Importance of Risk Management
Risk is regularly considered as an event that will have a negative effect on the project, therefore tends to avoid it. According to the PMBOK guide, risk is defined as “a doubtful condition or occasion that, if it occurs, has a negative or positive impact on the objectives of the project”. Projects are planned today but are to be executed tomorrow. With risk management, we can foresee, what we are going to encounter on our projects. And, we can prepare for it to avoid the damages or cash out the opportunities. This is essence of risk management.
Benefits of Risk Management
Anticipating and mitigating the risks is the difficult part that can be easily done if you have a project risk management practices on your projects. This will help in avoidance of any sort of misfortune and you can grab the opportunities that can benefit your project. The benefits of having risk management don’t just stop here, additionally there are many more advantages that can change the total result of a task. Beneath, we will discuss each advantages briefly.
Problem Areas are Identified
A risk register contains all the risk, even a small risk that might have a 1% effect on a project. So that you can have an obvious image of the risky activities in the project. This detailed planning might seem time-consuming but it will allow you to foresee every single unknown event. Imagine the benefit that it will have on your project. To foresee and to be prepared for every situation.
Early cautioning of potential dangers can be seen through the risk register. The early warning gives the project team an opportunity to find a way to mitigate issues before they increase to extreme issues. Through this, the risk can be mitigated or avoided on time to leave no impact on the project performance.
Cost and Time Buffers
Any risk that might occur in a project will require more money in order to deal with it. Therefore risk management allows the teams to keep some budget for all the risks that they have highlighted. Not only will the cost planning be affected but also the schedule. Risk plan helps in keeping a buffer budget for every constraint like resources, cost, time etc. and helps in less wastage of the same.
Focused Team Members
Throughout the project, the risks are by and large effectively followed and dealt with, which gives an upper hand for other team members to concentrate more on their tasks. Risk management is one of the elements of project success, as the issues are identified beforehand and will be handled smoothly and quickly.
Improved Coordination and Communication
The better the risk plan, better will be the communication among teams. In risk planning, all risk, positive or negative is identified before it occurs, which allows the team to work together to mitigate the risk. Together the teams discuss the issues and resolve the reasons for the risk instead of accusing each other. In projects, blaming leads to nowhere, rather different teams must have a detailed plan to make the project performance run smoothly.
Positive Decision Making
Project manager and team are aware of the possible risk in advance, is then able to make productive choices. The project will have continuous risk data which will be furnishing them with the most recent information. The more data, the better the decision the team can make.
Assumptions and Constraints in Risk Management
An assumption is something that is assumed in project planning and it can be true or false. Any consequences of the assumptions must be taken into consideration, so that the project will not suffer. Assumptions do not end up valid always. Once assumptions are false it leads to risk the project performance. A proper risk management also covers the project assumptions.
Constraints are limitations forced on a project. Risk, resource, schedule, quality, scope, and budget are the main constraints of the project. Like assumptions, constraints carry risk, for instance, a conceivable risk is that payment will be postponed in this manner contrarily affecting timetable and even the continuation of work on the task.
Project risk can be managed successfully through detailed planning, proper risk plan and periodically evaluating and updating the plan throughout the project life cycle. Once the risk is mitigated, it’s important to control the risk to make sure that it doesn’t occur again during the project. Changes to the risk plan must also be communicated through team members and stakeholders. Stakeholders must be aware of any kind of changes in the project.