Plan Risk Management Inputs

Risks associated with a project generally concern four project objectives—time, cost, scope, and quality—or any combination of the four. As you might have guessed, the project scope statement is an input to this process since it describes your project deliverables. The inputs of this process are as follows:

■ Project scope statement

■ Cost management plan

■ Schedule management plan

■ Communications management plan

■ Enterprise environmental factors

■ Organizational process assets

One of the key elements of the enterprise environmental factors to consider as in input in this process is the risk tolerance levels of the organization and the stakeholders. Risk tolerance is that balance I talked about earlier where stakeholders are comfortable taking a risk because the benefits to be gained outweigh what could be lost—or just the opposite. They will avoid taking a risk because the cost or impact is too great given the amount of benefit that can be derived. Here's an example to describe risk tolerance: Suppose you're a 275-pound brute who's surrounded by three bodyguards of equal proportion everywhere you go. Chances are, walking down a dark alley in the middle of the night doesn't faze you in the least. That means your risk tolerance for this activity is high. However, if you're a petite 90-pounder without benefit of bodyguards or karate lessons, performing this same activity might give you cause for concern. Your risk tolerance is low, meaning you wouldn't likely do this activity. The higher your tolerance for risk, the more you're willing to take on risk and its consequences.

Organizations and stakeholders, as well as individuals, all have different tolerances for risk. One organization might believe that the risk of a potential 7 percent cost overrun is high, while another might think it's low. However, either one of these organizations might decide to accept the risk if it believes the risk is in balance with the potential rewards. It's important for the project manager to understand the tolerance level that the organization and the stakeholders have for risk before evaluating and ranking risk.

Remember that organizational process assets include policies and guidelines that might already exist in the organization. Your organization's risk categories, risk statement formats, and risk templates should be considered when planning for risks. Defined roles and responsibilities and the authority levels the stakeholders and project manager have for making decisions regarding risk planning should also be considered when developing the risk management plan.

The project scope statement, as mentioned earlier, contains the project deliverables. This is the first place you'll start looking when identifying risks and it should be considered when determining the process you'll use to evaluate risks. The risk management plan (the only output of this process) will become part of the project management plan; therefore, other project management processes and guidelines should be considered when performing this process so that the risk management plan is in line with the overall direction and management of the project.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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