Learn more about the basics of risk management and how to handle it in project management in the first post of our new blog series.
Risk Management in Projects (1) – Introduction
Linh Tran, Monday 22 November 2021 | Reading time: 4 min.New blog series on risk management in projects
In the coming weeks, we will focus on a very relevant topic in project management: Risk management. This area of project management is very important, as projects are confronted with permanent changes and thus constantly with new risks.
In our first post we will give a short overview and a basic introduction to this topic. In the next few posts, we will introduce you to helpful risk analysis methods and the so-called risk catalog.
Basic terms related to risk management
To begin with, we will clarify the basic terms on the topic of risk management in projects in order to establish a common baseline.
(1) Risk
Risks in projects basically represent uncertainties or events that can have a negative impact on the project or the entire company.In project management, this damage always relates to one or more of the following factors: time, costs and quality. In purely mathematical terms, a risk is an event that has a certain probability of occurring or not. Therefore, risks are always associated with a probability of occurrence.
(2) Risk analysis
The goal of a risk analysis is to identify these uncertainties, to determine the probabilities of occurrence and consequences, and ideally to prevent or minimize the potential damage. Since risks are always added and eliminated during the project, risk management is usually performed continuously and alongside the project.
(3) Risk catalog
A risk catalog lists all potential risks on a project-specific basis. Thus, the risk catalog summarizes the results of the risk analysis and forms the basis for the subsequent evaluation of the collected risks.
(4) Risk planning
As part of risk planning, an attempt is made to prevent the risks identified in the risk analysis in advance by taking preventive measures. If this is not possible, measures are developed to reduce the damage.
Why is risk management so important for the success of a project?
Risk management is highly relevant in project management because risks contradict the basic principle of project management - planning. With project planning, we try to anticipate and structure all project steps. Nevertheless, the environment of most projects is characterized by uncertainties. The frequent reason for project failure is not that risks could not be avoided completely, but rather that risks were simply handled incorrectly.
Project managers pursue several goals with the continuous implementation of risk management. On the one hand, the aim is to create transparency for management and the individual project teams. This enables project managers to identify room for maneuver and take immediate preventive measures. On the other hand, risk management forms the basis for project success, as negative events can be prevented in advance where possible.
Conclusion
Risks are therefore events that can have a negative impact on the project or the company. Therefore, risk management is an important part of project management. The goal of risk management is to recognize risks in time and to eliminate risks or, if this is not possible, to apply appropriate risk management approaches.
In the next few articles, we will introduce you to various practice-oriented approaches to risk management. Perhaps you will discover the approach that suits you best and will be able to deal with risks more calmly in the future.
Read the other articles of the risk management series:
(Text by: Kathrin Jungwirth, Translation by: Linh Tran)