Risk Management Process

Figure 10.1 illustrates the project-risk-management process. It starts with identifying the risks your project may encounter.

Risk assessment may be quantitative or qualitative. Quantitative risk-assessment tools include failure modes and effects analysis, Monte Carlo Analysis, project simulation, PERT, probabilistic safety assessments, and the Management Oversight or Risk Tree. For risks reducible to a quantity (e.g., a cost or schedule days), you can compute a probable impact as the multiplication of the probability and the risk. For example, a 50% probability of overrunning by $100,000 has a probable risk of $50,000. This risk computation is useful as a relative ranking but is

I Identify I potential risk events

I Identify I potential risk events

Figure 10.1 The project-risk-management process.

only quantitatively useful if you can insure against the risk. Otherwise, it is going to cost you nothing or $100,000, never $50,000.

I focus on qualitative risk assessment with risk ranking because the data is usually not available to justify detailed quantitative risk assessment, and supplying probable risk numbers tends to yield a false sense of believability.

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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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