Back to Basics | Project Risk Management (Part-II): Risk Analysis

In the first part of the series 'Back To Basics' of Risk Management, we looked at what is risk & why you should worry about it. Also, it was mentioned in brief, why risk management is inherently a proactive characteristic of a project manager. In this part, we will look at what is risk management, life cycle of a risk in risk management process and what is risk analysis.

Also read Why You Should Manage Project Risks | Risk Analysis | Risk Assessment | Challenges in Risk Evaluation and Risk Response.

What is Risk Management?

It is a systematic process:

Risk management is the systematic approach of using practices, procedures and policies of identifying, analysing, tracking, controlling, delegating and communicating risks.

It is an Art as well as Science:

Risk Management is a science as well as art. The science part involves identification, evaluation and prioritization of risks along with planned, organized effort to reduce, track and control the probability and impact of undesirable occurrence. The art part involves correct evaluation, prioritization and response planning. It is deliberate to mix science and art of risk management. The judgment of assessing & building risk response plan in its subjective part is an art but the systematic & repeated risk tackling approach with set of guidelines can evolve as a science. Like project planning, risk management evolves continuously.

At a higher level, risk management involves

1. Identification and recording of risk
2. Evaluation of the possibility that can be attributed with the occurrence of risk
3. Determine the vulnerable consequences that can be attributed to risk
4. Identify risk response strategies to reduce impact that may arise with occurrence of risks
5. Prioritize risk reduction approach based on a strategy
6. Assign resources to manage the risk in accordance with risk response plan
7. Review & close the risk

What is Risk Analysis?

Establish the Context: The important element in risk analysis (and of course risk management) is establishing a context. It involves, knowing what are organization’s objective, project’s objective, stakeholder’s expectations, etc. It also involves, understanding what differ from organization to organization, from one project to another, the eco-system and so on. Risk analysis is best done as a group activity with subject matter expert's advice.

• Identify risk: In a stakeholder meeting, the entire group can get involved & together they can identify, enlist the incidents/risks which will be hindrance to meet your project objective
• Identify the reasons: The next thing you need to do is to identify all those things that may lead such risk to occur e.g. if your supplier is unable to provide raw material on time, you need to identify the reasons for such occurrence or your key resource may be so over-burdened that he might look out for another job, etc.
• Identify your Gears: Next you will have to identify all the nuts & bolts in your hands that can be used to reduce likelihood of the risk from happening (avoidance) and, if it occurs, utilize all that in your control to reduce its adversities. In above case, project manager can deploy additional resource to assist a given key resource.

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Also read Why You Should Manage Project Risks | Risk Analysis | Risk Assessment | Challenges in Risk Evaluation and Risk Response.

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