Project risk management frameworks and best practices

Project Risk Management risk is defined as an uncertain event or condition that, if it occurs, will affect one's project objectives, targets, or goals. A risk may have a positive or a negative effect: it may help or hinder one's project. However, since there are usually far more things that are likely to go wrong with a project than are likely to go right, risk management deals with negative aspects. Risk management largely is the art of trying to prevent things going wrong with projects.

One must analyze the project objectives to determine what is, or is not, a risk. Every project is defined by its objectives - which is just another way of saying that every project is defined by what it is trying to achieve. Most projects have four key objectives. The objectives are as follows: (1) Functionality -- the characteristics or performance of the project deliverables; (2) Quality -- the level of excellence of the project deliverables; (3) Schedule -- the date by which one is trying to deliver everything; and (4) Cost -- the budget within which one is attempting to complete everything. Not all of these objectives need be explicitly stated or even defined, but they are usually present to some degree or other (Davion Systems, 2003).

There may also be other objectives. These objectives can include the following: (1) Safety - no one should be hurt or injured by the project or the project deliverables; (2) Environmental - neither the project itself nor the deliverables should constitute an environmental hazard; (3) Political - avoidance of political embarrassment, etc. Subsidiary objectives are often negative, as they deal with trying to prevent unwanted effects. Unless there is a specific reason for identifying them as distinct objectives, they are often bundled into the Quality objective (Davion Systems, 2003).

A risk is any future event that, if it occurred, would prevent one from reaching the objectives. Specifically, a risk is any future event that would cause one's costs or schedule to increase, or would result in reduced functionality or quality of the project deliverables, or would adversely affect a subsidiary objective (Davion Systems, 2003).

The project risk management process can be divided into six operational areas. These areas include the following: (1) Risk Management Planning; (2) Risk Identification; (3) Risk Assessment; (4) Risk Quantification; (5) Risk Response Planning; and (6) Risk Monitoring Control (Davion Systems, 2003).