Risk Management As a Project Management Process

It must be remembered that there is nothing more difficult to plan, more doubtful of success, nor more dangerous to manage than the creation of a new system. For the initiator has the enmity of all who would profit by the preservation of the old institution and merely the lukewarm defense in those who would gain by the new ones. — Machiavelli

The art of project management consists of many processes. As defined by the Project Management Institute in the PMBOK® Guide, there are five essential project management processes, as shown in Figure 1-1. For reference, we define these processes simply as follows:

• Initiating processes — Obtaining commitment to begin a project

• Planning processes — Establishing a plan to accomplish the business need that the project addresses

• Executing processes — Coordinating the people and other resources assigned to the project

• Controlling processes — Ensuring achievement of project goals through monitoring and measuring progress so that remedial action can take place in a timely fashion

• Closing processes — formalizing completion of the project by acceptance of final deliverables, leading to an orderly project end.

OVERVIEW OF RISK MANAGEMENT PROCESSES

Before discussing how to manage risk, we must agree on a definition for the term. In the context of project management, we define risk as:

The potential events or circumstances that threaten the planned execution of the project.

This definition puts a totally negative context around the word risk. Others, such as the Project Management Institute, include the positive opportunities (impacts) that risks may have on a project. However, in developing a proactive risk management philosophy, it is most important to concentrate on the negative aspects of risk.

Each project management process has a corresponding risk management process, as shown in Figure 1-2. To establish a common reference framework, we define the risk management process simply as follows:

• Initiation: Project opportunity assessment — Examining the high-level requirements of the project opportunity to define risks versus opportunities in order to make a decision to proceed or not to proceed with the endeavor

• Planning: Risk management planning — Identifying risks and developing mitigation strategies and contingency plans to minimize their impact

• Executing: Project risk audit — Auditing the effectiveness of project management processes

• Controlling: Continuing risk management — Monitoring identified project risks to trigger the implementation of risk mitigation strategies and contingency plans; identifying new risks

&#