What is risk management?
Risk is everywhere around us, it is a part of our daily language. We often hear remarks like: “you cannot make tangible progress without taking risk”; “Life itself is a risk”; “take the risk, dare the occurrence”. “Not taking risk is a risk”. I know many of HARRYBAKER blog readers should be acquainted with a few of these types of assertions.
I guess you are probing where the focus of this article is heading, right? Let us examine the definition of risk to drive the point home.
“Risk is an event/sets of events that should it occur will impact on project objective”
Source: PRINCE2 manual
Analysing this definition, the phrase “should it occur” has made it expressly clear that the event is not within our control. If we are then not certain whether it will occur or not, should it stop us from going ahead to execute the projects at hand. Should we not live our lives because of the uncertainties that are beyond our control?
Our focus should then be on how to plan ahead for these uncertainties; it is like planning contingencies or preparing for the rainy days.
Then can we plan contingencies for a project? Certainly yes, but how do we plan for a realistic contingency?
- Identify the risk that can affect your project objective(s). It is easier to challenge what you anticipate effectively, identifying the likely show-stoppers will put you in control.
- An assessment of the identified risks will help you to be better prepared. Estimating the likely impact and probability of risk occurring is important. Estimating is risk management. As the saying goes:”Who builds a house without first estimating the cost?”
To avoid ridicule will involve estimating the cost and preparing for it in advance. This will include forecasting the “should it occur” factor and planning for it (Risk response)
Before embarking to go ahead on any project, it is imperative to count the cost, estimate the pros and cons and then make a decision to go along or retreat if you don’t have enough resources to see it to the end.
Management of risk is as crucial for an individual as it is for an organization. Everyone who is managing or planning to undertake any giant stride in attaining any major feat must be a good risk manager. Risk management helps to achieve more success in all endeavours and gets every man better equipped for future uncertainties in an uncertain environment.