The purpose is therefore not to necessarily eliminate all risk but rather to remove avoidable risk, reduce uncertainty and retain a desired level of intrinsic risk.Key actions to reduce intrinsic risk include: The conventional stages of risk management are typically represented by a six phase approach namely: risk management planning, risk identification, qualitative risk analysis, quantitative risk analysis, risk response planning, and risk monitoring and control.The requirements for an effective risk management process therefore include the project context and characteristics of all participants.
There are a number of techniques for risk identification including, but not limited to, brainstorming, checklists, prompt lists, questionnaires, and Delphi groups as well as various diagramming approaches.
The techniques may be used to identify both opportunities and threats.
Several factors complicate the analysis including possible multiple effects on a number of systems by a single risk event and false impressions of precision and reliability through the deployment of mathematical techniques.
The purpose therefore is to assess the overall level of risk exposure, to highlight specific areas of risk and to develop responses to that risk.
The same quantitative techniques can be deployed to take account of opportunities and threats in the context of uncertainty measurements in terms of time and cost as well as the probabilistic combination of individual uncertainties.
This is especially true because ranges of variables and associated probabilities are calculated and could be assigned best case (minimum optimistic) or worst case (maximum pessimistic) estimates to include threats and opportunities.Risk identification is an iterative organised process for identifying risk events which may affect the project.It repeated at different phases of the project life cycle.Risk and uncertainty are terms basic to any decision making framework.Risk is imperfect knowledge where the probabilities of possible outcomes are known and uncertainty exists when these probabilities are not known.The most common technique is a two dimensional probability-impact matrix that allows the relative significance of the risk to be ranked on a high, medium, or low impact basis.This allows independent assessment of the probability and consequence of a risk as well as the qualitative definition of the basis for the risk and its risk level.This management process is mirrored within a project environment.Uncertainty in a project includes: Best practice in project management is therefore concerned with the management of uncertainty that matters to the project in an effective and efficient manner.Ambiguity is associated with uncertainty in the interpretation of variable data sources influenced by the behavioural constructs of those involved in the process.Clarification and hence management of ambiguity and uncertainty, improves the effectiveness and efficiency of decision making.