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Types of risk response:Avoid, Reduce, Fallback,Transfer, Accept, Share, Exploit
Most risks are anticipated and included in the project plan. In a way, we accept the risks.
mitigate
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Today, effectively managing risk is an essential element of
successful project management. Proper risk management
can assist the project manager to mitigate against both
known and unanticipated risks on projects of all kinds. Failure to
perform effective risk management can cause projects to exceed
budget, fall behind schedule, miss critical performance targets, or
exhibit any combination of these troubles.
Certainly there are a number of factors that determine
whether a project will be a success, but it seems likely that
failing to perform adequate risk management will increase the
possibility of failure. The old axiom, “failing to plan is planning
to fail,” appears to apply to risks. Having an effective method
to plan for and manage project risks that is easy for the project
team to understand, use, and apply is critical. As projects increase
in complexity and size, taking a multidisciplinary approach to
project management requires giving proper attention to risk
management. This article proposes a simple risk management
tool that has been shown to be benefi cial to managing project
risks and improving project success
Risk analysis techniques include expert interviews, expected
monetary value, and response matrices, along with more advanced
risk techniques such as the Monte-Carlo method. Pritchard (2001)
and Raz and Michael (1999) provide comprehensive information
about and references to risk analysis techniques for various
applications and requirements. One risk management technique
multiplies probability of the risk occurring with the expected
impact of the risk. This leads to an evaluation for each risk. In
this work, the method of using the risk probability multiplied by
the risk impact value is expanded by also multiplying a detection
value for each risk.
Multiplying three values of likelihood of occurrence (or
probability), severity (or impact), and detection is the familiar
format of the failure mode and effects analysis (FMEA) used
for process, design, and service planning. The FMEA technique
dates back to the United States military procedure MIL-P-1629
(1949). Bongiorno (2001) provides an overview of a design
FMEA (DFMEA), as well as the basic mechanics of the FMEA
technique. Currently, the technique is an integral part of ISO-
9000 and QS-9000 quality certifi cation levels. It is used within the
comprehensive framework of product and process development
with such tools as FTA, APQP, QFD, DOE, SPC,8-D, and the like
(FMEAC.COM,2003). The FMEA method is a natural addition
to the project risk management process due to its ease of use,
familiar format, and comprehensive structure.
In the method of applying the FMEA format to project
risks, it is defined here as the project risk FMEA or RFMEA. The
RFMEA technique is not just another way of analyzing project
risks but helps focus the risk contingency planning required early
in the project on critical risks. Pritchard (2000) first identified
the FMEA technique as an advanced format capable of capturing
project risks. The use of the FMEA technique is developed
here with terminology, along with a detailed methodology. In
addition, the method of using the RFMEA with simple graphical
analysis techniques is introduced for risk priority planning.
First, the most common risk terminology in the literature is
reviewed with the reader. Second, definitions for using the
RFMEA are provided. The method of creating the RFMEA is then
explained. The benefi ts of the RFMEA are discussed to help the
engineering manager, project manager, and team members realize
the importance of this method. A case study of the RFMEA in
use is shown as an example for the reader. The conclusion
highlights the importance of such a method to the engineering
management community
While the literature on risk management is plentiful, the
defi nitions and meanings of a few key similar terms within
the fi eld are inconsistent.
A Guide to the Project Management
Body of Knowledge PMBOK® Guide
(PMI,2000) defines the risk management process as being comprised of six steps: risk
management planning, risk identification, qualitative risk
analysis, quantitative risk analysis, risk response planning, and risk
monitoring and control. A project risk is defined as “an uncertain
project riskisdefinedas“an uncertain project risk event or condition that,
if it occurs, has a positive or negative effect
on a project’s objectives” (PMI,2000). Authors have used various
terms for depicting the probability attribute of a risk event such
as, “probability,” “likelihood,” “probability of occurrence,” and
“occurrence frequency.” Scales used for these probability ratings
range from low, medium, and high,1 to10,0 to1.0, or some other
nonlinear or linear scale. Although these terms and scales are all
correct, inconsistent use and terminology creates confusion.
The discrepancies do not stop with the probability value. A
second attribute typically associated with a risk event is what is
called the “impact,” “severity,” “consequence,” or the “amount at
stake.” Even the
PMBOK® Guide
(2000) mixes the words impact
PMBOK® Guide
(2000) mixes the words impact
PMBOK® Guide
and consequences in the discussion on tools and techniques
for qualitative risk analysis under section11.3.2.1. The impact
attribute is defi ned as “the effect on project objectives if the risk
event occurs” (PMI,2000).
To add to the confusion, the meaning of the combined
probability and impact value varies. Depending on the authors’
preference for naming these two risk attributes, the combination
Mitigate (reduce). Sometimes you do not have budget to eliminate a risk or cannnot be eliminated. you cannot accept the risk because of its level.
Knowing and acceptance of the expected risks in the Project and having cover to such Risks.
Behind every risk stands an individual or body of individuals. So the first response to mange a risk is to explore the possibility for dialogue and meetings with the concerned parties. The best tools for successful dialogue is knowledge about related rules and laws, presentation skill and the ability to project the benefit which would outpace the risks.
1- Time reserves or buffers
2- Contingency reserves of cost
A Risk Management Plan is a document that a project manager prepares to foresee risks, estimate impacts, and define responses to issues. It also contains a risk assessment matrix.
A risk is "an uncertain event or condition that, if it occurs, has a positive or negative effect on a project's objectives."[1] Risk is inherent with any project, and project managersshould assess risks continually and develop plans to address them. The risk management plan contains an analysis of likely risks with both high and low impact, as well as mitigation strategies to help the project avoid being derailed should common problems arise. Risk management plans should be periodically reviewed by the project team to avoid having the analysis become stale and not reflective of actual potential project risks.
Most critically, risk management plans include a risk strategy. Broadly, there are four potential strategies, with numerous variations. Projects may choose to:
Sharing (Transfer)
