How to Manage Risks

We don’t live in a conventional world where our daily lives carry out orchestrated events according to plan with a minimal to zero probability of slip-ups or surprises.  There is always a ‘risk’ in chance that something could occur that could effect the planned outcome. This can come from either an activity, event or even a lack of action.

Risk management comes from the idea of taking a proactive approach in identifying, analyzing, and preparing appropriate course of action to decrease the probability of negative impact events  instead of reacting which could potentially be costly. This helps you, and your organization, to take a systematic approach in preventing financial losses and credibility impact if a loss was to occur.

It is important to note that risk management also covers identifying and managing positive impacts (opportunities) to the project and to take advantage of them.

Risk Management is a simple process that can be easily integrated in your every day life. In management, it is a great component to improve the efficiency and effectiveness in decision making and project planning while minimizing loss. It involves commitment and diligence in your part, and your organization, to plan carefully and does not require complex models to foresee and avoid risks.

The Approach
Risk management starts by asking yourself four simple questions on the product, service, or activity you want to execute:
What could go wrong?
How can you prevent negative impacts (threats and losses) from occurring?
What is your plan of attack if the above occurs?
Are there any positive impacts (opportunities) in the horizon to improve the performance?

The Process
Risk management is a simple process that can be broken down into three major components:

Assess the Risk – Identify, Analyze and Evaluate Risk

Identify – draft a list of potential events that might degrade, delay, or prevent the execution of your product, service, or activity
Analyze – understand the risk (and its impact) and decide on the course of treatment (should you to address it or not, if so – how and will you introduce new risk to the system)
Evaluate – assess the various levels of risk, evaluate the potential losses/gain and prioritize them accordingly

Treatment - generate a list of options treating the risk, evaluate these options, appoint and implement the treatment plan
Review – audit and monitor your overall plan to ensure the treatment plan is applicable

Potential Benefits
Some of the benefits of risk management include:
Avoiding the risk
Enable the organization’s ability to prepare and address threats and opportunities
Protecting the organization from economic loss and/or legal liability
Protecting the organization’s reputation and image
Conserve resources (FTEs, time, cost, income, property, etc)

This post can also be found at ProjectManagers.net