Project Smart ~ Exploring trends and developments in project management today

Calendar iconNot recorded
Adobe PDF icon

Risk Management Options

~ By Paul Bower

Risk management written on a puzzle piece

Risk management as a shared or centralised activity must accomplish the following tasks: identity concerns; identify risks and risk owners - evaluate the risks as to likelihood and consequences; assess the options for accommodating the risks; prioritise the risk management efforts; develop risk management plans; authorise the implementation of the risk management plans; track the risk management efforts and manage accordingly. It is possibilities that are being accommodated. It is management's job to do the planning that will accommodate the possibilities. The customer is the final judge, but internal goals should be to a higher level than customer expectations.

The key words in risk management are: proactive; management; accommodate; acceptably; professional; possibility. The need for new risk assessment and management techniques is required to continuously track down potential and critical risks, and to develop strategies for handling these risks, for example: during product development. It is obvious that without a strong risk management plan as part of the process, a company will waste time, money, and resources, and will fail to manage their projects correctly.

Risk management is the sum of all proactive management directed activities within a programme that are intended to acceptably accommodate the possibility of failures in the elements of a programme. From an organisation's perspective a failure is anything accomplished in less than a professional manner and/or with a less-than-adequate result.

Risk Management Options

Risk management options are usually cited as risk handling options subdivided as: avoidance, control, assumption, risk transfer, and knowledge and research. Generally, the assessment of management options is a hip shot since the necessary decisions must occur early in a programme when things are still fuzzy. However, if experienced personnel are given the facts, one can expect very good decisions since there is seldom any real mystery about the practicality of options available. (The practicality of any option is usually just an issue of schedule and funding.)

Avoidance: Use an alternate approach that does not have the risk. This mode is not always an option. There are programmes that deliberately involve high risks in the expectation of high gains. However, this is the most effective risk management technique if it can be applied.

Control: Controlling risks involves the development of a risk reduction plan and then tracking to the plan. The key aspect is the planning by experienced persons. The plan itself may involve parallel development programmes, etc.

Assumption: Simply accepting the risk and proceeding. However, there can be a tendency within organisations to gradually let the assumption of a risk take on the aura of a controlled risk.

Risk Transfer: Means causing another party to accept the risk, typically by contract or by hedging. Liability among construction or other contractors is often transferred this way.

Knowledge and Research: This mode is not "true" risk handling, but rather a technique for strengthening other techniques. This approach can best be viewed as an adaptation of the approach used by a student writing a thesis: intensive study with specialised testing - in other words doing your homework.

Never expect initial risk management plans to be perfect. Practice, experience, and actual loss results will dictate changes in the plan to allow different decisions to be made in dealing with the risks being faced. In order for companies to succeed in the twenty-first century, they need to excel in all aspects of their business, which includes risk management, so they can fulfil their own and their customer's goals.

Conclusion

Risk management is an on-going process, and is a combination of proactive management directed activities within a programme that are intended to accommodate the possibility of failures.


Comments

Be the first to comment on this article.

Add a comment



(never displayed)



 
2000
What is the month after June?
Notify me of new comments via email.
Remember my form inputs on this computer.

Introduction to Project Management

Hand moving a chess piece

Whether you're engaged in a project for the first time or a seasoned pro, here's a useful overview of all that project management encompasses.

Pareto Analysis Step by Step

Pareto principle or eighty-twenty rule represented on a blackboard

Pareto Analysis or the 80/20 rule enables you to see what 20 percent of cases are causing 80 percent of the problems on a project.

Writing A Project Proposal

Proposal stamped in red on a manila envelope

Ten tried and tested tips for writing excellent project proposals guaranteed to improve your acceptance rate.

Avoiding Project Failure: It's Not Rocket Science

Man dreaming of space, rockets and satelites

Don't become the casualty of a failed project. Always put measures in place that address these five common problem areas to help secure your project success.

PROJECT SMART is the project management resource that helps managers at all levels improve their performance. We provide an important knowledge base for those involved in managing projects of all kinds. With weekly exclusive updates, we keep you in touch with the latest project management thinking.

WE ARE CONNECTED ~ Follow us on social media to get regular updates and opinion on what's happening in the world of project management.


Latest Comments

Aimee Windmiller-Wood commented on…
Top 10 Qualities of a Project Manager
- Thu 23 February 5:06am

Liam commented on…
High Anxiety: Managing Projects With Your Pants Down
- Fri 17 February 9:27pm

Daniela commented on…
Better Coaching Using the GROW Model
- Thu 2 February 3:21pm

Latest tweets

General Project Management • Help With My Project Management Dissertation https://t.co/EoVJgBqYum #projectsmart #pmot about 4 days ago

General Project Management • Prince2 Advice https://t.co/pP7mAnGTJP #projectsmart #pmot about 5 days ago

General Project Management • Re: Interview Help 30-60-90 Plan https://t.co/BNA7TTqz1I #projectsmart #pmot about 5 days ago