An uncertain event or condition which can have impact on either cost, time and scope. Risk Analysis is the process to identify the business, financial, technological & operational risk.
A risk is something that could affect the success or failure of a project. Analyze risks regularly as the project progresses. While you may not be able to avoid every risk, you can limit each risk’s impact on the project by preparing for it beforehand.
5 Risk Management Process Steps
1. Establish the Context:
It is vital to understand the situation in which a risk arises before it may be absolutely assessed and reduced. Firstly, defining the connection between your organization and the environment wherein the hazard exists, this allows in figuring out the boundaries to which danger is restricted.
• Identifying proof of a hazard in one specific area.
• Planning out the complete organization process.
• Mapping the identification of the hazard, recognition of reason behind the risk etc.
• Outlining a framework.
• Analyzing risks involved in all stage.
• Deciding upon the risk solution/s.
2. Identify the Risks:
The reason of this step is to recognise what could go incorrect (possibility) and what’s the outcome (loss or damage) that takes place.
Key questions to ask include:
• What risk can occur? List hazards, incidents or accidents that might takes place with the aid of systematically working through every competition, actions or phase of event will make you aware of what would possibly happen at all phase.
• How and why it can occur? List the viable causes and scenarios or description of the hazard, incident or threat.
• What is the probability of them taking place?
• What can be the outcomes if the risk occurs?
Types of Risks:
- Technological Risks
- Skills Risks
- Political Risks
- Business Risks
- Requirements Risks
3. Analyse or Evaluate or Rank the Risk:
You assess or rank the threat by way of figuring out the risk significance, that’s the mixture of chance and outcome. You make decisions about whether the risk is good enough to handle or whether it is severe enough to warrant treatment.
This step includes comparing the probability of incidence and ensuing effect of each identified risk issue and short listing over the risks that probably have the more impact and ought to be consequently controlled first. The priority of the probability of occurrence can be evaluated by way of combining outcomes of likelihood (possibility) and effect of consequences.
The risk can be evaluated based on the 5 scale framework: 1-Rare, 2-Unlikely, 3-Possible, 4-Likely, 5-Almost certain. Similarly, the effect of outcomes can be scaled on: 1-Negligible, 2-Minor, 3-Moderate, 4-Major, 5-Catastrophic. Greater the blended score of the parameters, higher the threat component ought to be prioritized for mitigation.
4. Treat the risks:
This is also called Risk Response Planning. During this step you investigate your maximum ranked risks and set out a plan to deal with or alter those dangers to acquire suited risk levels. How are you able to decrease the chance of the negative risks in addition to improving the opportunities?
Risk treatment includes figuring out the range of options for treating the danger, comparing those options, making ready the risk treatment plans and enforcing those plans. It is about thinking about the alternatives for treatment and deciding on the most appropriate technique to reap the favored outcome.
Strategies include the following:
Avoid: Do something to eliminate the risk.
Mitigate: Do something to reduce damage if risk materializes.
Transfer: Pass the risk up or out to another entity.
Accept: Do nothing about the risk. Accept the consequences.
5. Monitor and review:
Monitoring and evaluation make sure that the important facts generated with the aid of the danger management system is captured, used and maintained. Review is an critical a part of the risk management treatment plan.