What Is Risk Management In Project Management

One thing every project manager knows is risk is part of any project. The first thing you incorporate when planning for a project is the risk involved. What can go wrong is the question every project lead will ask them and risk management focuses on reducing the risks in a project. 

This may sound pessimistic but thinking pessimistic to avoid failing sounds better than actually failing. You see the fear of the unknown, what will happen if this happens and all sorts of things, no one can control it but one can minimize the chances of a bad thing happening. 

Think of it in this way, the chances of you getting mugged in a dark alley is more than a busy road. So, you take the busy road for better security. This is called risk management as the probability of you being robbed in a busy street is far less than a dark and empty one. 

Risk management on Projects? 

Risk management on projects is the process of finding out, analyzing, and taking necessary steps to react to any risks which arise during the life expectancy of the project. By finding and managing risks we make sure the project is on track to meet its objective. 

What classifies as a risk? Anything which will delay your project from reaching its goal within the given timeline is a risk. Only being reactive to risks is not enough. Why do you think project managers are paid so much? Because their job is to deliver the project within the deadline. To make sure there aren’t any hiccups, project managers spend a lot of time identifying possible risks and taking precautions against them. 

In a project, management risk is a potentiality that can delay the project, affect its performance and budget. When risks present themselves in reality they become issues and they need to be solved for the project to move smoothly. So, the sole purpose of risk management in project management is to prevent risks from becoming issues. 

Is risk management always the same?

Risk management varies from project to project. Some projects do not require much risk management because the project is simple and the employees working there are aware and skilled at what they do. 

For example, You own a restaurant and you will host a Christmas party. Risk management for the party is going to be easy. Make sure the restaurant treats each guest properly, the food being served needs to be delicious and the music needs to be good. 

But when you are the project manager for the new iPhone, then you need to identify potential risks and thorough planning is necessary. Because if you let the phones go into production and there is an issue, it could cost the production of millions of dollars. 

Plus, the smartphone market is competitive and if they are not released in time, the company may incur a loss. This is why analyzing and identifying risks beforehand is crucial in this scenario. 

During this risk management, you might also need to deal with other things in your company, such as hiring remote workers. In cases like this, you can partner with a Professional Employer Organization (PEO), International payroll, or other providers local to where you are, and they will help you recruit, pay, and provide other facilities for your new and international employees. As a result, you will have more time to analyze risks and find solutions for them. 

Is there a thing called positive risks? 

Yes, positive risks are also a thing in risk management. Not all risks are bad, some are good for the project. Negative risks can damage the project significantly whereas good risks can increase the chances of the project being a success. 

An example of positive risks can be: You estimated 1000 people will buy your product but 10,000 people want to buy so more people buying your product is a positive risk. 

Another positive risk could be a delay in shipment, which opens a new window for your products where they will sell faster, increasing your sales. 

The project management team needs to identify positive risks before they become a reality as it helps them better implement them. Also, positive risks can turn into negative ones and negative ones can turn into positive so it’s better to plan for both.  


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