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Tips for Formulating a Risk Management Plan

written by: Ronda Bowen • edited by: Michele McDonough • updated: 7/31/2010

Have you been looking to learn about or brush up on project risk management fundamentals? If so, you've come to the right place. Find out about how to incorporate risk management in your projects and why its important to do so in this article.

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    The Basics

    Project Risk Management: Avoid a Failed Project Project risk management is, in one essence, the practice of making sure that your project doesn't fail. Of course, it's more complex than that. Good risk management means that you are ensuring that you've done research about your project's potential weaknesses. Every project should have a risk management plan. A risk management plan consists of several parts: The risk analysis, constructing a risk management plan, tracking risk, etc.

    Read on to find out more about project risk management fundamentals.

    Image Credit: Image courtesy of sxc.hu/somadjinn

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    Performing Your Risk Assessment

    The first thing you need to do when working on your project risk management plan is to determine how much risk is involved in a project. When you perform a risk analysis, you will need to know the differences between different types of project risks - there are qualitative risks and quantitative risks. It is important to be thorough in your risk analysis. Like any project, you need to make sure that your risk analysis has a well-defined scope. When performing your assessment, you'll want to keep a risk register to track the different risks and the probability the risks have of happening.

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    Creating a Solid Project Risk Management Plan

    Once you've gathered your information from your risk analysis, it will be time for you to construct your risk management plan. Once you've identified your risks, you'll want to evaluate the risks and prioritize them in terms of what risks are the most likely to occur.

    Put together a risk treatment plan for determining how you will handle each risk should it actualize (find a template for the risk treatment plan in our media gallery). Your risk treatment will formulate a part of your risk management action plan. The risk management action plan will contain a communication plan (for ensuring that all team members and stakeholders are kept informed about the developments of your project) and it should also create a plan for auditing your project management risks. In your plan, make sure that you account for how you will track your project to manage project risk.

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    Money and Risk: Don't Forget to Include Risk Factors in your Budget

    Should a risk happen, it could be very expensive. When performing your risk analysis, you will find out the price tag associated with different potential risks. When creating your project plan, you'll want to carefully prepare a project budget. You can use the project budget template provided to you in the media gallery, if you like. Make sure you remember to determine a risk reserve for your project and set aside funds in the advent that a risk materializes into a problem.

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    Other Risk Topics To Be Aware Of

    When you're managing project risk, you should be aware that different types of projects will come with different levels of risk. Make sure you understand how to respond to negative risks. Make sure that you're also exerting effort towards project control. Take ownership of risks in projects.

    Risk management in IT comes with its own set of particulars. Ensure that you understand how to create a risk management plan for IT projects before getting started.

    Finally, you should realize that poor risk management can lead to project failure, so to make sure that you manage your project's risks properly, you may want to familiarize yourself with how to create a risk management checklist.



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