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Friday, 9 December 2011

Risk Management

Risk is the net negative impact of the exercise of a vulnerability, considering both the probability
and the impact of occurrence.
Risk management is the process of identifying risk, assessing risk, and taking steps to reduce risk to an acceptable level.
Not all the risks are negative. Some events (like finding an easier way to do an activity) or conditions (like lower prices for certain materials) can help your project! When this happens, we call it an opportunity… but it’s still handled just like a risk.

As per PMP the project risk management process are:

The over view of the risk management process are given below:

1. Plan risk management:
This process defining how to conduct risk management activities for the project.
The main output of the is process is Risk management plan document.
Here the risks are categories, Risk Breakdown Structure, probability, impact guidelines and risks scales are created.

2. Identify risks:
In this process identify the risks that may affect the project.
The main output of the process is risk register, it contains the Identified risks, Potential responses and Root causes.

3. Perform qualitative risk analysis:
This process prioritizes the risks for further analysis.
The analysis involves some of the following activities:
Further investigation of the project's highest risks.
  • Type of probability distribution to be used.
  • Sensitivity analysis to determine the risks likely to have the most impact.
  • Determining the level of quantified risk.
The below probability impact matrix is used in qualitative risk analysis:

The corners of the chart have these characteristics:
Low impact/Low probability – Risks in the bottom left corner are low level, and you can often ignore them.
Low impact/High probability – Risks in the top left corner are of moderate importance – if these things happen, you can cope with them and move on. However, you should try to reduce the likelihood that they'll occur.
High impact/Low probability – Risks in the bottom right corner are of high importance if they do occur, but they're very unlikely to happen. For these, however, you should do what you can to reduce the impact they'll have if they do occur, and you should have contingency plans in place just in case they do.
High impact/High probability – Risks towards the top right corner are of critical importance.

4. Perform quantitative risk analysis:
The process of numerically analyzing the effect of identified risks on overall project.
The Expected Monetary Value (EMV) technique is used to arrive the probability and impact of the identified risks.
This tool is a statistical concept that calculates the average outcome when the future includes scenarios that may or may not occur. In simple terms it is the percentage probability multiplied by the value of the impact if it did occur. The example is shown below:
Decision trees are used to make decisions about individual risks when there is an element of uncertainty. The example is shown below:

5. Plan risk responses:
The process of developing options and actions to enhance opportunities and to reduce threads to project objectives.
Its time to add more updates to the risk register with response strategy, risk owner and is figuring out what will you do when the risk happens.

Handling the negative risks strategies are:
  • Avoid
  • Mitigate
  • Transfer
  • Accept
The response planning even find more risks,
Secondary risks are risks that come from a response you have to another risk. If you dig a trench to stop landslides from taking out your camp, it’s possible for someone to fall into the trench and get hurt.
Residual Risks are those that remain after your risk responses have been implemented. So even though you reinforce your tent stakes and get weatherproof gear, there’s still a chance that winds could destroy your camp if they are strong enough.

6. Monitor and control risks:
The process of implementing the risk response plans, tracking identified risks, monitoring residual risks, identifying new risks and evaluating risks process throughout the project.


  1. To manage the risk successfully one should have Pmp Proffessional s.With high competition, companies have to develop products fast and innovatively always adding value and greater customer satisfaction. it is important to learn and practice its basic principles which collectively and naturally help in effective management of risk. As a project manager i follow PMBOK guide of PMI

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  4. Informative post! I really like and appreciate your work, thank you for sharing such a useful information about Risk management strategies, keep updating the information, hear i prefer some more information about jobs for your career hr jobs in hyderabad .