Risk Management Planning Process

Introduction 

A project risk is defined as a condition which is uncertain that when it happens may negatively or positively impact on some or all of the objectives of a project like cost. A risk may be caused by one or more reasons such as a potential requirement, a constraint, an assumption or any other condition which may increase the likelihood of a positive or negative outcome (Project Management, 2017). In order for an organization to be successful in a project, it should be committed to addressing the management of risk consistently and proactively throughout the project life. Project risk management is the process through which planning risk management, risk identification, analyzing risks quantitatively and qualitatively, responding to the risks and controlling the risks are conducted ( Cagliano et al., 2015) . Without a risk management plan, an organization is likely to experience several problems that arise from unmanaged risks. This paper describes the process of risk management. 

Risk Management Planning 

Plan risk management is defined as the process of describing the performance of activities of risk management. The main reason for conducting the process is to make sure that the risk management visibility, degree, and type are compatible with the significance of the project and the risks. The plan also helps in communicating to the stakeholders so as to get their support for the process of risk management. There are several techniques and inputs that are employed in this process. 

Planning Risk Management Inputs 

According to Cagliano et al. (2015), a plan of project management is among the inputs. The project management plan is used to give the current state and baseline of the areas that are affected by risks such as cost. In the process of planning the management of risks, the baselines and the management plans are considered so as to make the process consistent with each of them. The other input is the project charter which is used to give other inputs like requirements, descriptions and high-level risks. The stakeholder register is another input. It has every detail that is related to the stakeholders of the project and gives an overview of their responsibilities ( Carbone & Tippett, 2004) . There are also the organizational assets that can be useful in the process of risk management. They include the lessons earned, standard templates, the formats of risk statements, roles and others. The organizational environmental factors also influence the process of risk management and include thresholds, tolerances, risk attitudes, and others. 

Techniques of Planning Risk Management 

In the category of techniques, there are analytical techniques which are applied to define the context of risk management of a project. This involves combining the risk exposures and risk attitudes of the stakeholders of the project ( Project Management, 2017) . The stakeholder analysis of the risk profile, for example, can be conducted to determine the risk tolerance and appetite of the stakeholders. Other methods like the use of scoring sheets are used determine the exposure to risk of the project depending on the entire context of the project. 

Expert judgment is another technique at this stage. Expert judgment is considered from individuals and groups who have special knowledge and training in different subject areas. The experts may include senior management, technical associations, project stakeholders and others. Meetings are also the other technique. Meetings are held the members of the project team to make a plan of managing risk. Those who attend the meetings include the team miners, stakeholders and project manager. 

Planning Risk Management Outputs 

The key output is a plan for risk management. This is a document which describes the process of managing risks and how it will be performed. This document has several parts including methodology, budgeting, roles, risk categories, and others. The methodology gives the tools, data sources, and approaches which will be employed in performing the project risk management. The roles part states the risk management team members and clarifies their responsibilities ( Project Management, 2017) . The budgeting part gives the estimation of the needed funds and resources. The other section is that of the risk categories which gives a means of classifying the potential risks and their causes. 

Identification of Risks 

According to Hillson and Murray-Webster (2017), i dentification of risks is the process through which risks that may have an effect on the project are determined and documented. The main reason for risk identification is to document any existing risks and the knowledge they give to members of the team to anticipate for the same. The people that participate in this process are the team members, the project managers, the risk management group, customers, experts of the subject matter, stakeholders and end users. These individuals are encouraged to determine some of the risks in this process. The identification of risk is a process that is iterative since new risks can arise during the progress of the project. The risk statement format is consistent to make sure every risk is understood well. The risk statement should allow the comparison of the effect of one risk with others. 

Identification of Risks Inputs 

The plan of managing risk is an input in this process also. There are various elements in the plan that can be applied in identifying risks. These include the roles of different individuals, the management activities, the schedule and budget and risk breakdown structure. The other input is the cost management plan which gives the controls and processes that are helpful in identifying risks (Dey, 2012). There is the plan of schedule management, quality management, baseline of scope, estimate of the cost of activities, stakeholder register, and others. The scope baseline facilitates the understanding of the project’s potential risks. 

Identification of Risks Techniques 

The techniques at this stage include documentation reviews, techniques for gathering information, assumption analysis, diagramming tools, checklist analysis, and SWOT analysis. The techniques of gathering information are used to identify risks. The first method is brainstorming which is used to get a comprehensive risk list. There is the Delphi technique which is a method used to seek advice from experts ( Project Management, 2017) . The other two methods are root cause analysis and interviewing which involves identifying the causes of certain problems and interviewing stakeholders respectively. 

Identification of Risks Outputs 

The risk register is the key output of the process of risk identification. This is a list that contains the risk analysis results. The register also has the outcomes of the other processes of risk management. The register also contains a list of the risks that have been identified and their responses. The identified risks get discussed in detail in the risk register. The root causes of the risks are also given which include the events and conditions that can cause the identified risks. 

Performing Qualitative Risk Analysis 

Qualitative analysis of risk performance is the process through which prioritization of risks is done. This is achieved by combining and assessing the probability of risks to occur and the impact they may have. The main reason for this process is enabling the project managers to lower the uncertainty level and put a focus on the risks of high priority. These processes assess the priority of the risks which have been identified using the likelihood of occurrence. The other factors considered during qualitative analysis include response time frame, the risk tolerance of the organization which is associated with constraints of quality, scope, schedule, and cost ( Project Management, 2017) . Assessments of such elements reflect the attitude of the stakeholders and the project team. Performance of qualitative risk analysis is normally conducted throughout the lifecycle of a project. There might be bias during the assessment of the risks and therefore it is required that definitions of probability levels and impact are established. Evaluating the quality of information which is available can also help in clarifying the importance of the risk to a project. 

Qualitative Risk Analysis Performance Inputs 

The plan of managing is among the inputs in this stage where elements like roles, budgets, risk categories, and schedule activities are applied in performing qualitative analysis of risk. If some of these elements are not available, they can be developed in the process of performing risk qualitative analysis ( Hillson & Murray-Webster, 2017) . There are also other inputs such as the scope baseline, the risk register, organizational assets and environmental factors. The risk register has information that is employed in prioritizing and assessing the risks. The baseline is used to evaluate whether it is a common project because these types of projects normally have got risks that are well understood. 

Qualitative Risk Analysis Performance Tools and Techniques 

The first technique is the assessment of risk impact and probability which is an investigation of the chance that some certain risk will happen. The potential risk effect on the goal of the project is also assessed for every risk that has been identified. The risks can either be assessed during meetings or interviews whereby participants that are familiar with the risks participate. The matrix of probability and impact is then constructed after the assessment has been completed ( Project Management, 2017) . The other techniques which follow include expert judgment, assessment of risk urgency, risk categorization and assessment of risk data quality. 

Qualitative Risk Analysis Performance Outputs 

Project update documents are the main output of this process. They include risk register updates and assumptions log updates. The risk register gets updates as new information is obtained through assessment of risks (Dey, 2012). The updates range from risk scores, risk categorization to risk ranking. Assumptions also might change as new information is availed from the qualitative assessment of the risks. The assumption log is therefore updated so as to accommodate all the information. 

Performing Quantitative Risk Analysis 

Analysis of quantitative risk performance is the process through which the risks identified are analyzed numerically to determine their effect on the overall objectives of the project. The main reason for conducting this process is to produce quantitative information on risks which supports making of decisions and reduces uncertainty. This is performed on those risks with high priority after qualitative analysis. The effects of the risks on the objectives of the project are determined in this stage. Lack of enough data may hinder the execution of quantitative risk analysis because one may fail to create the suitable models. The project manager, therefore, exercises expert judgment so as to identify the needs of quantitative risk analysis ( Project Management, 2017) . The budget and availability of time are some of the factors considered before conducting a quantitative risk analysis. 

Quantitative Risk Analysis Performance Inputs 

The inputs at this stage are the cost and plan of managing risk. Others are the plan of schedule management, the risk register and organizational environmental factors. The risk plan gives the methods, tools, and guidelines used in the process of quantitative analysis. The cost management plan gives procedures on the management and establishment of risk reserves (Webb, 2018). The schedule plan gives guidelines on the risk reserves management also. The risk register can be used as a point of reference for conducting quantitative analysis of risks and the environmental factors and assets give insight into the context of the risk analysis. 

Quantitative Risk Analysis Performance Techniques 

There are data collection and representation methods used in risk analysis. Interviews are part of this and they are used to collect the required information. Probability distributions is another tool that is used in simulation and modeling to find the uncertainty in costs and schedule of project activities. Both continuous and discrete distributions are used. The other category is that of the analysis and modeling tools. These include sensitivity analysis which helps in the determination of risks with the biggest impact on the goals of the project. Expected monetary analysis of value is also done to calculate the approximate income when future scenarios that may occur or not occur are considered. Lastly, expert judgment is also needed to identify the possible schedule and cost impact. 

Quantitative Risk Analysis Performance Outputs 

According to Webb (2018), project update documents are the main outputs of quantitative risk analysis. They are updated with information that has been obtained after the analysis of the updates that may be made concerning probabilistic project analysis, the probability of meeting the time and cost objectives of the project, trends on risk analysis and prioritized quantified risks list. 

Planning Risks Responses 

Planning risk responses is the process through which actions and options are developed to reduce threats and enhance opportunities. The major reason for conducting this is addressing risks by inserting activities and resources into the schedule, budget and project plan as required. Every risk response needs a mechanism of understanding through which the risk is addressed ( Project Management, 2017) . This is the mechanism that is applied during the analysis of the risk response to have the desired impact. It also entails identifying and assigning an individual to take responsibility of risk response. Risk responses are suitable for the risk, realistic, cost effective and agreed upon by everyone that is involved. It is required that the risk response is selected from a number of options. 

Planning Risks Responses Inputs 

The main inputs of planning the risk responses are the register and plan of managing risk. The risk register is used to determine the risks that have been identified, their root causes, the risk owners, the potential responses, the warning signs, the risks that need an immediate response and other things ( Ward & Chapman, 2003) . The risk management plan helps in providing risk thresholds that are used to identify the risks that needed specific responses. 

Planning Risks Responses Tools and Techniques 

There a number of risk response strategies used here. The strategies that are likely to be efficient are used for every risk. Tools of risk analysis like the decision tree are used to select the most applicable responses. Particular responses are selected for every strategy including backup and primary strategies as required. A fallback plan is also created for implementation when the strategy that has been selected does not become fully effective or if an unexpected risk occurs. Secondary risks are reviewed in this process. The secondary risks are those risks that arise in the process of implementation of risk response ( Project Management, 2017) . A contingency plan is also allocated for costs and time and it includes information on those conditions that can trigger its application. There are four strategies for dealing with negative risks which include mitigating it, transferring it or accepting it. The strategies for responding to positive risk are sharing it, enhancing it, or accepting it. 

Planning Risks Responses Outputs 

The first output at this stage is the project plan update where elements like cost, quality, schedule, procurement; human resource management plans, scope baselines, cost and schedule baselines are updated. Updates of project documents are the next outputs. A number of documents are required in the process of risk response. For instance, when a risk response has been agreed upon, it is included in the register. The risks which are viewed as low quality are written in a watch list to be monitored. 

Controlling Risks 

Risk control is defined as the process through which plans of risk response are implemented, tracking of identified risks is done, monitoring of residual risks is done, new risks get determined and effectiveness of risk processes are evaluated throughout the life cycle of a project. The main reason for conducting control risks is improving the efficiency of the risk approaches through the life cycle of the project so as to continuously optimize the identified risk responses. The planned responses of various risks which are documented in the risk register get executed during the entire project (Rowan, 2018). The project work, however, is monitored constantly for outdated, changing and new risks. The techniques applied in this process include trend and variance analysis. Controlling risks can also involve choosing strategies, taking corrective measures, modifying the management plan of the project and executing a contingency plan. 

Controlling Risks Inputs 

The plan of project management is the first input which gives guidelines for risk controlling and monitoring. The risk register is the other output which has things like risk owners, agreed responses to risks and control actions for the assessment of the effectiveness of the response plan. There is data on work performance which includes incurred costs, schedule progress, and deliverable status ( Project Management, 2017) . Reports on work performance are also included. These take information from measurements of performance which is impactful in controlling the risks that are related to performance. 

Controlling Risks Tools and Techniques 

There are various techniques applied during risk control. They include reassessment of risk, risk audits, trend and variance analysis, reserve analysis, measurement of technical performance, and meetings. Reassessment of risk is done because risk control leads to new risks. The number of reassessment times depends on the progress of the project relative to the objectives ( Carbone, & Tippett, 2004) . Risk audits are done to examine and document the efficiency of the process of risk management. Trend and variance analysis is a way of comparing the planned results with the actual ones. Meetings are also held so as frequent risk discussions are conducted which may lead to the identification of more risks and opportunities. 

Controlling Risks Outputs 

Information on work performance as a risk control output gives a method of communication and support of decision making during the project. Change requests is another output which results from the implementation of contingency plans. The change request might include a recommendation or a preventive action ( Project Management, 2017) . There are updates on project management plan also which are especially applied if the change requests are approved to update in changes. The document updates are also included as a result of the risk control process. The updates may be the project actual outcomes or risk reassessment outcomes. Updates on organization assets are also some of the outputs which are updated with updates including lessons learned, risk breakdown structure and impact matrix. 

Conclusion 

To sum it all, risk management is a very significant aspect of the process of project management. There steps involved in risk management are planning of risk management, identification of risks, risk analysis and planning risk responses and controlling risk management. All these processes involve inputs, techniques, and outputs. This being a crucial process of the project, a conscious decision has to be made at every level of the organization to pursue and identify effective risk management during the project life cycle. 

References 

Cagliano, A. C., Grimaldi, S., & Rafele, C. (2015). Choosing project risk management techniques. A theoretical framework. Journal of Risk Research , 18 (2), 232-248. 

Carbone, T. A., & Tippett, D. D. (2004). Project risk management using the project risk FMEA. Engineering Management Journal , 16 (4), 28-35. 

Dey, P. K. (2012). Project risk management: a combined analytic hierarchy process and decision tree approach. Cost Engineering , 44 (3), 13-27. 

Hillson, D., & Murray-Webster, R. (2017). Understanding and managing risk attitude . Routledge. 

Project Management, I. (2017). A guide to the project management body of knowledge: (PMBOK® guide) (6th ed.). Newtown Square, PA, USA: Project Management Institute. 

Rowan, K. E. (2018). Goals, obstacles, and strategies in risk communication: A problem ‐ solving approach to improving communication about risks. Journal of applied communication research , 19 (4), 300-329. 

Ward, S., & Chapman, C. (2003). Transforming project risk management into project uncertainty management. International journal of project management , 21 (2), 97-105. 

Webb, A. (2017). The project manager's guide to handling risk . Routledge.