Project managers must manage risk. This means that you need to know how to do a risk analysis. This method forecasts potential risks and negative events that could impact the project or parts of it. Analyzing risks is to identify and reduce them. This includes minimizing both the risk and the likelihood of them occurring.
What is risk analysis?
A risk in project management is an event or situation that could have a negative impact on the project’s success. These are just a few examples.
External risks are those that affect customers, suppliers, stakeholders and contractors.
Internal risks are those that affect team members, senior managers, and other internal people, situations, or issues.
Project-related risks can include logistical or technology problems.
Event-related risks are those that are difficult to predict and even more difficult to control, such economic crises or political issues.
These events can lead to decisions being made haphazardly, which can create risks and other issues. This is how you can forecast these situations in project management. This allows you to create a plan to address any potential risks.
What is a risk analysis?
These risks are assessed separately using a risk analysis matrix.
The risk matrix measures each element of a 1-5 scale.
Probability of a Risk: 1 means there is no chance of the risk happening, and 5 means that the risk is certain.
The impact level: 1 indicates that there are almost no consequences, 5 indicates that there is a high likelihood of financial or late delivery.
This matrix will allow project managers to determine whether the risk is high, moderate, or low.
This is not a tool that can be used once and forgotten. This is a method of project management that should be used throughout the project’s lifetime.
Risk analysis is vital
It is not possible to underestimate the importance of a thorough risk analysis. Project managers should also be able to use this skill as part of their learning and practice. PMI has included a whole knowledge area on Project Risk Management in the PMBOK(r).