Written By: Mark A. Frasher; May 28, 2017
The Boy Scouts of America have a motto, it is: “Be Prepared”. To Boy Scouts, this motto is a reminder to always be in a state of readiness of mind and body so they can do their duty. For a project manager though, its less about a state of mind and body and more about being aware of what can happen, analyzing it, and preparing a mitigation strategy. So, to answer the question - "what is risk management" - in a nutshell? It's all about preparation.
That is what risk management is to a project manager - preparation. It is the function of identifying risks, and preparing for them in advance in order to limit the impact of any that come to fruition. It may seem obvious to some, but waiting for risk to actualize during the completion of a project is a risky proposition, pun intended.
Truly, all project management activity, is in some fashion, is a form of risk management. Scheduling, budget preparation, communications planning, etc., all have aspects that help the project manager prevent risk that could derail the project. The focus of risk management though, isn't necessarily to identify risk that are inherent in knowledge areas such as time, cost, procurement, and the like. Instead, it is to understand risk that are not "typical" or may be project specific. Often these risk will affect the project's schedule, budget, or scope - but are unique to the project.
Once these risk are identified, the project manager must then analyze their potential for occurring, that is to say the likelihood that the risk will occur. Then the project manager must analyze the risk's potential impact to the project. Then, with this knowledge, the project manager can create a mitigation strategy.
Taking a simplistic approach, risk management can be summed up in its simplest form by two key statements:
If project managers take this approach on each of their projects, they would see a reduction in failed projects, over spending, or time crisis’ due to risk. However, this is not a science, and there are more developed methodologies for identifying and managing risks.
Finally - we all know that we live in a world of uncertainty. Projects are not immune to this uncertainty. As a project manager, it is your duty to assess the situation, identify risks, formulate mitigation strategies, and prepare for the inevitable. In another, perhaps cliché statement, remember Murphy’s Law: “what can happen, will”.