Risk analysis

Abstract

In order to end up a project successful and deliver it on time and on budget, it is important to get an overview of the risks, which is associated to the project. A project start often with a high uncertainty and you always have a plane of how the project should end, if you do not handle the risks of the project, there is a high probability that the project fails. Most of the projects fail due to lack of risk management, because in many projects the risks are not proactively identified, analyzed and mitigated or even in some projects the risk is a part of projects planning process, the projects fails, because they do not investing their resources completely and not pay attention to it. [1].

In this article I will provide a definition of risk, benefits of risk analysis, how important risk analysis in projects is and which tools you can use to analysis the risks of a project.

Definition

You can fine different tools and definition for risk depending on the context in which it is used. A definition from Oxford English Dictionary sounds like “the possibility that something unpleasant or unwelcome will happen”[2]. This is more general and related more to your every day. Something you are always a fear of, like what if this happen? Risk is something, you are never sure, but you can always minimize the probability of the risk by have a plan B. Frank Knight defines the uncertainty and risk as “...Uncertainty must be taken in a sense radically distinct from the familiar notion of Risk, from which it has never been properly separated. … The essential fact is that "risk" means in some cases a quantity susceptible of measurement, while at other times it is something distinctly not of this character; and there are far-reaching and crucial differences in the bearings of the phenomena depending on which of the two is really present and operating. … It will appear that a measurable uncertainty, or "risk" proper, as we shall use the term, is so far different from an un-measurable one that it is not in effect an uncertainty at all." [3] To minimize the uncertainty and reduce the risks on the project, you may regularly look back to your risk analysis, because most of the projects fail due to lack of risk management, in many projects the risks are not proactively identified, analyzed and mitigated or even in some projects the risk is a part of projects planning process, the projects fails, because they do not investing their resources completely and not pay attention to it. Risk is the most important part of the project planning process. It is a management tool, which project manager use to project group or projects. Project group must be informed of the main risks and how they will deal with those risks. Often it requires extra resources to eliminate risks; these resources must allocate the project group. It used in many areas such as public debate, research, danger of disease, death or accidents, threatening environmental problems in terms of risk of climate changes, CO2 , pollution and so on. It is also used in many other projects such as customer needs and price, new technology and resources, construction and delivery projects, research projects and interests and other tasks.

Reference

[1] Why projects fail: Avoiding the Classic Pitfall, An Oracle White Paper, October 2011

[2] Oxford English Dictionary

[3] Frank Knight: Imperfect competition through Risk and Uncertainty, Part III, Chapter VII

[4] DS484:2005