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What is risk management?

Definition

Risk analysis and risk management is a process that allows individual risk events and overall risk to be understood and managed proactively, optimising success by minimising threats and maximising opportunities and outcomes.Ìý

Definition from ºìÌÒÊÓƵ Body of Knowledge 8^thÌý±ð»å¾±³Ù¾±´Ç²Ô

Risk management

Risk managementÌýis focused on anticipating what might not go to plan and putting in place actions toÌýreduce uncertaintyÌýto a tolerable level.

Risk can be perceived either positively (upside opportunities) or negatively (downside threats). A risk is the potential of a situation or event to impact on the achievement of specific objectives

Working with the risk owner, the project professional ensures that risks are clearly identified before moving on to the risk analysis step of the risk management process.

The projectÌýrisk management processÌýreflects the dynamic nature of project­work, capturing and managing emerging risks and reflecting new knowledge in existing risk analyses.

A risk register is used to document risks, analysis and responses, and to assign clear ownership of actions.

The risk management process

Source: Project Risk Analysis and Management Guide 2^nd edition

Watch: What is risk?

What is riskÌýanalysis?

Risk analysisÌýprovides guidance on where the greatest vulnerabilities lie. Because risk analysis is fundamentally perception based, it is important for the project professional to engage stakeholders early to identify risks.

To make sense of differing perceptions, it is important to describe risk events clearly, separating causes (facts now), from risk events (situations that may occur), from effects (that have an impact on one or more of the project measures). This enables subsequent analysis and management of risks.

Effective risk analysis and contingency planning will see planned time and/or contingency used. Unused contingency is most likely caused by overestimation, luck or the efficient management of risk. Insufficient contingency is most likely caused by optimistic estimation, bad luck or inefficient management of risk.

Outputs from risk analysis help the project professional to:

• Understand the probability of achieving out­turn dates, costs or
• Inform and influence decision-making about the chances of achieving the business case and
• Agree the level of contingency to provide the required level of confidence.

ºìÌÒÊÓƵ Learning

The following risk management resources are available on ºìÌÒÊÓƵ Learning. This is a member only resource.

• Information sheet - Risk management
• Mini guide - Project risk analysis and management

Find out more about ºìÌÒÊÓƵ Learning

The Asymmetry between Threats and Opportunities in Risk Management

Results from a Survey among ºìÌÒÊÓƵ Corporate Members

Our latest survey was conducted among our Corporate Members by our Risk Management SIG with the aim of assessing the state of risk management in projects, with an emphasis on definitions and processes around opportunity management.

This report revealed the differences between the application of risk management for larger and smaller projects.

Download the report

ºìÌÒÊÓƵ Podcast

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State of the art risk management projects: What you need to know

Emma meets Peter Simon, a Director at Lucidus Consulting and a member of the ºìÌÒÊÓƵ Risk SIG Committee.

He is co-author of a new ºìÌÒÊÓƵ report looking into opportunity management as part of the overall project risk management process. The findings reveal notable areas where what is defined in textbooks and standards do not match what’s happening in practice.

ºìÌÒÊÓƵ Risk Interest Network

The ºìÌÒÊÓƵ Risk Interest Network provides a forum in which to share knowledge and ideas, develop expertise and understanding and actively promote the adoption of project risk management.

ºìÌÒÊÓƵ Body of Knowledge 8^th edition

The ºìÌÒÊÓƵ Body of Knowledge is a foundational resource providing the concepts, functions and activities that make up professional project management. It reflects the developing profession, recognising project-based working at all levels, and across all sectors for influencers, decision makers, project professionals and their teams.Ìý