We already tried to understand why Risk management is important, you can give a quick read to check
We will see why the risk analysis is important. Three main tasks are associated with it and are
Controlling the risk
Risk management starts at the very early stage when the project starts. But the important part is this process continues through out project life. Risk management strategy should be based on corporate program risk management strategy if that exists. First step towards this process is to identify. One need to understand the project context. Once that is understood, the process of identification of risks continues.
The risks are identified and documented in Risk Register. We will see the detail later. Few risks are identified from the lesson learnt documents which is prepared based on the similar type of previous projects. Lets’s consider the below scenario.
A project requires some of the deliverable to be executed by an external vendor because of their expertise on the matter. But previous experience with them implies the team who are likely to be working on the project are normally over booked. Which gives rise of the risk that the project may exceeds the schedules. So this is a candidate for a risk and should be part of the Risk Register.
After the Risk is identified, next step is to assess it.
What is Risk Assessment?
Assessment of Risk broadly covers two important areas.
- Likelihood of the occurrence of the risk
- Impact of the risk
Based on which risk assessment and prioritization is done and that is called the Risk Assessment.
Now Likelihood of the risk implies how likely or what is the probability that the risk may occur. This is denoted by a number ranging from above 0 to less than 100. it is not denoted by 0 because that means the risk will not occur and also it cannot be 100 because that will not be denoting the risk probability rather than a certain event. The number is more will indicate the chance of occurrence is more.
The other important part of the Risk Assessment is identifying the Impact. Impact is the consequences of the event if occurs. It is normally identified as Minor, Medium and Major.
But also can be additionally identified as Moderate and Catastrophic.
Both likelihood and Impact together contributes towards the governing of the risk.
RISK = Likelihood X Impact
After this risk assessment is done, one is required to choose from the following approaches to deal with the risk.
They are called thfe Risk responses and we will see more about it in the next few write ups.