By their very nature, project breed uncertainty. It is quite usual that there is no historic information to help develop duration, work and cost estimates, so you are uncertain about project schedule and budget.
It is normal that those assigned to your project team are unknown at the beginning, or even whether they will be available when you need them, not to mention whether they have the appropriate skills sets or not.
In most cases, projects are initiated solve a problem but there is no clear solution. Often, the problem itself is not clearly defined and therefore project scope is uncertain.
PMP PMBOK risk management attempts to reduce the uncertainty to an acceptable level. This last point is important all projects have an inherent level of risk by their very nature and seeking to reduce that to zero is of only impractical but almost impossible to do.
In risk management, you try to reduce or eliminate the probability and impact threats while increasing the probability and impact of opportunities. In case you find that strange that risks are defined as threats and opportunities, the common thread between them both is there probability, and this too needs to be managed.
Here are some of the most common terms that you will come across within PMP PMBOK risk management:
Risk. An uncertain event or condition that, if it occurs, as a positive or negative effect on the project’s objectives
Threat. A conditional situation unfavourable to the project, a negative set of circumstances, and negative set of events, the risk that will have a negative impact on the project objectives if it occurs, or a possibility for negative changes
Opportunity. A conditional situation favourable to the project, a positive set of circumstances, the positive set of events, a risk that will have a positive impact on project objectives, or a possibility for positive changes
Risk tolerance. The degree, amount, all volume of risk that an organisation or individual will withstand
Project objectives are identified within the project charter and for the purposes of the PMP PMBOK exam, the objectives usually focus on the scope, schedule, quality, and budget objectives.
The known risk is one that you can identify, analyse, and develop a response for.
Unknown risks are by their very nature unknown and hence there is no way you can plan for them. Schedule and cost reserves are usually set aside for unknown risks.
PMP PMBOK Project risk management is the least mature practice in project management.
Many projects have no real risk management plan, and their approach to managing risk is limited to identifying four or five things that could go wrong. These are discussed every now and then and such risks are often not documented.
Planning for the unknown is challenging to say the least, and probably one of the reasons why people do not spend as much time on risk management as they should.
Risk management planning is a process of defining how to conduct risk management activities for a project.
Here are some general guidelines to keep in mind when planning for risks:
The amount of risk management planning should be commensurate with the amount of uncertainty and the degree of criticality of the project.
Projects that are similar to prior projects and that are not complex need less risk management than complex projects with new and emerging technology and that have a high impact on the success of the organization
Risk management should begin very clearly on in the project and continue until the project is closed
To elevate the importance of risk management on the project, sufficient time, resources, and budget need to be allocated to the risk management process
Risk management planning needs to be consistent with the projects approach full scope, schedule, cost, and quality. Therefore you should include information on scope management, schedule management, cost management, and quality management as you plan for how to address risk.
If you have a project with a very tight delivery timeframe and yet you have no schedule management plan, you need to account for the lack of attention to schedule management in your risk or planning.
However, if you have a robust schedule management plan that includes contingency reserves, or detailed approach to analysing the progress on critical and near critical paths, sufficient scheduling software, and people skilled in developing schedules, your risk management plan will not need to focus as heavily on the schedule aspects as you plan for risk.
The scope statement contains information about the types of deliverables and the associated acceptance criteria. A well thought out scope statement means less certainty, and therefore, less risk associated with the scope and quality of the product and the project.
In organizations a practice risk management, plenty of tools and documentation are available that can help you. As an example there may be templates for probability and impact matrices and risk registers, or maybe even definitions for high, medium, and low risks already in existence so that you won’t need to develop on your own.