The world today is uncertain. Some of these uncertainties pose very great risks that affect our ability to achieve our goals and objectives efficiently. Since projects are intimately associated with goals and objectives, efficient and effective management of risk is a very crucial factor for successful management of any project. Experts in the filled of project management point out that failure to conduct timely and effective risk management assessment on projects, can cause projects to exceed the financial plan i.e. the resources budgeted for, fall behind time schedules, miss critical performance targets or exhibit any combination of these troubles. Due to these, proper risk management can assist the project managers and the whole team responsible for delivering the project, to properly mitigate both known and unanticipated risks on projects of all kinds and ensure that the projects achieve its objectives within the set parameters hence satisfying all the stakeholders' demands.
Carbone and Tippett (2) further assert that although there are a number of variables or factors that determine or influence the success of a project, in most cases, it is more likely that lack of adequate risk management will amplify the risk of failure. According to them, the old maxim, 'failing to plan is planning to fail,' appears to be appropriate to managing project risks. As projects increase in complexity and size, improving project success requires giving proper attention to risk management. Therefore, developing proper and effective strategies that are easy to comprehend and utilize for all stakeholders especially the project team is significant for the success of projects.
The Concept of Risk Management
According to Hubbard (46), a risk is uncertain future event or condition. It can be a positive opportunity or a negative threat of actions and events. In this context, risk management therefore is the recognition, evaluation, and prioritization of risks followed by the coordinated and economical application of financial herewith to minimize, monitor, and control the probability or impact of unfortunate events or to maximize the realization of opportunities. Carbone and Tippett (5) claim that because of the unique nature of projects, there is a lot of uncertainty present in all projects. As result, identification and analysis of risks is required for effective risk management. According to them, one cannot manage risks if one does not characterize them to know what they are, how likely they do occur, and what their effect might be.
Overview of Risk Management in Managing projects
Project Risk Management has developed into a recognized discipline that has its own rules. According to Chapman and Ward (7), project risk management is the practice of identifying, evaluating and controlling uncertain factors that possess the ability to significantly disrupt realizable performance in order to evade or mitigate potential negative effects. Higuera and Haimes (32) point out that making timely and informed decisions by evaluating the prevailing and future situations of what is most likely to go wrong, as well as the probability and severity of the focused outcome is very crucial to risk management. This entails the analysis and accurate evaluation of the trade-offs related with all the strategic options for risk mitigation in terms of their costs, benefits and analysis of the impact of current decisions on future options. This process requires proper identification of risks, the detailed analysis of the identified risk, planning on how to deal with the risk, devising strategies to track all the identified risks effectively, controlling, and communicating of risks to all stakeholders particularly the project team directly involved in carrying out the project activities.
The Role and Importance of Risk Management in Managing Projects
According to Chapman and Ward (40), the role of risk management in managing projects is to ensure that the inevitable risk associated with every project is at a level that is acceptable to stakeholders i.e. the funding party and is effectively managed by all ways. Chapman and Ward (57) further argue that all the parties involved in managing projects should welcome risk in their projects since ''it enables and supports change, innovation and creativity as long as it is taken sensibly, intelligently and appropriately''. It is crucial to point out that not all risks are bad since the concept includes both threats and opportunities, there are uncertainties that matter because if they occur they would hinder achievement of project objectives (threats), but there are also uncertainties whose occurrence would help to achieve those objectives (opportunities). This is the fundamental reason why risk management in managing projects is an important part of effective project management , it enables one to identify risks and be in a position to manage them effectively thus resulting to project success.
The role and importance of risk management in managing projects is of great significance in all kinds of projects. It enables one to save and gain many resources that can be wasted if uncertainties in project events are not dealt with in a proper manner. Effective management of risk leads to reduction of obstacles that hinder delivery of the project outputs and allows utilization of chances that occur. This leads to delivery of project outputs on schedule, on resources budgeted and within specifications demanded by stakeholders as well as increasing the moral and reputation of team members.
Copyright (c) 2012 Morgan D
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Morgan D is an experienced freelance writer for 5 years now, he writes research papers, essays papers, thesis proposal and dissertation papers.He is currently working with uk best essay provider visist the site to view more articles on various topics
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