager with respect to Project Risk Management:
The following are some of the responsibilities of the Project Manager and Risk Manager:
• Getting the senior management’s support and carrying out as well as encouraging strong communication
• Determining risk tolerance levels & tailoring the risk management activities in the project to suit the needs of the project as well as the risk tolerance levels
• Generating an approved Risk Management plan that reflects the project’s risk management processes
• Carrying out and overseeing the Risk Management Plan activities and processes
• Reporting as required
• During project closure – determining what went well and where there are areas for improvement.
• You document lessons learned so that future projects could use them

Remember, just earlier on in this chapter I said that risk management is everyone’s responsibility but according to the practice standard for risk management though risk management is everyone’s responsibility, the project manager will be held accountable for successful completion of risk management activities in the project.

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Next: The Risk Management Processes