RISK Management Process Risk management involves managing what you did not plan to happen. Risk is present in all projects, whether it is a small project to construct a two bedroom flat or a complex project involving many phases and stakeholders like the building of a railway system. Risk management is concerned with establishing a set of rules and procedures for managing risk, rather than relying on reactive and intuitive approach. Risk management is essential for effective project management. It sets out a formal approach which, if applied will enable the project team to manage risk proactively. It is recognized that risks are project specific. Risk is futuristic in nature. It is a future event that may jeopardize the success of the project. An issue is a risk that has occurred, Risk management rather than issue management is essential for effective project management. The common risk management process consists of five basic steps that includes risk strategy, risk identification, risk analysis, risk response and risk control. The five steps are presented below.
Risk Strategy – The risk strategy is required to set out the risk management plan on the project, usually, it may form part of the project execution strategy and will normally include the following items.
Timing of the risk management plan
Objectives of the risk process.
Scope of the risk management process
Risk management methodology
Expected results of the process
Methodology and tools to be adopted.
Risk Identification – Risk should come early in the project cycle as part of the feasibility studies and project scoping. This will ensure that realistic contingencies are built into the project to absorb the risk. Risk Identification is a continuous process during project execution. This is because the project execution will throw up new risks that need to be identified. In most projects, there are certain risk which if not resolved may impact on the kick off of the project execution. For instance, stakeholders’ identification and involvement must be planned and adequate mitigating measures identified during the project scoping process. If this is not done, the project may not be able to start.
Risk Register – The output of the risk Identification process is the risk register which contain information associated with risks that could occur in the project. The risk register enables the project risks to be logged and tracked throughout the life of the project. The risk register is useful for providing a wide range of information in the risk management process. It also allows information about risk on the project to be stored in a manner that is useful for subsequent projects.
Risk Analysis – Risk analysis is divided into qualitative and quantitative risk analysis.
In qualitative risk analysis, risks are analyzed based on the impact and probability if they occur. The analysis helps provide an overall risk ranking for the project. It is important to rate the risk to identify which of them deserve the project scarce resources. The risk are put in a matrix format to rate each risk in terms of Probability –likelihood of occurrence Impact- the effect on the project if it happened.
The scoring can be used to classify the risk as high, medium or low, which allows scarce resources to be focussed on those risks that are rated high.
Risk Response – The key point at this stage is to choose an appropriate course of action or adopt an alternative pathway to make the risk less severe.
The potential response option may fall into one of the following categories,
Avoid – avoid involves modification of the project plan to sidestep the risk.
Transfer- Transfer involves transferring the risk from one party to another such as transferring the risk to an insurance company.
Mitigation involves responses that lower the probability of the risk occurring and the impact if it occurred.
Endure – it may be decided that the project can live with the risk, that is, endure the risk. For instance, it is assumed that everyone on the project will work eight (8) hours a day but the project may be able to endure it if some people work for less than eight (8) hours a day.
Engr. Obumeyan is a Chartered Chemical Engineer and is presently engaged as Consultant on the Abuja Light Rail Project.