Factors of Risk Management Planning - Example

Risk management planning Introduction A risk management plan is a manuscript that is prepared by manager of a project in order to predict risks, to approximate the effectiveness and come out with plans to mitigate them. It also includes the risk assessment matrix (William, 2000). A risk is any condition or uncertain event that, if it emerges, has negative or positive impacts on a project’s goals. Managers who are responsible for risk must regularly monitor the progress of a project as risk can occur any time in any project. The management of risk plain consist an analysis of possibly risks with both low and high impact, together with mitigation strategies to assist the project from falling down if any problem occur. The management of risk plan must also keep on updating to avoid analysis been stale and not well effective (Myron, 2007). There are distinct kinds of risk management and uses that contain planning for adverse events (i.e. disasters), calculating credit-worthiness, calculating the insurance rates, determining the warrant of a merchandise, and many more. There are several factors that have to be identified in order to evaluate risk; which include: Event: What would happen? Probability: How possibly is it to happen? Impact: How awful will it be if it happens? Mitigation: How can you trim down the probability and by how much? Contingency: How can you trim down the impact and by how much? Reduction = mitigation x contingency Exposure = risk – reduction Once you have identified the above, the outcome will be what is known as exposure; this will be the amount of risk that cannot be escaped. Sometimes exposure is known as liability, threat, or severity; and it assist to find out if the planned activity would take place. Mostly, this is just a straightforward cost verses benefits formula. These elements can be applied in order to determine if the threat of executing is lower or higher than the threat of not executing the change. If you decide to go forward (in some cases there is no choice, for instance, federally obligated changes) then your exposure is called assumed risk. In some regions, the assumed risk is decreased to a dollar value which is later used to calculate the profitability of the concluding merchandise (William, 2000). The next procedure will be to define your project. For example, if you are accountable for a computer system that endows with vital data to mass population. The server or the main computer that supplies information is stale and it requires to be substituted (Parkinson, 2005). Your task will be to develop a threat management plan for the migration. This is a situation whereby impact and risk are listed as low, medium or high (that is very familiar particularly in project management). The first thing to do is conduct an interview with a number of people who are similar with that project and ask what would happen, how to assist prevent it, and what action to take if it happen. You must take enough notes! The result is very important for the following steps. You should be optimistic with your idea, but do keep control of the result. It must stay on target and focused. Afterward, you need to identify the consequence of every risk. From the result, there is a data which shows what can happen if threats materialized. Correlate every risk with consequences that are occurring during that session. You must also be very specific in each risk. Project delay should not be tolerated as it will lead to more risks. After correlating each risk with consequence, the irrelevant issues need to be eliminated. For example, a car dealership’s computer system, then risks like plagues pandemic, nuclear war, or killer asteroids is more things which will bring disruption in the project. This is because that there is nothing you can plan for them or reduce their impact (Parkinson, 2005). The only thing you can do is just keep them on mind, but do not include them on your risk plan. Once you have listed all risk elements, you need assign probability for every risk element, and determine the possibility of it actually materializing is low, medium or high. If you absolutory must use numbers, then the probability figure on a scale from 0.00 to 1.00.0.01 to 0.33 is low, 0.34 to 0.66 is medium and 0.67 to 1.00 is high. You should note that if a certain risk assessment is zero, then you just eliminate that from consideration. Below is a table that shows how probability should be analyzed: Subsequently, you need to assign impact as low, medium or high, but this will be based on a number of pre-established guidelines. If it’s necessity to use figures, then the scale from from 0.00 to 1.00 as follows: 0.01 to 0.33 is low, 0.34 – 066 is medium, 0.67 – 1.00 is high. Below is a table that shows how impacts should be analyzed: After analyzing the total risk, the next stage will be to develop mitigation strategies. The plan for mitigation is to decrease the probability of a risk that might materialize. In most cases, this is done for medium and higher risk only. The first priority is given to the high and medium risk, and if you are interested with low you will analyzed afterward. For instance, if you have a risk element of a delay in delivery a vital component; you can mitigate the threat by requesting premature in the project (Myron, 2007). The next step will be to develop contingency plans. The purpose of contingency is to decrease the impact of a threat does materialize. Also, contingency will be designed for higher and medium risks. For instance, if there is a delay of critical components, then you might decide to continue using the older ones until the arrival of the news components. Afterward, you need to analyze the effectiveness of your strategies. This is how much you have achieved to decrease the probability and impact. You can obtain this by assessing the contingency and mitigation strategies remove effective ratings to your risks. To achieve this, you must regularly monitor your project in order to determine it progress (Parkinson, 2005). A well considered risk management processes craft a product that serves the needs of a consumer, including risk managers, ultimately the public, community and industrial stakeholders and risk assessors themselves. Various interpretations of the design may apply to our presentation. One of the foremost goals of design replicates the overall efficacy of a product to its perspectives users (William, 2000). Moreover, the second key facet of design is the assurance of technical eminence. A lot of technical facets of quality may perhaps not be perceptible to end users, but nevertheless they are much important prerequisites that normally give out the foundation for the quality of a decision support product. Looking for the apt mix of technical utility and quality, given constrictions, is the quintessence of design of a verdict support product (Myron, 2007). Conclusion For any project to flourish, there should be a risk management planning. The reduction of risk increases the chances of successfulness. In order to reduce these risks, the managers involved in that project must follow the guidelines very keen. Any decision which they may undertake can determine the future of a project (William, 2000). Risks are analyzed in three categories; that is low, medium and high. However, the most hazardous is medium and high risk, thus they should be given the first priority. When analyzing the strategies for reducing risk, it is actually good to use a table, as will be easier to conduct assessment (Myron, 2007). References: Parkinson, K. Assessing and Reducing Risk, New York: Macmillan Publishers, 2005. Myron, S. Quality for Assessing and Reducing Risk, Washington: longhorn Publishers, 2007. William, B. Risk Management Planning, London: Penguin Press, 2000. Read More