Topic 7.1: Risk management

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Although we have talked a fair bit about risk to this point, let's stop and reconsider what we actually mean by risk in the project context.

You may recall that in preparation of the business case we were primarily concerned with the risk to the organisation of proceeding with one or more project alternatives.

Theoretically, though, by the time we get to the planning phase, organisational risk is not the project manager’s problem anymore (if it ever was); that risk should have been given appropriate consideration and dealt with in initiation.

In fact, by authorising the project, the organisation is effectively saying we accept that risk, now get on with it!

Therefore the project manager is principally concerned with risks to project delivery; in other words, any uncertain event or condition that might affect project outputs.

This is not to say that outcome realisation is no longer important; indeed, any changes that are made to the project plan in the course of delivery should be very clearly understood in that light.

This is something we will return to in detail in a later module.

Nevertheless, for the purposes of project planning and the discussion here, we will limit ourselves to project output risks.

From here on, the whole point of project risk management is to identify as completely as possible any potential issues that may arise, and predetermine how these might be resolved.

In that way, when uncertainty conspires to frustrate the project, we have at our disposal the resources necessary to continue with the least disruption.

The risk management process

The project risk management process follows five distinct stages that recur in a cycle:

Risk identification

Risk analysis

Risk prioritisation

Risk treatment, and

Risk monitoring and control.

And as with all things project management, this process is dependent on and governed by the quality of your stakeholder consultation and engagement.

Note too our careful use of language: a risk is an uncertain event (in other words, it has not yet occurred) that may have one or more impacts on the project; whereas an issue is an event that has occurred and is impacting upon the project.

It is also important to flag that even though we generally think of risks as something negative (as in Murphy’s Law), the processes we follow here are equally reliable in addressing opportunities; that is, uncertain events that might have a positive impact on the project.

Keep that in mind as we introduce these techniques to consistently address project risk.