Project risk is defined by the Project Management Institute as an uncertain event or condition that, if it occurs, has a positive or negative effect on one or more project objectives.
Project risk management is concerned with the analysis and prioritization of “risk events.” According to the PMI, the structure of a proper risk management system is:
- Risk Identification
The most important risks to project success are identified.
- Qualitative Risk Analysis
Rankings are given to each risk based on a scale of 1-10, high/medium/low or similar.
- Quantitative Risk Analysis
Simulations are run to determine the monetary effect of the risks on the project, or the combined effect of multiple risks.
- Plan Risk Responses
Actions plans are drawn up for risks that are deemed serious enough to warrant it.
- Control Risks
Throughout the project, risks are re-prioritized and re-analyzed as necessary to ensure the most important project risks are always given the attention they need.
The first four occur during the project planning phase, and the last one during project execution.