what is risk?

For people who know Risk only as a trademarked board game, here is a good article from the civil engineer blog:

The advantages of using PRINCE2 in Risk Management

Risk ManagementWhat is a risk? If you were to ask 10 people this question I would wager that at least half of them would refer to threats or negative possibilities. Indeed the Oxford Dictionary describes risk as “a situation involving exposure to danger”. However if we take the PRINCE2 definition of risk, “an uncertainty of outcome, whether positive opportunity or negative threat”, one can see straight away an advantage of looking at risk management with a PRINCE2 mindset. Positive things might happen as well as negative and if there is the possibility ofsomething positive happening then it makes good sense toexploit those situations,

In terms of negative threat, the earlier we identify a negativerisk in a project the cheaper it will be to manage, exploit or avoid it altogether. PRINCE2 prescribes undertaking risk analysis in the very first process of a project. What are the big, obvious risks? How can we build our project to avoid the negative risk and exploit the positive opportunities? Assessing these options upfront will reduce the likelihood of expensive changes in direction or scope later in the project.

PRINCE2’s approach to risk management is based on the OGCs publication ‘Management of Risk: Guidance for Practitioners’ (MoR) which documents 9 risk management principles:

1. Understand the projects context
2. Involve stakeholders
3. Establish clear project objectives
4. Develop the project management approach
5. Report on risks regularly
6. Define clear roles and responsibilities
7. Establish support structure and a supportive culture for risk management
8. Monitor for early warning indicators
9. Establish a review cycle and look for continual improvement

PRINCE2 promotes the implementation of these tried and tested principles. For example the PRINCE2 Risk Management process starts with Identify, this is to identify the context of the project and assess which objectives might be affected and then identifying and registering individual risks for assessment.

The method points us to risk analysis at regular points and keeps us conscious of the need for risk management throughout the project. As a minimum PRINCE2 states that risk should be assessed within the project at stage boundaries, to aid the decision making process of whether or not to proceed to the next stage.  The culture of risk awareness that the method promotes is a success factor that makes us more conducive to success rather than failure.

Assess is the second step in the PRINCE2 Risk Management process and promotes the understanding of a risk not only in traditional terms of probability of occurring and the impact if it does occur but also in terms of proximity (when the risk may occur). The proximity of a risk can influence not only the probability and impact levels of a risk but also the response that we give in managing the risk. It’s not a common aspect of risk that is considered but is nonetheless an important one.

The greatest advantages of using PRINCE2 for Risk Management is it’s provision of a solid, but simple method for dealing with risk. Providing guidance on all aspects of risk management, including some areas which I have not covered here such as roles and responsibilities. It supports the 9 principles of MoR and prescribes regular review points for risk management throughout the project process. The saying “Risk management is for sissys” is unveiled as the Ostrich Lalalala! Approach to risk management that in the end costs more and perhaps ultimately this is the advantage of using PRINCE2 for risk management.

Joanne Saunders is a Senior Principal Lecturer at QA- ;leadingtraining experts in project management courses and Prince2 online. Her experience in industry delivering business process change, marketing campaigns, IT infrastructure and software development projects, has made her a most effective Project Management Lecturer. Joanne’s experience and knowledge of a broad range of Project Management Methods enables her to provide solid guidance and support to clients when developing a project management method of their own and to embed that method into their business.

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