1.1 Background Every project differs in comparison to other projects although there may be similarities between projects. There are significant changes among projects due to the fast pace of changes in technology. Every project has risk components that needs to be managed. Hillson (2002) defined risk as an uncertain event or condition that has either positive or negative effects on project objectives. A sound management of project risk is crucial for project success due to variations in actual quality, time and cost performance compared to the expected ones.
When a stable response strategy is agreed upon, the process enters final stage, where an assessment of the risk associated to the response strategy is conducted as explained next in risk management section. 3.2 RISK MANAGEMENT The risk is calculated as the product of its probability of occurrence and the resulting affect on the project. Each risk has three dimensions- quality-risk, cost-risk and schedule-risk. According to Gericke, risk treatment can be classified into preventive, reactive and proactive risk treatment. Preventive risk treatment aims to prevent any risk by eliminating its causes.
The very process of identifying project risks forces some discipline at all levels of project management and improves project performance (Erik W. Larson). Project risk has its origins in the uncertainty present in all projects. Known risks are those that have been identified and analyzing, making it possible to plan
When an organization like a bank fails to come up with ways of mitigating any risk that they face or could possibly face. The impact of risk can have far-reaching effects on an organization that fails to be prepared. Organizations like banks can benefit from considering their risks especially when it is doing well and when there are indications of market growth. It is advisable for risk management to be used as a preventive measure and not a reactive measure. The risk management process is all about identifying exposures to risks, measuring those exposures and making a decision on how to protect the business from the risks (Kidwell et al., 2016).
FACTS IMPACT ON PROJECT RISKS Figure 7 Facts Impact on Project Risks Source:(Burtonshaw-Gunn 2009) In this pre planning stage risk should identify properly and need to prepare a proper risk assessment plan. After making the assessment plan we can clearly take the action for mitigation process to the identified risk. Finally we can monitor those risk how it is behaviour. When managing those stages in preplanning stage, it helps to control the triple constraints such as Time, Cost & Quality.Because of the proper risk management we can stop the time over run & cost over run in project when it
The potential risks are then categorized and prioritized according to their positive and negative impacts in the project which will help to manage those risks. Risk assessment: The potential risks that are identified are evaluated in order to find out the root causes of those risks and their impacts in the project. Risk actions: All possible solutions are evaluated in order to manage the potential risks and prevent them from affecting in the project. The solutions are made considering what might reduce the likelihood of the risk and how the risk will be managed if occurred. Risk management and control: A proper planning is made and carried out to implement the possible solutions that were identified to reduce the risk likelihood and to manage the risk.
Besides that, the cycle of information gathering, analysis and management action is itself a form of risk management where project risk management makes this process more explicit, formalising the information collection and analysis while acknowledging that many of the data are uncertain. Furthermore, project risk management encompasses a wide range of technical, financial and market risks and also a range of potentially critical soft organisational issues as recognised in the Pentathlon model (Goffin and Pfeiffer, 1999). Therefore, the authors also mentioned that in many projects the management requirement is to understand the relative severity of the risk, compared to other projects and options available to the
Strategies are mechanisms adopted by an organization as solutions to help keep things in order and to pave the way toward its desired objectives (Carrell., Elbert., et al., 1998). Risk is a future, uncertain event or condition with a probability of occurrence (Barnabei, 2008 & Fadun, 2013). If it is to occur it may have a positive or negative effect, a possible loss or impact on a projects achievement of objectives (Renn, 2008). Risks can occur in any form, some of the most common risks in an organization that are likely to occur are operational, credit or market risks (Barnabei, 2008 & Fadun, 2013). Risk management fundamental in an organization as it is the managing of risks in an organizations operations whereby they do not try to eliminate or avoid the risk but rather harness the opportunities and minimize its threats (Fadun, 2013 & Renn & Walker, 2008).
This helps to decide the order in which the risks are dealt with. It involves analyzing the type of problem and its criticality. It also helps gauge the effect of not handling the risk. It aids in determining whether the investment involved will bring necessary returns. It is one of the steps in the risk management process.