Risk is defined as follows:
“A risk is an uncertain potential condition or event
that, if it occurs and is not mitigated, may have negative or positive impact
on the project objectives.”
Or
“A measure of the inability to achieve program
objectives with defined cost and schedule constraints.”
Types of Risk:
Risk can be
either positive or negative. Positive risk provides an opportunity to be
pursued whereas negative risk is one that raises an issue which should be
mitigated or avoided based on the criticality.
Example of Positive Risk - “If
we buy pumps for all our facilities bundled together in one purchase order, we
can obtain a volume discount.”
Example of Negative Risk - “Each
day that a critical piece of equipment is late in reaching the site, will throw
the start up schedule off by these days.”
Levels of Risk:
There are four levels of risk including strategic,
program, projects and operational. These are described below:
Strategic
Risk:
Risks that ensure that business survives with long
term stability and security of the organization are strategic risks.
Program Risk:
Program risks are involved in the management of
interdependency between a wider business environment and projects.
Projects:
At project level, risks exist in creating progress and
project plans.
Operational Risks: these are the risks which lye upon supplier
management, technical faults etc.
Risk Methodology:
It is the procedures and practices that allow managers
to take preventive measures to mitigate risk well in time before they arise or
when they tend to be affected.
The practices of risk management are used both in
private and public sectors including activities like insurance, finance and
investment, public organization, governments and health care etc.
Management planning now encounters risk management as
its essential part. Key people involved in risk management include process
owners, procurement teams, business managers, strategic owners and key
suppliers.