PROJECT RISK MANAGEMENT

ANS 3.
The steps of Project Risk Management
Risk management includes the assessment of risk and the mitigation strategy. identification
of risk and evaluating the impact of the risk is part of risk assessment and risk mitigation
strategy including the plan to minimize or eliminate the impact of risk events. risk can be
positive or negative. Positive risk brings Opportunities like if you complete the project early
you can take the next project. negative risk can damage the project And are something that
uncertainly occurred.

1. Risk identification
Risk identification is the first step in project risk management. there are many ways to
identify the risk like a risk checklist. using the checklist of potential risks can be
helpful for the project risk management team as it provides specific risks and
broadens the perspective. using experience to develop the checklist is a valuable
source to identify the risk of the project. project risk can be on its technical side, cost,
weather, completion time, legal and political environment, and finances. A risk
breakdown structure is used to categorize the risk at different levels.

2. Risk evaluation
Evaluating the risk means evaluating the probability that the risk event will occur and
the evaluation loss associated with the event and the probability of occurrence of an
event is evaluated. The negative impact of risk is evaluated on the project. Some risks
can highly impact the project, but they are unlikely to occur some can occur having a
higher impact.
Example: risk evaluation by the project risk management team of delay in the
delivery of major equipment required in the project and will increase the project cost
if it happens. so this risk was considered to be of high potential with negative effects
which is likely to occur.

3. Risk mitigation
risk mitigation refers to decreasing the impact of risk or decreasing the chances of the
occurrence of the event. it includes the avoidance of risk by following the other plans
or sharing the risk, reducing the risk, or transferring the risk

4. Risk avoidance
To mitigate the risk avoidance will include an alternate strategy that will have low
risk, but it will cost higher. to avoid the risk, some cost has to be bear by the team.
Example: it was evaluated that the vendor will delay the delivery of the equipment
required, so to avoid that risk new vendor was appointed which was charging a little
 higher than the previous one another example can be of using drug testing on pilots
before they board on the flight to avoid the risk of accident and crashes.

5. Risk sharing
Sharing of risk with others to reduce its impact. it is a journal to reduce the political
and legal risks associated with the projects. the risk is shared between 2 or 3 partners.
the benefit is that the other partner will absorb some of the risks if the event of risk
occurs.
For example: in international projects, the risk is shared by local partners as they
have knowledge of the current market and bring some expertise to handle the political
and legal issues of that area or region. in this case both the project benefits and project
risk is shared.

6. Risk reduction and risk transfer

Risk reduction is done through investing the funds to reduce the risk like Hiring some
experts to examine the project plan which will incur some cost, but it will reduce the
risk, and risk transfer refers to the shifting of risk from one party to another by taking
insurance of stock, plant, and machinery and other assets.
Example: Risk reduction example is Using different flights by key experts of the
company so that if the plane crashes one of the experts can be saved or the risk is
reduced. risk transfer example is the purchase of insurance For the event occurring
over which the company has no control.

7. Contingency plan
After assessing and planning for risk mitigation a contingency plan can be helpful in
the event of a risk. Contingency plans are helpful when difficult situations occur,
some companies allocate funds or budgets to the contingency plan to lower the risk.
having a contingency fund or budget helps to solve the problems.
For example: if it was evaluated that the truck drivers are going on strike, for this the
contingency plan is to use the train as transportation.