What is Risk Management?

Without referring to the millions of websites and paperwork knocking about that talk about Risk Management, I need to attempt to give a easy view from the attitude of somebody who has to manage risk day to day across main projects. This is real risk management, arms on.

After all, “Risk” and “Risk Administration” will have variations of the same common meaning depending on the circumstances or context to which it is applied, but in principle, all risk management will follow more or less the identical process.

So, what is a Risk? A risk might be any influence on an anticipated or deliberate outcome that adjustments that outcome. In child-talk, it’s anything that would stop you getting what you need or expect.

This is an important note: Risk hasn’t occurred yet. If the end result has already changed on account of a risk “occurring” then it’s no longer a Risk, it’s an Challenge and must be managed differently.

So basically – A risk is something, anything, that could occur that will impact or change a desired or planned outcome. There are such a lot of completely different ways to state this that, so simple as the idea is, it can easily get confusing. Let me provide you with an example;

“If it rains today then the sector trip has to be cancelled” – the risk is that it may rain. The impact is that the planned trip will must be cancelled. Risk Administration is recognizing the risk potential analyzing the probability and impact and either mitigating it or preparing alternative options that will allow the original plan to succeed.

Risk Administration a hundred and one

On some of my projects in Asia I’ve had to seriously consider the impact of rain on project outcomes. I was on one job in Korea, Seoul, where we had a limited time to move a banks’ trading office from an old building that had been sold off, to a new building. The old building owner declared bankruptcy and sold off the office block. The new owner, the government, kicked everyone out on quick notice. We had 3 months to discover a new building, fit it out and move 200 workers including one hundred twenty trading positions.

This really tested my groups Risk Management ability. This was a working business, the only window to move the 200 employees was over a weekfinish – after trading stopped on Friday evening and earlier than it started on Monday Morning. Guess what, we had a Storm heading in, and for those that don’t know how things work in Asia – Typhoons are given warning signals as they approach by the local creatorities.

Each signal signifies a level of “risk” and or probability of a direct strike. Because the signal rises in power the threat (and danger to life and property) turns into imminent and public services shut down. Individuals are told to go house or stay off the streets and, for a number of hours to a number of days, everything grinds to a halt.

I had a disturbing time managing risk by the hour. The choice to roll back the move to the old office or proceed and hope we bought everything in earlier than the hurricane hit was a 15 minute evaluate, each quarter-hour for the primary half of the weekend. That was Risk Management like I by no means had to handle before. Risk Management is critically vital to project work.

What’s Risk Management?

So, the meaning of “What’s a Risk” should, I hope, be graphically clear now..? Risk Administration is the process of managing risk as it pertains to specific circumstances. The strategies, tools and processes used to manage risk are quite pragmatic and common-sense. But we all know that there is not any such thing as “Common Sense” so the perfect way to get a consistent framework round managing risk is to learn some best practices based mostly on trade proven templates and methodologies.

I’m not here to push one methodology or finest apply in opposition to another. I’ve my personal preferences primarily based on my industry and experience but I know and have seen many different project managers use various methods and instruments in Risk Management, all valid and most of them effective at doing the job.

In a observe up article I will talk more specifically about Project Risk Management. I’ll share some templates and examples and hopefully fire up some discussions too. There isn’t any one right way to do Risk Administration but there’s a consistent framework that should be followed and there are some superb industry standards in Risk Management space.

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