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By: Andrew J. Malanga, Hong Kong, 2014Project management is an essential function that is the single greatest means of assuring that a project is successful in meeting its objectives. Project management provides managers with tools that improve their ability to plan, implement, and manage activities to accomplish specific organizational objectives. Risks are inherent in all projects and [pullquote]without the use of accurate and effective risk metrics a project manager can fail to mitigate serious risks and end up watching his project fail[/pullquote]. Risk management is a core element within the broader discipline of Project Management. The basis to successful and effective risk management is a clear understanding of the risks faced by the project. The basis to all risk management is first and foremost: risk identification; however, it must amount to more than simply listing identified risks and characterizing them by their probability of occurrence and impact on objectives. In everyday life as we interact with our environment we are subject to and develop methods to deal with risk. For example, we may identify that there is a risk that our car will be stolen or damaged. We diminish that risk by ensuring we lock our car doors and park it in well lighted places. These are proactive measures to reduce the likelihood of possible adverse events. This represents one of two broad categories of risk management referred to as risk mitigation. On the other hand, in the scenario above, we may purchase insurance so that we can replace or repair the vehicle should the worst happen. Here we presume a risk event, the theft or damage of our car, has already transpired and, consequently, have ready a pre-planned set of procedures designed to minimize or mitigate the negative impact of such an adverse event. This is referred to as contingency planning and represents the second of the broad categories of risk management. This same thought process in our car sample above is easily extrapolated to project management. [pullquote]Project risk equates to uncertain events that have either positive or negative effects on a project.[/pullquote] It is important to remind ourselves that all projects carry risk through uncertainty. In fact, all project managers should recognize that project management, at its core, is really risk management. Ultimately, then it is the project manager's responsibility to ensure project risks are identified and managed. Risk management is an essential function that helps assure that a project meets all objectives from cost to functionality. Literature in the field addresses different statistical methods, mathematical modeling, and formal processes to calculate the probability and impact of risks. Experience, however, shows that using a formal, structured process to handle possible foreseen and unforeseen project risk events minimizes surprises, costs, delays, stress, and misunderstandings. Even though this is so, risk management is not always approached with the same rigor of other project management processes; yet, unmanaged or unmitigated risks are one of the primary causes of project failure. It’s disappointing that many managers believe that in the final analysis, risk assessment depends on subjective judgment. In fact a standardized process for identifying, assessing, and responding to risks should be incorporated in all projects. Improving project risk management involves both improving the ability to identify and influence risk during the project lifecycle, and embedding risk management into mainstream project delivery. Researchers such as in Nielson (2006), Turnbaugh (2005), and Gray (2008), refer to a set of major processes of project risk management. These processes and variations thereof can be found elsewhere in the Project Management Body of Knowledge (PMBOK) and are typically enumerated as shown below: Risk Identification—of the project specific risks and their scope. Risk Classification—of the risks’ category, likelihood, and severity of impact. Risk Response—to mitigate adverse events or exploit opportunity. Risk Tracking—to adjust risk responses and controls during project execution. By identifying risks and potential consequences of risks, the Project Manager can both maximize the results of positive events and minimize the consequences of adverse events. In this way [pullquote]risk management can be leveraged to prevent many risks from turning into project killers[/pullquote]. Project managers and all supervisors with resource control must acknowledge the importance of risk identification as the starting point for an effective risk management process. Particular attention should be given to the necessity of decomposing risk into its component source elements; because risk can only be mitigated at the source.