The objective of risk management is to develop response actions to minimize the impact of possible negative events during every phase of a project. The process also works to increase the impact of the positive events and mitigate the problems associated with making changes (Project Management Institute, © 2013). The risks in many projects are multifaceted in nature because the positive impact created at one stage of a project, could have dire consequences at another. For example, occasionally in construction projects, floor slabs will have design defects that will not properly drain and eliminate the migration of water breaching the inside of the structure. A minor re-design of the slab configuration will eliminate the drainage problem but cause a significant structural issue with roof trussing and its ability to hold the house together during a minimal shift.
The changes made to correct the slab issue are great, but the problems it will create down the line are greater unless the initial solution is analyzed all the way through the project. Identifying the risk and plausible solutions is done through a series of procedures, techniques, and analysis to meet the objectives of risk management. Another dimension of the risk management kaleidoscope understands the definition of risk from various viewpoints and positions with stake in the project. The risk management operation requires a planning process describing how to conduct the risk management based on the activities and tasks necessary to complete the work. There is an intangible element with assessing the risk of defining the tolerances and attitudes of the organizational leaders and stakeholders.
A project manager with experience will have a more complete understanding of this component performing an internal analysis of risk appetite and risk tolerance levels surrounding the organization and the primary stakeholders. The amount of risk for a project is measured, analyzed, and quantified with numerous equations, graphs, and statistical parameters to confirm and justify the data, but understanding what is in the head of corporate leaders and stakeholders and the level of risk they are comfortable with; is not on a spreadsheet. The understanding of this type of risk management comes from experience and high-level communication skills put into an action plan before the project is started. The risk management process is dependent on several documents for information to achieve its objectives, respond accordingly with monitor and control procedures specific to the project (Project Management Institute, © 2013).
The risk team will rely in the risk management plan to identify and classify their roles and responsibilities in the key areas. The team also collects information from cost management plan that assists in controlling levels of precision, accuracy, and units of measure. The cost management for risk managers involves more controlling of operational expenditures than total cost of the project (Cooper, Raymond, & Walker, 2005). The information provided by the schedule management plan is also a vital document especially in conjunction with the cost management plan to control progression throughout the project life cycle. The scope baseline document is a mandatory piece of information the risk team will look closely at for possible assumptions and uncertainty that might exist. Information for the project that the teams will use throughout the project as reference and updating tools are the stakeholder register, procurement documents, and enterprise environmental factors just to name a few (Project Management Institute, © 2013).
The risk management team completes the identification process with the creation of the risk register and a defined risk management plan (RMP) explaining the risk activities, risk challenges, risk treatment, and structured response in detail. This RMP defines the tools, resources, roles, and responsibilities for managers and line workers alike to minimize project defects and enhance project production. The RMP delivers four main objectives significant to the project, by categorizing the risk into different levels for each phase and department. The risk categorization provides the probability and impact of the risk to gain a better understanding of the impact on the project in terms that are explicit to each, department, or stakeholder at every stage. The risk management matrix has four primary project objectives defining a plan to address cost, time, scope, and quality.
The risk management during the initial planning stages is performed the same way with adjusted tolerances because of limited information. (Project Management Institute, © 2013). Provided below is a Risk Breakdown Structure (RBS) as defined in the; A Guide to the Project Management Body of Knowledge (PMBOK® Guide). The RBS is performed on the information in the course syllabus “. Your organization has decided that to be successful in the global economy it must expand its supply base into China” (The Apollo Group Inc., 2010). Project Risks: Internal risks of compatibility with stakeholders and foreign lending institutions. The technical capabilitites and servicing capacity for optimum production levels. External Risks: Implmenting organizational objectives in bureaucratic ccontext of host country and meet essential program operations. Risk associated with enviromental enterprise and conceptual framework. Shortage of resources, poor infrastructure, foreign currency, cultural and socioeconomic enviroment. Incomplete understanding of project objectives, design, and sustainability to promote future growth.
Cooper, D. F., Raymond, G. S., & Walker, P. (2005). Project Risk Guidelines: Managing risk in large projects and complex procurements. Hoboken, NJ: John Wiley & Sons.. Kerzner, H. (2009). Project Management: A systems approach to planning, scheduling, and controlling (10th ed.). Hoboken, NJ: John Wiley & Sons. Project Management Institute. (© 2013). A Guide to the Project Management body of knowledge. (PMBOK® Guide), Fifth Edition. Retrieved 02 17, 2014, from http://common.books24x7.com/toc.aspx?bookid=51356. Sollish, F., & Semanik, J. (2007). The procurement and supply manager’s desk reference. Hoboken, NJ: John Wiley & Sons. The Apollo Group Inc®. (2010). Syllabus CPMGT/302 Procurement and Risk Management. School of Business. Pheonix, AZ: University of Phoenix.