When it comes to risk management, hope is not a strategy ... all single point estimates are wrong ... and communication is everything. Understanding these principles and two others are the only way to turn risk management theory into meaningful practice.
Risk management is essential for the success of any significant project. Information about key project cost, performance and schedule attributes is often unknown until the project is underway. Risks that can be identified early in the project that might impact the project later are often termed “known unknowns.” These risks can be mitigated, reduced or retired with a risk management process. For those risks that are beyond the vision of the project team, a properly implemented risk management process can rapidly quantify the risk’s impact and provide sound plans for mitigating its effect.
Risk management is concerned with the outcomes of a future event whose impact is unknown and dealing with this uncertainty. Outcomes are categorized as favorable or unfavorable. Risk management is the art and science of planning, assessing, handling and monitoring future events to ensure favorable outcomes. A good risk management process is proactive and fundamentally different than reactive issue management or problem solving. Risk management can be better understood by five key concepts: