Risk Management

Risk Management… The What, Why, and How

It’s time to get proactive, and I don’t mean go out and buy the popular facial cleanser advertised by Adam Levine. If you’re a business, it’s time to stop reacting and to start risk managing. As Michael Stanleigh writes in a post for PM Hut, proper risk management is about attempting to control outcomes in advance. And though the best risk management cannot guarantee a fixed outcome, it should at least mitigate any negative impacts that may occur.

Systems of Risk

Actually, managing a risk is just a beginner step. At the professional level, experts operate on a dynamic system of risk that must be properly quantified to formulate a predicted impact. Once potential risks are identified (and this should be done at a very early stage) the team is free to prioritize that risk based on a number of factors including historical data, past occurrences, and even hunches – but assessment does not stop here.

…opportunity and risk generally remain…high during project planning (beginning of the project life cycle) but because of the relatively low level of investment to this point, the amount at stake remains low. In contrast, during project execution, risk progressively falls to lower levels as remaining unknowns are translated into knowns. At the same time, the amount at stake steadily rises as the necessary resources are progressively invested to complete the project.

For a three month project, Stanleigh suggests three separate risk assessments over the project lifecycle: one at the outset, one after the first month, and one after the second month to keep pace with project related changes.

Response Options A, B, and C

At the point where your team is ready to respond to a risk, you may then choose one of three options. You can A. eliminate the risk by avoiding or nullifying its cause, or B. somehow reduce the probability of occurrence, thereby mitigating the risk. You could lastly C. accept the possibility of risk and develop a contingency plan in the event that the risk should occur.

Controlling Outcomes

Why do risk management in the first place? Well, one could look at it this way: a teenager who is going to a prom may or may not have acne. But do they really want to wait until the date of the prom to find out? Absolutely not! You’ll want to get proactive.

Read the full post at: http://www.pmhut.com/risk-management-the-what-why-and-how

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