What is risk management?

Definition

Risk analysis and risk management is a process that allows individual risk events and overall risk to be understood and managed proactively, optimising success by minimising threats and maximising opportunities and outcomes. 

Definition from APM Body of Knowledge 7^th edition

Risk management

Risk management is focused on anticipating what might not go to plan and putting in place actions to reduce uncertainty to a tolerable level.

Risk can be perceived either positively (upside opportunities) or negatively (downside threats). A risk is the potential of a situation or event to impact on the achievement of specific objectives

Working with the risk owner, the project professional ensures that risks are clearly identified before moving on to the risk analysis step of the risk management process.

The project risk management process reflects the dynamic nature of project­work, capturing and managing emerging risks and reflecting new knowledge in existing risk analyses.

A risk register is used to document risks, analysis and responses, and to assign clear ownership of actions.

The risk management process

Source: Project Risk Analysis and Management Guide 2^nd edition

Watch: What is risk?

What is risk analysis?

Risk analysis provides guidance on where the greatest vulnerabilities lie. Because risk analysis is fundamentally perception based, it is important for the project professional to engage stakeholders early to identify risks.

To make sense of differing perceptions, it is important to describe risk events clearly, separating causes (facts now), from risk events (situations that may occur), from effects (that have an impact on one or more of the project measures). This enables subsequent analysis and management of risks.

Effective risk analysis and contingency planning will see planned time and/or contingency used. Unused contingency is most likely caused by overestimation, luck or the efficient management of risk. Insufficient contingency is most likely caused by optimistic estimation, bad luck or inefficient management of risk.

Outputs from risk analysis help the project professional to:

• Understand the probability of achieving out­turn dates, costs or
• Inform and influence decision-making about the chances of achieving the business case and
• Agree the level of contingency to provide the required level of confidence.

APM Risk Specific Interest Group

The APM Risk SIG (Specific Interest Group) provides a forum in which to share knowledge and ideas, develop expertise and understanding and actively promote the adoption of project risk management.

APM Body of Knowledge 7^th edition

The APM Body of Knowledge 7^th edition is a foundational resource providing the concepts, functions and activities that make up professional project management. It reflects the developing profession, recognising project-based working at all levels, and across all sectors for influencers, decision makers, project professionals and their teams.