Risk or threat is common and found in various fields of daily life and business. This concept of risk is found in various stages of development and execution of a project. Risks in a project can mean there is a chance that the project will result in total failure, increase of project costs, and an extension in project duration which means a great deal of setbacks for the company. The process of risk management is composed of identifying, assessing, mitigating, and managing the risks of the project. It is risk management that drives the decisions that may affect the development of the business capability and also the management of the project. . Issues differ from risks, as risks relate to the events that could be revealed or emerge and end up affecting the project’s scope, budget, business performance, management objectives and schedule. Risks are measured in accordance to their most probable chance or chances of occurrence and the way that they can impact the program (Hillson & Simon, 2007). Risk can be defined as any kind of trepidation that could significantly impact the capability of the project to meet its scope, budget, change management, business performance objectives, and schedule.
The Risk Management Plan is used as guidance to all the involved team members on managing the project wide risk levels and the team level risks. The process of risk management also allows the project to create strategies to efficiently and effectively attend to the potential obstacles that may arise to hinder the success of the project. When the project scope is clearly defined the foundations for developing the project plan are established. The project scope is basically a definition of the intended end results or the main mission of the project (Gray & Larson, 2008). Having a definitive scope is essential to the overall success of the project because it is the root or the defined purpose of the project. Without a scope the team would be struggling about the project with no concrete purpose. It is the scope the interlocks all the various elements of the project’s plan.
Before any plan is made, it is essential that the project team uses an array of information sources to scope out the needed data which will aid in the development of a risk management plan. Therefore, it is important that the team tracks risk and all involved risk management activities that will enable it to develop plans to mitigate the risk. One method of finding information is to analyze projects that are similar and might also have similar risk. This is considered as being historical information which gives insight into the history of how the risks were managed, mismanaged, or discovered during the project (Hillson & Simon, 2007). This can provide risk teams and project managers with crucial information in regards to the current project. It is best for the project team to research through commercial databases and company library volumes or project databases that can give them insight about the risk that may occur in their specific project.
The process of risk analysis is also imperative to the project’s success. If there is no established processes the team of the project is operating with blind spots throughout the course of the lifecycle of the project being unprepared for what may happen to result in an impact to the project scope, cost, and schedule. In addition to this, contract terms and conditions that are vague or ambiguous are a factor to the failure of the project (Hillson & Simon, 2007). All parties that are participating in the project are somewhere along the line bound to misunderstand the requirements of the consumers which may led to setting the stage for lawsuits that are costly. There are other forms of documentation that can be used for the mitigation of risk that is found in a project. Another essential documentation that is often used in parallel to the risk management plan is the work breakdown structure (WBS). It is used as a means of input to the risk management plan processes (Heldman, 2005).
It usually helps the project managers and the project team to recognize the components of a project that are at risk or certain risks that are unique to a specific area of the project than compared to a risk that is commonly found throughout the project. There also various qualitative analysis that can be used to in identifying and analyzing risk in a project. The method of qualitative risk analysis involves the assignment of a numeric value to the scales. This risk analysis is normally used for projects that are larger and that risks have a greater and more significant impact (Heldman, 2005). There are various software tools and methods that can be used, an example would be the use of Monte Carlo analysis for calculating values for projects that are large and difficult. There are various values that are assigned to the magnitude or intensity of the risk, for example, High-.80, Medimum-.50, Low-.10; these are used to rate and prioritize the risks (Heldman, 2005).
A risk registry is also an essential documentation that can be used analyze the quantitative aspect related to risk and threats that are found throughout the project. The Risk Breakdown Structure is created to identify the various risks categories in the project so that they can be in the prioritized response plan (Heldman, 2005). The nature of each of the risks determines the impact and the significance that it has on the project’s success. Therefore, there should be several talks and meetings held between stakeholders to clear up high level issues in regards to those that have terms of contracts, terms and conditions. This is the pinnacle risk as it is causing delays in the operations and leading to the stakeholders making bad decisions that have negative impact on the overall project.
Gray, C. F. & Larson, E. W. (2008). _Project Management: The Managerial Process_. Boston, MA: McGraw-Hills Companies, Inc.
Heldman, K. (2005). _Project Manager’s Spotlight on Risk Management._ San Francisco, CA: Jossey-Bass.
Hillson, D & Simon, P. (2007). _Practical Project Risk Management: The ATOM Methodology_, Vienna, VA: Management Concepts, Inc.
Project Management Institute. (2000). _A Guide to the Project Management Body of Knowledge (4th ed.)._