Project Risk Management

06 November 2010

A project risk management plan must be properly prepared for any contingency. This can be the plan that makes or breaks a project if a massive risk becomes a reality and impacts a project.

The purpose of a project risk management plan is to be prepared for all known possible risks that might impact a project during its execution phase. For this to happen, proper preparation must take place before the project commences into its execution phase.

The first important step in establishing a project risk management plan is to properly identify all possible and probable risks that might possibly come in contact with your project. No matter how small or insignificant they may be, the risk has to be documented.

The next step of a project risk management plan is to assess the impact potential, and probability of the risk impacting the project itself. With this analysis completed, the priority list of the documented risks can occur.

The proper way to prioritize the risks is by assessing the level of damage a risk can inflict on a project when it impacts it. No matter how slight its probability of impact, the ones that can do the greatest damage should be dealt with immediately to minimize their impact. The mitigation of the risk is done by the appropriate party. This can be an employee of the company, the project manager or even a third party contract employee. The important thing is that they are dealt with correctly.

What some people might be surprised at is that part of every project risk management plan is a contingency to not only purchase insurance to cover the monetary cost of an impact, but also the option to do nothing.

The option to purchase insurance to cover a risk in a project risk management plan is generally the best solution, when the cost of mitigating the risk is more than just letting the risk impact the project. It is not the preferred method, but at least the monetary loss will be compensated and the project will not go over budget.