Understanding Risk Management
- Risk = Probability x Impact
- Key factors: Event, Probability, Impact, Mitigation, Contingency
- Exposure = Risk – Reduction
Steps to Develop a Risk Management Plan
- Define your project scope
- Gather input through brainstorming sessions
- Identify consequences for each risk
- Eliminate irrelevant issues
- List all identified risk elements
- Assign probability (High, Medium, Low)
- Assign impact (High, Medium, Low)
- Determine risk level for each element
- Rank risks from highest to lowest
- Compute total risk
- Develop mitigation strategies
- Focus on high and medium risks
- Aim to reduce probability of risk occurring
- Develop contingency plans
- Focus on high and medium risks
- Aim to reduce impact if risk occurs
- Analyze effectiveness of strategies
- Compute effective risk after mitigation/contingency
- Monitor risks
- Identify risk cues
- Regularly reassess risk levels
Key Tips
- Be flexible in analysis, using both qualitative (H/M/L) and quantitative methods
- Consider limiting analysis to critical path for complex projects
- Plan for change – risk management is an ongoing process
- Use risk reduction value to determine budget for risk management
Risk Assessment Table Example
ProbabilityLow ImpactMedium ImpactHigh ImpactLowLowLowMediumMediumLowMediumHighHighMediumHighHigh
Remember, effective risk management is about balancing the cost of risk reduction against the potential impact of risks. Regularly review and update your risk management plan as the project progresses and new information becomes available.
