What Is Risk Management?

What Is Risk Management?

Cisco, Apple, Aon and Allianz have just announced a new cyber risk management solution for businesses. And that’s a great news! Especially for companies as they can now secure their servers from harmful malware. This helps in enhancing their safety and lowers risks connected with the leakage of information.

But what about managing risk of company’s other aspects, such as funds, team performance or product delivery? A company should be able to predict the risks linked to all the facets of a business’ efficacy. But what exactly is risk management? In order to manage risk in the proper way, it’s important to know its central objectives. In today’s article, we will focus on risk management in project management since these two aspects are vital to the company’s success.

According to projectmanager.com, project risk management is:

the process of identifying, analyzing and then responding to any risk that arises over the life cycle of a project to help the project remain on track and meet its goal. Managing risk isn’t reactive only, it should be part of the planning process to figure out risk that might happen in the project and how to control that risk if it in fact occurs.

The Key Assumptions of Risk Management

The ISO determined a set of principles which can be helpful in assessing the risk. But they can be used not only in general risk management connected with economic issues but also in project risk management. And here’s how the process should work (according to ISO)

• The process should create value for the organization.
• It should be an integral part of the overall organizational process.
• It should factor into the company’s overall decision-making process.
• It must explicitly address any uncertainty.
• It should be systematic and structured.
• It should be based on the best available information.
• It should be tailored to the project.
• It must take into account human factors, including potential errors.
• It should be transparent and all-inclusive.
• It should be adaptable to change.
• It should be continuously monitored and improved upon.

Following these rules will help in avoiding problems and failure in project management. If you implement them, the risk will be much easier to assess and in the result, to avoid.

How It Works?

But how exactly should the process of project risk management be performed? There are 5 steps:

1. Step 1: Identify the Risk.
   Identifying the risks which your project carries is the 1 step you have to take. It is crucial in following the next steps.
2. Step 2: Analyze the risk.
   Analyze what is causing the risk, what are the main factors, the main issues? Consider every aspect so that you can find the right answer.
3. Step 3: Evaluate or Rank the Risk.
   Once you found the risk and analyzed it, calculate what damages it can bring to your project. Take into account every possibility to be ready for every possible outcome.
4. Step 4: Treat the Risk (Risk Response Planning).
   When the 3 previous steps are taken care of, it’s time for preparing the right plan of how to deal with it. When creating such a plan, remember to take all aspects of a project into consideration. In order to obtain the proper results, it is worth to take into account the ISO principles mentioned before.
5. Step 5: Monitor and Review the risk.
   Now that you have done the detailed analysis and took the right steps, it’s time to watch how the project is going. Has the risk increased? Or maybe it has diminished? It is important to always observe it because overlooking a single element may cause loss.

To Conclude

Risk management can save your project from failure. Moreover, it can contribute to its efficacy. Remember that the proper process of risk management can save the day in many harsh and complicated situations.