Managing risks in project is imperative for its success. We need to have a process (or processes) in place for risk management to be effective. Here are the five steps project manager can use for risk management:
1. Identify Risks – Identify risks that affect the project (positively or negatively) and documenting their characteristics
2. Assess & Analyze Risks - Assess the risk impact, Analyze the probability of risk occurrence and prioritize the risks, numerically analyze the effect of identified risks on project objectives (usually on cost, schedule and scope targets)
3. Plan Actions – Explore all the possible ways to reduce the impact of threats (or exploit opportunities). Plan actions to eliminate the risks (or enhance the opportunities). Action plans should be appropriate, cost effective and realistic.
4. Monitor & Implement the Action – Track the risks throughout the project. If risks occur then implement the risk strategy based on action plan. Ex. If mitigation strategy is selected, execute the contingency plan based on risk triggers. In case contingency plan fails, execute fallback plan.
5. Measure the effectiveness & Control the risk impact - Measure the effectiveness of the planned action and controlling the risk impact by understanding risk triggers & timely implementation of planned actions.
Risk management processes are cyclic which starts from identification of a risk and it may result in identification of another new risk.
Usually, each individual have different opinions & ways to deal with risks. Some go for avoidance. Others go with risk taking. So, while working for a project, the approach to risk should be consistent to meet project objectives & this need to be documented in a risk management plan. Communication of risk and its approach to be done to risk team member/risk owners/stakeholders.
Here is the links for all the PMBOK Risk Management processes in Mind Map structure:-