Risk management in Project Management

Jessamy Amic

Posted: March 2, 2021

Table of Contents

When it comes to project management, the ideal is when systems are streamlined and operations are efficient. Sometimes, though, spanners throw themselves in the works and problems need solving. Having a sound risk management strategy in place helps mitigate problems from causing tremendous damage to the operations and can help maintain smooth systems running.

What is risk management?

In a nutshell, risk management is the process of making decisions that will reduce any adverse effects that risk might cause on a company. 

There are different ways to define risks, but essentially it is anything that might disrupt the efficiency or well-being of the company or employees. A risk required addressing and the method of resolving it depends on the risk itself. For example, some risk management strategies involve accepting the risk and looking for ways to exploit the possible effects, while others look to reduce and avoid the risk entirely from having any effect on the organisation. 

Read more: What are the risk management strategies?

By offering the right attention to protecting a company from risk, the company can prevent the loss or harm from risk. This can be financial, human resource-related or operational. The best outcome is where risk is diminished and business can continue either as normal or, where possible, in a better capacity than before.

What is a risk in business?

At the basics, a risk presents an opportunity for either a loss or gain. When it comes to a loss, we generally refer to the risk as “exposures”. Defective products, unacceptable service, fires, a lack of health and wellbeing in the employees are all exposures. These result in some form of loss to the business operations which requires resolving. A risk that might be a gain is seen as an opportunity. Some financial risks could result in a gain that leaves the organisation in a better space than before. While financial risks might lead to gain, it’s also important to recognise that they might yield a loss if things don’t go according to plan. 

What is risk management when it comes to project management?

Risk management specifically in project management refers to the process used by project managers and traffic coordinators to mitigate potential problems that could affect the project’s operations. This means pre-planning, problem-solving and considering any adversities that could impact a project’s schedule and success ahead of time. Risks and issues are different and require a different sort of attention. Issues are bound to happen and the problems associated require planning to reduce the impact. Risks, however, are events that might occur and require planning against the odds instead of against the issue. 

The project manager and the risk manager need to work closely together to reduce the risks that might occur in a project’s life cycle and limit any damage that could be caused. 

Why is risk management important?

Without risk management, a company has no support or protection against the possibility of a negative impact from a risk. Risk management is crucial to safeguard against any events which can disrupt operations. The main aim is to make sure the company stays running successfully and risk management is in place to ensure this happens as much as possible.

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