Process of Risk Management
PMBOK (project management Body of Knowledge) guide suggests that threat and opportunity both are included in risk. Opportunity can be seen as a risk as like a threat it also has uncertainties. It defines various processes to manage the projects and risks. These are as follows:
Plan Risk Management:
This is the first step of the process that includes the identification of the resources that may be used for planning the risk management layout. So, it includes the document that consists in the way to conduct and approach the risk management throughout the project. In this, degree, degree type and visibility of risk management are also assessed in this step in concern of the project (Harrington & McNellis, 2006). For example, while running any project, level of details related to the project are documented in this step those are influenced by the level of risk within the project. In this, scope, time, cost, quality and procurement aspects are included in this step of risk management (Saladis & Kerzner, 2011).
Identify Risks:
In this step of the process, risks are identified and gathered along with assessing the impact of such risk over the project. These identified risks are entered on to the risk register in which none of the risk, causes and responses of each risk is defined. This step is used multiple times as new risk may be raised during the project and existing risk may be changed into new way throughout the project (Snyder, 2013). Due to changing in the environment with the progress of project, risks are also modified and changed so the success of the project can be ensured. The main output of the process of this step is the risk register that is used to feed and drive the next process of risk management. For example, while running the IT project risk register is formed in this step in which risk as technical risk, and other risks and causes of risks as technical advancement, change in business environment is registered along with responses of these risks over the completion of the project (Saladis & Kerzner, 2011).
Perform Qualitative Risk Analysis:
Risks those are registered in the risk register are analyzed in this step in terms of analyzing risks probability and impact of the project. Similarly, as per the highest priority of the risks over the project, risks are separated so that sufficient action can be taken (Snyder, 2013). For this, probability and impact matrix (PIM) is used to prioritize and rank the risks and noted in the risk register back. It helps the manager to take sufficient actions and time to solve or overcome the risks as per the priority. This qualitative risk analysis assists the analysts to identify the aspects and characteristics of existing risk that may be changed into new risk with the progress of the project (Harrington & McNellis, 2006).
For example, as technological advancement in IT project is noted as a risk for the project that can be overcome through using innovation and creativity but it can be changed into a new way with the progress of the project in terms of aligning current business environment or many more (Snyder, 2013).
Perform Quantitative Risk Analysis:
This process assigns projected value of the risk in concern of the time and cost those are ranked in the previous process. In this process, the quality of the risk analysis is evaluated in terms of determining the probability and impact of the risk to the project. For example, while prioritizing the risks in the previous step, are analyzed in this step in terms of determining that involvement of technical advancement in IT project would take how much time and cost for reaching at the project’s goals and objectives (Saladis & Kerzner, 2011).
Plan Risk Responses
This process of the risk management plan defines all knowledge areas of the risk and builds upon collecting information from the previous process steps. It is because it helps to develop plans for managing the risk along with identifying the reasons that are responsible for the risk. This process will ensure the development of appropriate option and actions to enhance the opportunities and reduce threats that may be related to the project objectives. Through assigning roles and responsibilities to the associated people this process is completed for risk response (Saladis & Kerzner, 2011). As per the priority, risks are addressed through the following activities as budgeting, scheduling and project management plan. These responses are supported by the people who are involved in the project and these should be realistic and cost effective so that positive results can be achieved. For example, through offering roles and responsibilities of the manager of departments and technician, responses of risk are implemented in this process to reach the objectives of the IT project (Harrington & McNellis, 2006).
Monitor and control risks
In this step, the risks are diagnosed through using treated and controlling the risk management plan. Risk response plan is implemented and tracked risks are monitored in this process. New risks are monitored in this process through using sufficient tools and techniques along with having control over the current tools to manage risks effectively and efficiently (Snyder, 2013).
For instance, through monitoring steps of risk management plan in IT project, success of IT project would be ensured.
Causes for Change
Changes in the business environment, high competition and need of current technology influence success or failure of the project. It is because changes in the current business environment should be incorporated with the techniques and process of the project (Mantel, Meredith & Shafer, 2006). It ensures to the positive response in terms of aligning project tools with the current changes in a business environment. Similarly, high competition also demands to the involvement of the changes in the project so that the competitiveness of the project can be ensured. Technical advancement also demands to the alignment with the project so that the effectiveness of the project can be sustained (Meredith & Mantel, 2011).