What Is the Connection Between Project Management and Risk Management?

Project risk management is the activity of identifying and analyzing project risks and taking countermeasures. Including two aspects of maximizing the impact of positive factors and minimizing the impact of negative factors. The content mainly includes: (1) Risk identification, that is, identifying risks that may affect the progress of the project, and recording the characteristics of each risk. (2) Risk quantification, that is, assessing the interaction between risk and risk in order to assess the scope of the project's possible output. (3) Risk countermeasure research, that is, determining the steps for selecting opportunities and responding to dangers. (4) Implementation of risk countermeasures, that is, responding to changes in risks during project progress. Not only do these programs interact, they also interact with programs in other areas. Each procedure may involve the efforts of one person or even a group of people based on the needs of the project itself. These procedures occur at least once during each project phase. ^[1]

Project risk management

1. Risk factors. Risk factors are the sum of a series of risk events that may affect the development of the project in a good or bad direction. These factors are complex, that is, they should include all identified items, regardless of frequency and likelihood of occurrence, Profit or loss, etc.

2. Potential risk events: Potential risk events are discrete events that can affect the project, such as natural disasters or the departure of special personnel from the team. When the possibility of such an event or significant loss is relatively large ("relatively large" should be determined according to the specific project), potential risk events should be considered in addition to risk factors.

3. Signs of risk. Risk signs, sometimes called trigger engines, are an indirect display of actual risk events. For example: loss of morale may be a warning sign that the plan is being put on hold; and cost overruns in the early stages of operations may be a rough assessment of performance.

4. Input to other programs. The risk identification process should identify a requirement in another related area for further operation.

Risk quantification involves an assessment of the interactions between risks and risks. Use this assessment to analyze the project's possible outputs. This first requires deciding which risks are worth responding to.

1. Input for quantifying risk Investors' tolerance for risk. Different organizations and individuals often have different tolerance limits for risk.

2. Tools and methods Different tools and methods have certain deviations in risk quantification.

2. Statistics are aggregated. Statistics are always added to each specific task.

Risk countermeasure research includes tracking progress of opportunities and definition of countermeasures against crisis. The countermeasures against threats can be divided into the following three points:

1. Avoid-Eliminating specific threats often involves excluding the origin of the threat. It is impossible for the project management team to exclude all risks, but specific risk events can often be excluded.

2. Mitigation-reducing the expected capital investment of risk events to reduce the probability of risk occurrence (such as the use of patented technology to avoid the scrap of products produced by the project), and reducing the risk factor of risk events, or both

The implementation of risk countermeasures includes the implementation of risk management programs to respond to risk events during the project. When accidents happen, they need to be repeated

1. Keep alive

2. Stable situation

3. lower the cost

4. Stable income

5. Avoiding business disruptions

6. Keep growing

7. Build credibility and expand influence

8. Dealing with Special Incidents

9. Guiding Principles for Risk Management

10. Eliminate or minimize conditions and activities that cause loss

11. When risks cannot be eliminated or reduced to an affordable level, commercial insurance that can compensate for huge losses should be purchased

12. For those risks that have no material relationship with the company's business or financial situation, it should be decided to insure or bear the risks according to the principles that are beneficial to the company

Based on a comprehensive analysis and assessment of risk factors, the formulation of an effective management plan is the key to the success or failure of risk management. It directly determines the efficiency and effectiveness of management. Therefore, being detailed, comprehensive, and effective becomes the basic requirement of the plan, and its content should include: the principles and framework for formulating risk management plans, measures for risk management, and working procedures for risk management.

Project Risk Management Phase I

In the latent stage of risk, the risk has not yet appeared, but its possibility exists in various signs. Risk management at this stage focuses on

prevention:

1. Identify potential risks. This is the number one priority for risk prevention and cannot be prevented without identification. An important means of identifying risks is quantification. The benefit of quantification is that the signs of risks can be identified through comparison. Critical points can be set as early warning indicators. For example, we identified high blood pressure as a major risk for heart disease, so we set a set of quantitative indicators for detecting blood pressure, and set the warning threshold at 90/140. In this way, we can monitor the risk of hypertension by comparing it with normal indicators.

2. Avoid and transfer risks. Is another effective way to prevent potential risks. When you recognize that something may be risky, you can avoid the risk by giving up doing it, or doing it in a safer way. If you know that drinking alcohol can cause high blood pressure or heart disease, you can avoid the risk by avoiding alcohol or switching to red wine or beer. One of the most common ways to transfer risk is to buy insurance. Even if you are unfortunately suffering from a heart attack, paying medical expenses with insurance companies can greatly reduce the risk of life and economic loss.

3. Prepare risk response plans and crisis management plans. It is the core content of risk prevention. Once the risks and crises come, having a response plan can effectively reduce the risk of losses and the disaster of the crisis. You can divide the commonly used medicines in places that are easily accessible at home and the office, enter the hospital's phone number into the phone, and tell people around you how to deal with them in advance. This is a risk plan. In case of a heart attack, these prepared plans are enough to save your life. Many people died suddenly because of these plans. Some risk plans may never be used, but this does not mean that they are redundant. Only when the crisis is at stake will people feel their vital value.

Project Risk Management Phase II

In the stage of risk occurrence, the risk has already come, and the loss caused by the risk is not difficult to predict. The risk management at this stage focuses on responding to:

1. Select and implement a risk response plan. Prepared plans in advance can greatly improve the efficiency of decision-making in risk response and simplify decisions to choices. For example, when a flight failure occurs, the fuel is often enough to fly for half an hour. There is no time to make a decision. It can only be implemented in a prepared plan. When your computer system is attacked by a virus, when your key technical person suddenly resigns, when your main customer delays payment for some reason, when your main supplier suddenly announces an increase in price, if you can Prepare a plan to deal with in advance, you will have more choices, have sufficient response time, and will not be helpless under the sudden blow of risk.

2. Take expedient measures to mitigate risks. Sometimes it takes time and conditions to implement a risk plan, and expedient measures are designed to win time and create conditions. In the face of kidnappers, you should not send troops but negotiators first, and the latter will gain time for the deployment of the former. In the face of angry passengers after flight delays, you first need to mobilize not airplanes but drinks and food. Soothe the excitement of travelers; when your computer is paralyzed by a virus, your first thing to do is not to repair the system but to rescue the files; when the customer delays the payment, your priority may not be to collect debts but to reverse the loan funds. In many cases, expedient measures are also an integral part of the risk plan. However, when unexpected conditions do not occur, emergency expedient measures can best test the resilience of a manager.

3. Take remedial measures to offset losses. When the loss caused by the risk is unavoidable, the loss outside the dyke can be remedied. For example, if the export product is returned in the importing country due to quality problems, it will be exported to domestic sales to recover part of the loss; if the customer is unable to pay the debt, some losses can be offset by assets such as cars and computers; , Just arrange training to avoid wasting time. Lost in the East, closed in Mulberry.

Project Risk Management Phase III

At the risk consequence stage, the loss caused by the risk has become a reality and the situation is critical. The risk management at this stage focuses on emergency and aftercare:

1. Select and implement a crisis management plan. If the thrombus infarcts the heart muscle; if the flood breaks the embankment; if the plane falls into the sea; if the media exposes the old bottom; if the computer files are completely destroyed; if the debtor's account escapes; the risk becomes a crisis, The response became an emergency. Emergency response is actually no different from risk response, but the role of the plan will be more prominent, because there is no time for you to think deeply in a crisis, and you can only choose an idea prepared in the past.

2. Implement disaster relief measures. Crises are often accompanied by catastrophic consequences. Losses have become facts, and the situation cannot be reversed. Therefore, after-life measures need to be considered, such as saving lives, caring for family members, regaining credibility, cleaning up the mess, and finding alternative solutions.

3. Archive the lessons. This is the last thing to do after the aftermath, but it is often overlooked and forgotten. All the records of risks and disasters are the heritage of human beings, which will provide valuable clues for future generations to identify risks. Today's people are progressing on the shoulders of their predecessors. Without the information left by their predecessors, we are still groping in the dark and will trip on the same stone numerous times. Document management is the threshold we must cross to become a learning organization.