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What is Risk Management in Project Management?

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Enterprise risk management and project management have some similarities, especially at first glance. The former concentrates on terminating an existing threat whereas the latter focuses on building something entirely new.

Nevertheless, both concepts parallel each other, which makes up one of the reasons why they can utilize agile procedures to come up with more efficiently acquired results.

The Meaning of Risk Management in Projects

What is Project Management?

In essence, project management combines various activities to drive projects from ideas all the way to the final development phase. These activities comprise the project commencement, creation of the timetable, information dissemination, adjustment and change observation and the compilation of data, particularly at the completion stage.

What Skills should a Project Manager Have?

Bearing in mind that the project manager is in charge of implementing the strategies outlined in for a given project, he or she should boast strong organization abilities as well as the necessary knowledge pertaining risk and threat mitigation.

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The Significance of a Project Team for an Organization

One individual may lack the capacity to partake in all the requisite activities that safeguard the success of the project. However, this factor is dependent on a project’s size. Large projects, for instance, call for various things including metrics, objectives, and deadlines in a bid to prove progress and stability.

When it comes to smaller projects, on the other hand, a single person may be in a better position to organize the integration of the different requirements. For a large project, a project manager needs to work with a team of other people with allocated individual duties. What this means is that each project team member responsible for a specific aspect or portion of the project and reports to the project manager who oversees the entire project’s progress by reviewing their specified tasks.

What does Risk Mitigation in Project Management Entail?

Risk mitigation calls for project managers to assess risks through various ways such as tracking, identifying, implementing a program, prioritizing and reviewing potential impact.

How do Project Managers Conduct Risk Identification?

In project management, risk identification encompasses the reviewing of both negative and positive project risks.

In most cases, positive risks translate into opportunities. Nonetheless, this case only applies when a project team makes appropriate plans. For instance, completing a project before the stipulated deadline may bring in more sales. On the contrary, if production does not meet the growing demand or if marketing and sales fail to align themselves to the new timeline, such an opportunity may put the team’s reputation at risk or even cause financial loss.

Alternatively, negative risks point to potential negative results. For example, many faults can potentially cause delays in product development before the scheduled completion period. As a result, marketing and sales teams may lack product to offer their customers, assuming that they had already initiated their strategies.

How do Project Managers Form the Necessary Risk Response

In project management, risk response can take various forms including acceptance, mitigation, avoidance or transference.

Avoidance entails preventing the possibility of an event’s occurrence. Since in most cases risk avoidance may prove to be a daunting task for project managers, they may be forced to attempt risk transfer. For instance, taking up insurance against an accident in a bid to transfer costs to the insurer in case the insured event occurs.

In certain cases, project managers accept the significance of risk, which is mainly through acknowledging its existence while participating in a cost-benefit analysis. For example, when the possibility of an event happening is too low in comparison to the income the project stands to generate, then the risk can be accepted. Also, in some cases when there is high market demand, it may be worth accepting the risk of failing to meet all the deadlines and pushing them forward.

For risk mitigation, a project manager is required to assess the likelihood of the risk occurring and come up with plans for alleviating its potential result. A project manager may also resolve that risk management translates to delaying the deployment of marketing strategies, especially when a tight deadline is involved.

How does a Project’s Development Translates to Compliance?

A project’s duration necessitates agile development. In this case, agile encompasses the engagement in a series of principles and values that fall within project development. The term integrates the risk management process through continuously evaluating a projects metrics to make sure that production targets and risk mitigation tactics blend. Similarly, compliance demands the need to ensure that risk mitigation approaches safeguard companies from negative risks.

Author Bio: Ken Lynch is an enterprise software startup veteran, who has always been fascinated about what drives workers to work and how to make work more engaging. Ken founded Reciprocity to pursue just that. He has propelled Reciprocity’s success with this mission-based goal of engaging employees with the governance, risk, and compliance goals of their company in order to create more socially minded corporate citizens. Ken earned his BS in Computer Science and Electrical Engineering from MIT.  Learn more at ReciprocityLabs.com.
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