Managing Risk

What is Risk Risk is the chance of things happening that could have an impact on the outcomes it achieves, or on the objectives of the various functions it undertakes. Risk can be divided into two elements: The likelihood of something desirable or undesirable happening The likely consequences if any one or all of the things that could happen do eventuate.

What is Management Risk? Risk management provides structured systems for identifying and potential risks, and devising and implementing responses appropriate to their impact: strategies of risk prevention risk transfer impact mitigation risk acceptance Within a single activity or proposal, a mix of each of these strategies may have application for different individual risks.

Types of risk Strategic, for example a competitor coming on to the market Compliance, for example responding to the introduction of new health and safety legislation Financial, for example non-payment by a customer or increased interest charges on a business loan Operational, for example the breakdown or theft of key equipment Others: health and safety risks, commercial risks, employee risk management, environmental risks.

Risk management process

Step 1 Familiarity with activity design Step 2 Risk assessment Step 3 Risk response planning Step 4 Reporting Step 5 Implementing

Risk management process Step 1 Familiarity with activity design -Consider strategic objectives and context -Consider performance indicators -Consider key elements or components

Risk management process Step 2 Risk assessment -Identify risks -Analyse risks -Rank risks

Risk management process Step 3 Risk response planning -Identify responses to risks -Select best response

Risk management process Step 3 Responses : -accept the risk -avoid the risk -reduce likelihood of the risk occurring -impact mitigation

Risk management process Step 4 Reporting -Write risk management plan Step 5 Implementing -Implement risk management plan -Monitor and communicate risks -Review and re-evaluate

Benefits of Managing Risk Benefits at the program level: more effective strategic planning more effective strategic planning as a result of increased knowledge and understanding of key risk exposures fewer costly surprises fewer costly surprises, by preventing what is undesirable from occurring better outcomes better outcomes in terms of program sustainability, effectiveness and efficiency greater openness and transparency greater openness and transparency in decision-making and ongoing management processes.

Benefits of Managing Risk Benefits at the activity level: activities are more efficiently and effectively managed activities are more efficiently and effectively managed because advisers and stakeholders understand the activity’s vulnerability to risk and take adequate preventative or mitigation measures fewer costly surprises fewer costly surprises in activity implementation more likelihood of activities attaining their objectives more likelihood of activities attaining their objectives because constraints are minimised and opportunities maximised more likelihood of outcomes being sustainable more likelihood of outcomes being sustainable greater openness and transparency greater openness and transparency in activity decision making and management processes.

&r.l3= &r.s=b&topicId= Samuel J. Mantel Jr, Jack R. Meredith, Scott M. Shafer, Margaret M. Sutton, Project Management in Practice, second edition Timothy J. Kloppenborg, 2009, Project Management: A Conteporary Approach References