Project plans are "living documents" and are therefore subject to change. Changes are needed in order to prevent or rectify unfortunate situations. These unfortunate situations can be called project risks.
Risk refers to those dangerous activities or factors that, if they occur, will increase the probability that the project's goals of time, cost, and performance will not be met. Many risks can be anticipated and controlled. Furthermore, risk management must be an integral part of project management throughout the entire life cycle of the project.
Some common risks include:
• Poorly defined requirements
• Lack of qualified resources
• Lack of management support
• Poor estimating
• Inexperienced project manager
Risk identification is an art. It requires the project manager to probe, penetrate, and analyze all data. Tools that can be used by the project manager include:
• Decision support systems
• Expected value measures
• Trend analysis/projections
• Independent reviews and audits
Managing project risks is not as difficult as it may seem. There are six steps in the risk management process:
• Identification of the risk
• Quantifying the risk
• Prioritizing the risk
• Developing a strategy for managing the risk
• Project sponsor/executive review
• Taking action
Figures 14-14 and 14-15 and Table 14-13 identify the process of risk evaluation on capital projects. In all three exhibits, it is easily seen that the attempt is to quantify the risks, possibly by developing a contingency fund.
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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.