Risk Management is an integral part of the project management process for successfully completing a project. However, the subject of risk is difficult to understand if you are not familiar with the project management process. According to the PMBOK guide, Risk is defined as an uncertain event or condition that, if it occurs, has a positive or negative effect on a project’s objectives. Lets discuss the role of Project Manager in Risk Management.
Plan for risk management
A Project Managers first task is to document all of the risk planning, identification, analysis, and response planning in a risk register. Then you should discover and assign a resource specifically for that risk, called a risk owner. The risk owner is responsible for monitoring and controlling that risk. The risk owner will be noted in risk register along with other pertinent information such as WBS Id# , Risk Event/Impact, and Impact area.
The second task for a Project Manager is to look through the WBS, activity list, and planning documents to identify risk. Negative risk will negatively impact your project’s scope, time, and cost. Positive risk is risk that will help your project finish on time and within budget. All risks will be documented into categories. For example, a risk category could be technical risks, project management risk, organizational risk, or external risk. Once the risk has been categorized, risk will be turned into a risk statement. A risk statement is described using an “If-Then” statement. For example, “ If the resources do not arrive on time, then the roof cannot be completed.”
Assess, prioritize, and quantify risk
The third task for a project manager is to assess risk. Risk can be analyzed as either qualitative or quantitative. A qualitative analysis is used to prioritize your risk events. Qualitative analysis used a probability and impact matrix to prioritize risk. Risk can be categorized using a 3×3 matrix or a 5×5 matrix or low, medium, or high.
A quantitative analysis is used on any project that requires a statistical analysis. This type of analysis uses probability and impact to calculate expected value. There are 4 main types of Quantitative analysis:
1. Sensitivity analysis
2. Beta/PERT and triangular distributions
3. Decision tree
4. Monte Carlo simulation
Plan responses and contingencies
The final task a project manager is to plan a response and a contingency for each risk. Just because a risk has been identified, does not mean that it will actually happen. However, there is a likelihood that it will. So you have to decide on the correct response for a risk if it does occur. There are three common responses for positive and negative risks. Responses to positive risk are categorized as exploit, share, and enhance. These responses focus on using this risk to their advantage so they can gain an edge in the project. Responses to negative risk are categorized as avoid, transfer, and mitigate. These responses are used to make sure that a risk does not negatively affect a project.