Risk Management Process and Strategies
9 Pages4012 Words83 Views
Added on 2020-03-23
About This Document
1 | Page Risk Management Process and Strategies Abstract This report explores the concepts of risk management including definition of risk, risk sources, risk types, risk assessment, risk ranking and filtering methods, and risk management strategies. Contents Abstract 1 Introduction 1 Risk Sources & Types 2 Risk Assessment 3 Project risk management strategies 7 Conclusions 8 References 8 List of Figures Figure 1: Risk Matrix 5 Figure 2: Risk Probability vs Severity 6 List of Tables Table A: Risk Assessment 5 Table B: Multifactor strategies multiplic
Risk Management Process and Strategies
Added on 2020-03-23
ShareRelated Documents
1 | PageRisk Management Process and StrategiesAbstract This report explores the concepts of risk management including definition of risk, risksources, risk types, risk assessment, risk ranking and filtering methods, and risk managementstrategies. The objective is to understand how risk management practices work and how riskmanagement steps are taken by organizations to minimize their risks. For this, a WoodenFurniture Manufacturing Unit project is considered which involves set up of the productionunit. The paper identifies a list of risk sources that can be identified at the initial stage of riskmanagement post which these risks can be evaluated and then appropriate risk managementstrategies can be formulated based on the level of severity these risks present. Some of therisk sources that have been identified in this report include client characteristics, projectnature, professional services and project delivery methods. A major part of the analysis isdevoted to the steps involved in risk assessment beginning with risk definition, risk topicsidentification, risk evaluation, scoring, subtopic filtering, risk review, and riskcommunication. The report deeply explores the process of ranking and filtering that is usedfor the evaluation of project risks such that final risk scores can be calculated and riskmanagement processes can be prioritised based on these scores. Some of the models for riskassessment through the use of ranking and filtering that have been identified in this paperinclude risk matrix, multiplicative scoring, and weighted scoring. The risk managementstrategies have been identified for exogenous and endogenous risks that are two main types ofrisks identified in this paper. The literature on risk management strategies also includeconsiderations of governance structures that are affected by the international and nationalcodes of conducts defined by various associations and regulatory bodies. The report would beuseful in understanding how risk management practices can be used professionally in anorganization for minimizing risks.ContentsAbstract.................................................................................................................................................1Introduction...........................................................................................................................................1Risk Sources & Types...........................................................................................................................2Risk Assessment....................................................................................................................................3Project risk management strategies........................................................................................................7Conclusions...........................................................................................................................................8References.............................................................................................................................................8List of FiguresFigure 1: Risk Matrix............................................................................................................................5Figure 2: Risk Probability vs Severity...................................................................................................6 List of TablesYTable A: Risk Assessment.....................................................................................................................5Table B: Multifactor multiplicative scoring..........................................................................................5Table C: Weighted scoring....................................................................................................................6
2 | PageIntroductionRisk can be any event that occurs unplanned and results into positive ornegative impacts on a project. Risks result from uncertainties in outcome ofproject activities. In risks, there are possibilities of facing losses or undesirableoutcomes. Uncertainty and risks are often used interchangeably but the twoare somewhat different uncertainty is the case where possible outcomes of asituation are known but their probabilities of occurrence cannot be judgedwhile in the case of risk , risk impacts can be quantified as well as theirprobabilities can be known. Risk may not always lead to a loss but it is anoutcome which is unfavourable to the project in some way. This favourability isrelative to what a stakeholder is expecting from the project as an outcome. Twostakeholders can have different views on the same risk. Thus, their objectiveare required to be integrated which presents complexities on projects.A project needs to have appropriate strategies in place to ensure that theserisks are managed well otherwise, the gap between expectations and actualoutcomes would keep on increasing on the project. There are several tools andstrategies that are available for reducing risks but these strategies may differfrom industry to industry. In a manufacturing unit set-up project, risks may bemanaged through the use of appropriate contract arrangements withequipment and machinery vendors.Risk management is the process using which the risks can be minimized anyreducing its probability of occurrence and reducing the severity resulting fromit’s of occurrence in least possible time. Risk management is an iterativeprocess that involves cycles of three steps including risk identification, riskanalysis, risk response, and risk control.Risk Sources & TypesThere could be many sources of a project risk and the impacts of these riskscan have infinite possibilities. However, there are certain sources of risks thatare more frequently seen and thus, can be categorized as the primary sourcesof project risk. These include:Client Characteristics: There are certain factors related to clients that canaffect the outcomes of the project such as nature of business, form of business,track record of the client on managing manufacturing development projects,availability of funding, modes of compensation, attitude towards professionalservices, and the history of litigation or claims. These characteristics areimportant as they help in identifying the risks that can occur on a project aswell as defined the impacts of those risks on the project. In the current case, theclient is the manufacturing organization that have sufficient funds available forestablishment and has a clean record of paying companies that they outsourcetheir services to.Project Nature: Certain project related factors such as relationships betweenprogram budget and schedule, project site, political profile, project type, andapplicable laws or regulations, can also affect the types of risks and theirimpacts on a project.Professional Services: Many projects involve services from a third partycompanies including equipment suppliers, contraction contractors, and
3 | Pagearchitects which makes the project dependent on the availability andexperience of these third parties.Project delivery Method: Modes and methods of delivery of a project can bedifferent with different types of projects. For instance, a construction projectcan be delivered through one general contractor handling all sub-contractorsor through involvement of multiple prime contractors who would be deliveringthe project directly. Moreover, with the level of complexities and size of theproject, the familiarity with the contractors and sub-contractors can varywhich would affect the speed of approvals and construction.Others: There can also be other parties to contract or project that can affectthe risk portfolio of a project based on their involvement and influence on theproject. These parties can include employees, project team, regulatory bodies,public communities and more such internal and external stakeholders. Forinstance, in case of a manufacturing unit establishment is a design professionalinvolved in a product development then the skill, experience, and thecompensation offered to the contractors involved in factory set up andimplementation of the manufacturing equipments would affect the woodenfactory establishment.Risks can be mainly of two types that include endogenous and exogenous risks.Endogenous risks arise from the shocks within an organization whileexogenous risks result from shocks received from outside thecompany[ CITATION Jon124 \l 16393 ]. Exogenous factors can include marketingplans of an organization, its market reputation[ CITATION Xav12 \l 16393 ], Risk AssessmentOnce risk sources are identified, the risks that are likely to occur on a project caneasily be identified and then, the next step is to assess these risks. This assessmentinvolves understanding of the probability of the occurrence of the risk and theimpact of the risk event on the project. Certain risks can have very low probabilityof occurrence but if they occur, they can be catastrophic in nature while some risksoccurring more frequently can have very minor consequences that can be avoidedon a project. Considering these two aspects, the severity of the risk can bedetermined by considering both the measures.A common method of facilitation for risk management is the use of risk matrix andfiltering. It gives a sharper view of the risks faced a company by exploring a largeset of risk scenarios that are complex in nature. The filtering breaks down risks intotheir sub-components such that they are individually evaluated to assess theircontribution to the overall project risk. Risks are prioritized based on certain riskfactors and criteria’s of evaluation and risk scores are calculatedaccordingly[ CITATION Did03 \l 16393 ]. The steps followed in this method of riskassessment include:Defining risks and system scope: First step in any risk management practiceinvolves identification of a risk question answer to which would make the goal forrisk assessment. For instance, if the question is if the raw materials would be
End of preview
Want to access all the pages? Upload your documents or become a member.
Related Documents
Importance of Risk Management in Project Deliverylg...
|5
|1305
|184
Risk Management Framework in Healthcarelg...
|13
|915
|81
Cyber Security Management for Digital Fruitlg...
|31
|5453
|216
BEN610 ICT Project Management : Assignmentlg...
|19
|3996
|103
Risk Management and Procurement Management Assignmentlg...
|14
|3677
|73
Risk Management Plan for Construction Project - Deskliblg...
|15
|3448
|473