The Risks of Projects Managed
This section on the basics of risk management clarifies what risk management is, how to identify the risks associated with any project or system, and how to minimize risk impacts. Minimizing risks also means better production; this means that following risk management basics also covers dealing with risks to increase productivity.
As per the International Standards Organization (ISO), risk relates to the uncertainty arising from any known or unknown sources. To understand risk management, one needs to understand how a system works. A system is said to be a set of tangible and intangible components working together to achieve a common goal. In business communication, the phrase "project" often replaces "system." A project commences with creating a project plan to achieve a certain goal. The project managers then push different resources ("components" as in the definition of system) of the organization – people, different machinery, time, etc. – to achieve the project goal.
Natural as it is, managers include the resources at their disposal in the project plan. Similarly, project planners should also include risks associated with the different components of the project. To include risks, they should be able to identify and prioritize risks at different points of the project. Even the best managers cannot predict all risks. Still, once they get information about possible risks, they can prepare a checklist of those risks.
With the checklist of risks in place, project planners can come up with methods to tackle the known risks. Thus, with the project timeline and project phases, project managers should also keep a risk management plan. This plan is an effective tool for minimizing negative impacts of risk and helps in increasing the productivity of any project. You can better understand risk management plans with this example of a risk management plan. Risk management comes in different forms: avoiding the risks; minimizing the negative affects of any risk; accepting part of the risk effects (by increasing the amount of positive gains of overall project or the particular project phase where the risk is identified); or transferring the risk to some third party.
With this introduction to basics of risk management, let's take a look at risks in detail to understand the techniques that help in minimizing their negative impacts.