Question

Explain what project risk is and the processes for managing it. Conduct appropriate independent research.

Answer 1

Project Risk can be defined as the factor or a circumstance present in accomplishing a project, the occurence of which either results in a positive or the negative impact on the objectives or goals of a project.
Risk in its absolute terms refers to the chances of a project to fail in producing desired result or accomplishing ultimate goal. But its presence can also result in exploitation of opportunities that instead brings prosperity in the project success.
This project risk may or may not occur but its presence is a concern for the project leader. The project risk can create threat for the team or can also create opportunities if the project manager handles it in the best possible manner.
Thus when risk turns into an opportunity it creates certain benefits for the project and if the project risk creates threats it results in certain complexities such as not meeting deadline, not being able to control the cost , increase in hurdles thus increasing the chances of failures of project.

Project risks might deviate the team from attaining its main goals and objectives and might consume their whole time in curbing it thus every project to be successful should involve moderate amount of risk which the team members can mitigate and dissolve efficiently without compromising the project output and quality.

The processes that can be used to mitigate the risk:

1) Risk Identification:
For mitigating the risk it is important to identify the various areas where risks have the potential to occur. Certain risks common in all projects are :

Stakeholders risk : The stakeholders might not be inclined towards the project welfare and its execution

Regulatory risk : the risk of new laws and the policies of governing body that do not act in favour of project goal accomplishment.

Technological risks: risks due to technological advancements, improvements and innovation which results in obseletion etc.

Political risks : risks due to political instability, pressure groups, corrupt democrats etc.

Climate risk : in some situations project is also influenced by weather to a great extend. Thus this risk needs to be identified in advance to accordingly choose appropriate location.

2) Clarification of objectives:
In order to mitigate the risk the project manager should ensure that the project execution in done in a manner that it drives the team members towards the direction of accomplishing the set objectives and ensure not to deviate from them.
The team needs to be focused and diligent in achieving the core purpose of project in the best possible manner.
It will result in performing jobs and tasks to achieve these objectives through keeping them at the fore front. This will save project failures.

3) Risk evaluation:
After the risks have been identified and objectives are known clearly, then the next step in managing risk is to evaluate the probability of occurrence of the risk. The potential loss that is associated with the risk is also identified, and ways are found to minimize them. Risks have different consequence thus create different results. It is important to understand the variability of risks in each areas and the methods for turning them in favour of project, need to be identified.

4) Mitigating the risk:.
The final step in the process is to mitigate the risk through formation of a plan that will help reduce it to some extend.
The various methods used can be :

A) Risk avoidance : If the risk is trivial meaning the intensity of risk is low , and the risk evaluation does not depict anything alarming and the risk will not result in any repercussions for the project , then the best way of mitigating is avoiding it and concentrating in more important aspect to ensure it does not hamper the functioning of project or performance of tasks. Risk Avoidance means choosing best alternatives to ensure risk will remain in moderation.

B) Risk Sharing: when the project manager finds that the risk is not trivial and cannot be controlled solely and is increasing beyond expectations, then it should be mitigated by sharing it through partnering with another party. The benefits of projects will attract the another party to participate in project execution and this partnership will result in sharing of the associated risks with the other party also. This will decrease the scope of consequences that might result in project failure.

C) Risk reduction: Taking appropriate measures to reduce the risk through investing in appropriate measure can

D) Transfering the risk : It is the process of transfering the project risk to some other person, incase the project manager finds it difficult to minimize or control it. The best method of doing so is purchasing of certain specific insurance policy helping the project to succeed without any hurdles.

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