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In this essay I will be focusing on project risk analysis and management. This topic is all about identifying risks on a project and how to manage that particular risk.
Project risk analysis and management can be implemented to all projects, despite the companies or organisation, in respect of the timescale and budget.
My aim of writing this essay is that, many organisation or companies never thought it wise to include or involve risk analysis and management to their part of objectives while achieving a particular project task and it can make them not to accomplish such plan. This essay will show and also illustrate the benefits an organisation can derive if they implement risk analysis and management to their new project.
What is Project? A project is a momentary (temporary) endeavour under taken to create "Unique products, services, or results (output) [Project Management Body of Knowledge PMBOK].
A project is a task that requires a lot of time and effort. [Collins Cobuild English dictionary].
A project is a scheme of something to be doneâ€¦ [Chambers English Dictionary].
A risk is an unpleasant something, that has a possibility of occurring. [Collins Cobuild English dictionary].
A risk can be defined as an expose to a change of loss or damage. [Word web dictionary]. He who is not courageous enough to take risk will accomplish nothing in life (Muhammad Ali).
What is Risk Analysis? Is the combination of risk identification and risk quantification. (Dan Brandon, 2006). In other words, risk management is the process involve with the identifying, analyzing and handling risk (Dan Brandon, 2006).
Therefore project risk analysis and management can be defined or described as a process that allows the analysis and management of risk related with a project. If it is properly undertaken, will increase the probability or possibilities of successful finish point of a project to cost, time and performance goals.
In every plenty data risks can be assessed statistically, however all projects are not the same, things often goes wrong in a project for a specific or unique reasons. Dealing with risks in projects differs from situations or circumstances where there is an adequate data to adopt an actual approach. A project involves a strong technical, engineering and innovations. Companies or organisation needs project to achieve particular business goals. For example: Introducing a new product, Expanding into new geographical area, Achieving cost reduction etc, they are very good for companies, but companies may experience a great loss or misfortune if they don't consider risk analysis and management as part of the project objectives or tasks.
I will discuss the various ways or steps an organisation will use to identify risks in their projects.
Firstly, the company should know that risk exists as consequences of insecurity. In any project there will be risks or misfortune and uncertainties of various types, take for an example, the management and financial authority structure are not yet established, unavailability of resources or capital may not be at a required standard.
All these insecure procedures might cause an exposure to risk, which might cause problem or failure to the company.
Examples of these failures might be: marinating a particular budget, achieving the required closing date, finally achieving the expected performance goals.
In other words, project risk management is designed to reduce or remove risk that can be of threat in achieving a project objectives or goals. It should be regarded as an essential part of any project not just a piece of tool.
Secondly, after the identification of risks, the company should divide it into two stages and they are Risk analysis and Risk management.
Let's start with risk analysis, based on the above definition of risk analysis, is the combination of risk identification and risk quantification. This stage is divided into two sub stages and they are the qualitative analysis and quantitative analysis.
Now the qualitative analysis stage is based on the identification and subjective assessment of risks. It allows the main risk foundation or factors to be identified. Companies or organisation can identify the risk with the aid of a check list, interviews or brainstorming sessions. It is normally associated with some form of evaluation that will be the description of each risk and its impact. For example the high and low term of both risks impacts and its chances of occurring.
Furthermore, the main aim is to identify or the find the key risks, that can be analyzed and also managed in details.
Where as in quantitative analysis, it focus on an objective assessments of the risks. This stage involves more complicated techniques that normally require computer software. Some individual can see this stage as the most official aspect of the whole process that requires the dimension of insecurity in cost and time estimates and also as the possibilities of combing individual uncertainties.
Such skills or techniques can be implemented with differentiating each levels of effort ranging rom modest to extensively thorough. It is advised that new individuals (users) starts slowly, if possible they should ignore this particular sub stage, until a good environment or opportunity have been developed for project risk analysis and management in the organisation.
An early qualitative analysis is important or necessary because it brings a substantial benefits or profits in terms of understanding or knowing the projects and its difficulties, in spite of the quantitative analysis is carried out or not.
It also serves in high lighting possible or potential risks i.e. developing a specific plan to deal with a particular or specific risk issue. Quantitative analysis should be carried out as part of risk management. I strongly believe that actions for decision making will need to be modified or customized if risk analysis is adopted. A typical example of what am saying are: the authorize or sanction decisions for clients, where estimates of cost and time will be formed or produced in form of ranges and allied probabilities rather that single value figure.
Talking about risk management, this particular stage is the process that involves the preparation or formulation of management responses to main or major risks. It may start or begins during the qualitative analysis phase as the demand to reply to risks may be pressing and the solution might be fairly obvious. The loop between risk analysis and risk management, are that risk management can involve:
Firstly, identifying or discovering hindrances measure to avoid a risk or to reduce its upshots or consequences.
Secondly, establishing or grounding an eventuality plan to deal with the risk if they should occur.
Thirdly, originating advanced or further probe to reduce uncertainty through better information.
Fourthly, reckoning risk transfer to insurers (insurance companies).
Fifthly, considering risk allocation in contract.
Lastly, setting eventualities or contingencies in cost estimates, float in programmes and allowances in performance specifications.
One can have many reasons for using or implying project risk analysis and management, but I think that the main reason is that it provides or renders important or substantial benefits far in excess of the cost of performing it.
Some of the benefits or profit gained from using project risk analysis and management is not only meant for project but also for other parties like the organisation and its customer. Some of these benefits include:
An enhanced understanding of risks in a project and its potential affects that can lead to risk reduction and also the assignation of risks to the best party that can handle them.
An enhanced understanding of the project that can successively leads to gathering more realistic plans in terms of cost and time scale.
It creates an understanding on how risk in a project can lead to the use of more suitable type of contract.
A free lance view of projects risk that helps in justifying the act which enables more effective management of the risk.
It helps or aids in the distinction of good and bad management.
The cost of applying project analysis and management skills or techniques alters or changes according to the scope of work and the dedication to the process. Some examples include:
The cost of applying the process can be as small as the cost of few days of an individual time up to an upper limit of 5-10% of the management cost of the project, still this higher cost, as a percentages of the entire project cost, is comparatively little or small.
The time needed to carry out a risk analysis is partly dependent upon the accessibility of information. An elaborated cost and time risk analysis normally starts from one to three month counting the scale and complexity of the project and also the level of planning and cost preparation that have already carried out.
The lower limit of resources requirements suppose to be one individual within an organisation that has the experience of using project risk analysis and management techniques. Nevertheless, if an organisation does not have expertise, they outsource or acquired it from outside consultants.
Once a project risk analysis and management has been brought-in-to an organisation, in-house expertise will develop quickly or speedily.
Some people might be asking when project risk analysis should be used, and who should use it. Project risk analysis and management suppose to b e a normal process that are meant to start first in any life - cycle of a project and it should be done until the costs of applying it, is greater than the benefits the organisation will gain.
Implementing it in an early stage of a project is not beneficial because as the time goes the probability of its effectiveness vanishes.
I strongly believe that project risk analysis and management is necessary in today's project because, with it the company would be able to identify and manage risks. It also helps the particular company to be able to produce a successful project and also accomplish their objectives as a company.