"Risk is Inevitable. Risk is a Perception"
When we talk about Project Management, Risk Management is one of those concepts that you will come across your project life cycle and something which you cannot avoid. Risk Management pays off huge benefits to a project by countering events.
What is Risk Management?
Risk Management involves all those processes that deal with identifying, analyzing, and then responding to the risks that affect your project either positively or negatively.
You must be wondering as to how a risk can be positive in nature. Well, a risk is categorized mainly into Positive Risks and Negative Risks. Positive Risk is basically Opportunity that would benefit your Project and Organization. Negative Risk on the other hand is Threats that would negatively hamper the project growth during the project life cycle.
Let’s say you have a project that is work in progress and has a total budget of $10,000 for project duration of 5 months. Based on a Project Managers understanding of the requirements, he identifies the resources and assigns them based on the requirements so that the overall cost of the resources, systems and other processes don’t shoot up the budget of the project.
When Project Management is concerned, a Project Manager needs to give special attention to risk that could arise in a project. Negative risk in this scenario could be that due to unforeseen risks, the budget of the project exceeds the planned project budget of $10,000.
Positive Risks as we told could be Opportunities that could arise during the project phase. Example, during the project life cycle, there could be opportunities that the hard work of your resources pays off and you develop processes that speed up the project work to completion. In such cases the project might finish well under the Planned Budget.
Remember, even though Positive Risks are good for a company, but they are considered a Planning Error or a Lack in planning the project. Therefore a Project Manager must carefully understand both the Opportunities and Threats that could arise during the project and take appropriate steps to tamper the situation well.
How to plan Risk Management better?
A Project Manager should make Risk Management as a part of the Project Management Plan. He should be proactive enough to identify risks at the right time and appropriately categorize the severity of the risks. Communication is a key factor here. All the risks that are identified should be documented well and communicated to the associated stakeholders so that everyone is aware and understands the risks that could impact the project in the future. Right planning and embedding Risk removal strategies at an early stage in a project is sure to eliminate majority of the risks in the longer run. Even though not completely, but implementing risk management process will prevent the project from showing damaging effects.