PLANNING STAGE (RISKS)

Risk is an uncertain (positive or negative) event or condition or situation that if it occurs, has a positive or negative impact to the project objectives such as scope, time, cost and quality. The project risk may have a cause (one or more) due to a given requirement, assumption or constraint that creates a positive or negative outcome. Taking a simple example, if one of the project activities needs a permission from a certain personnel, then that agent may delay issuing that permit and therefore the project will be affected in terms of

• Time because some of the activities will be delayed.
• Performance due to limited time, some of the activities will be performed poorly
• Quality of the project due to poor performance and shortage of time
• Cost if there is no option of delaying the deliverance, then the project will have to undergo fast-track or crashing
• Scope if the above will be affected, automatically scope will also be affected

The positive risks are known as opportunities while negative risks are called threats.

There are two types of project risks

• Known risks – The risks that have been identified earlier and therefore it is easy to make possible plan on how to response them. These risks can be assigned as contingency reserve if they can not be managed proactively.
• Unknown risks – The risks that were not easily identified earlier, and therefore no plan for responding them. These risks can be assigned as management reserve if they can not be managed proactively.

The project risk can be accepted by the organization and stakeholders depending on the following:

1. Risk appetite: the degree of risk that they are willing to take while expecting a reward.
2. Risk tolerance:  the degree of risk that they are willing to withstand or tolerate
3. Risk threshold: the degree of risk that they have a specific interest.

In order to be successful in the project management, risks management has to be considered proactively and consistently throughout the project. If not, then it may lead to more problems and most especially from the negative risks.

Planning risks need to do five (5) processes:

• Plan Risk Management – The process of defining how to conduct risk management activities for the project
• Identify Risks – The process of determining types and characteristics of risks that may affect the project
• Perform Qualitative Risk Analysis – The process of analyzing the probability of occurance and impact of the risk to the project
• Perform Quantitative Risk Analysis – The process of analyzing numerically the effect of risks on the project
• Plan Risk Responses – The process of developing actions to increase opportunities and reduce threats to the project.

References:

PMI (2013). A Guide to the Project Management Book of Knowledge (PMBOK Guide 5^th Ed.) USA, Project Management Institute

http://investcorrectly.in/financial-planning/the-risks-of-mutual-fund-investing/