Tuesday, September 11, 2012

Risk Management

Risk is defined as follows:

“A risk is an uncertain potential condition or event that, if it occurs and is not mitigated, may have negative or positive impact on the project objectives.”


“A measure of the inability to achieve program objectives with defined cost and schedule constraints.”

Types of Risk:

Risk can be either positive or negative. Positive risk provides an opportunity to be pursued whereas negative risk is one that raises an issue which should be mitigated or avoided based on the criticality.

Example of Positive Risk - “If we buy pumps for all our facilities bundled together in one purchase order, we can obtain a volume discount.”

Example of Negative Risk - “Each day that a critical piece of equipment is late in reaching the site, will throw the start up schedule off by these days.”

Levels of Risk:

There are four levels of risk including strategic, program, projects and operational. These are described below:

Strategic Risk:

Risks that ensure that business survives with long term stability and security of the organization are strategic risks.

Program Risk:

Program risks are involved in the management of interdependency between a wider business environment and projects.


At project level, risks exist in creating progress and project plans.

Operational Risks: these are the risks which lye upon supplier management, technical faults etc.

Risk Methodology:

It is the procedures and practices that allow managers to take preventive measures to mitigate risk well in time before they arise or when they tend to be affected.

The practices of risk management are used both in private and public sectors including activities like insurance, finance and investment, public organization, governments and health care etc.

Management planning now encounters risk management as its essential part. Key people involved in risk management include process owners, procurement teams, business managers, strategic owners and key suppliers.

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