Implementing a Project Risk Management System

The non-inclusion of the process of risk management during the planning of the project might prove hazardous for the organization.

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Defining the project risk management system

The project risk can be understood as what negative or positive effect an uncertain condition will have on project objectives if arise.

The PRM (project risk management) system must analyze all the processes and the circumstances that can generate project risk and also determine mitigating the effect of the risk on achieving the project goals.

Project risk management may examine an opportunity or might begin with recognizing a threat. For example, these can be novel products or a competitor’s progress in product/project development.

The adequate PRM tool nowadays is the big data (BD) analysis.

Overview of project risk types

Risk management in project management can be defined as the practice to identify, evaluate, prevent, or mitigate risk arising in a project that can impact our desired results.

Types of project risk are

•  Schedule– unplanned scheduling conflicts that can delay the project
•  Cost– the project events that can impact the budge.
• Performance– events that can provide results not according to the project specification and are inconsistent

For example, hurricane Katrina is a perfect example of project risk management negligence made by the government. The ignored warnings and weather reports badly affected the and construction in the country that led to property destruction worth Millions.

Process of project risk management

The risk management process involves 5 steps that help manage risk.

• Identify the risk– project manager takes input from the project team and notes them down in the risk checklist or Risk register. They conduct it through SWOT analysis, scenario analysis, cause and effect analysis, and fishbone.
• Analyze the risk– using quantitative and qualitative tools to assess the most critical risk. The tool used is probability and decision analysis
• Risk evaluation– ranking the risk by analyzing its risk magnitude and its consequences. Cost-benefit analysis is to be performed to determine optimal strategies for mitigating the risk. The techniques used are contingency planning and existing standard operating procedures.
• Treat the risk– providing the highest rank to the most critical risk and making a plan to modify and to treat the risk by using risk response planning to achieve acceptable goals

• Risk monitoring– project managers go through project risks with a risk register to track, review, and monitor risk. It requires periodic status meetings, feedback, and after-action review. The techniques used are risk audit, variance analysis, and contingency analysis.

Importance of risk management for project success

The significance of risk management in making a project successful is

•  Identifying risk early in the project
• Planning for success by identifying potential impact and probability of occurrence of the risk
• Communicating risk to team members, stakeholders, and sponsors to ensure project execution smoothly
• Prioritizing the risk having higher Probability and impact than others
• Considering threats as well as opportunities to increase the chances of a project to become more profitable
•  Risk assessment
•  Developing risk responses to minimize the negative impact of the project
•  Developing a contingency plan for the risk
•  Developing preventive measure task for the risk

Implementation of the project risk management system

•  The project manager should support risk analysis and energize the team managers
•  Use of appropriate project management tools such as critical path method (CPM) and estimate at completion (EAC)
•  To conduct an independent risk assessment
•  To provide training to the project members regarding risk analysis and its concept
•  To organize the data known as risk banding
•  To gather quantified risk information by conducting risk data interviews
•  Performing the risk analysis and selecting the right software to handle it
•  To propose your risk mitigation approaches and alternatives
•  To periodically benchmark the process of risk management

Conclusion

Project risk management is the key component for better project scheduling, cost estimation, time management, and project plan. The stepwise approach that we have studied so far if included in the project management properly then the project can become successful.

The benefit of project risk management is that you get an opportunity to correct, utilize, and tackle the problem that can arise during the execution or completion of the desired project.

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