What is Risk?
- Risk is the possibility of suffering loss
- Possible – but not certain, so it is expressed as a probability
- Loss - is any unwanted consequence that might occur
What are the 5 Risk Management Steps in a Sound Risk Management Process?
Step 1: Identify the Risk.
You and your team uncover, recognize and describe risks that might
affect your project or its outcomes. There are a number of techniques
you can use to find project risks. During this step, you start to
prepare your Project Risk Register.
Step 2: Analyze the risk.
Once risks are identified you determine the likelihood and consequence
of each risk. You develop an understanding of the nature of the risk and
its potential to affect project goals and objectives. This information
is also input to your Project Risk Register.
Step 3: Evaluate or Rank the Risk.
You evaluate or rank the risk by determining the risk magnitude, which
is the combination of likelihood and consequence. You make decisions
about whether the risk is acceptable or whether it is serious enough to
warrant treatment. These risk rankings are also added to your Project Risk Register.
Step 4: Treat the Risk.
This is also referred to as Risk Response Planning. During this step,
you assess your highest ranked risks and set out a plan to treat or
modify these risks to achieve acceptable risk levels. How can you
minimize the probability of the negative risks as well as enhancing the
opportunities? You create risk mitigation strategies, preventive plans
and contingency plans in this step. And you add the risk treatment
measures for the highest ranking or most serious risks to your Project Risk Register.
Step 5: Monitor and Review the risk. This is the step where you take your Project Risk Register and use it to monitor, track and review risks.
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