Project Risk Management: Definition and Examples
Though appearing comparatively recently, the concept of project risk management (PRM) has already been interpreted from several viewpoints and, therefore, gained a full-fledged definition that encompasses its key goals and processes. According to the existing explanation, PRM is defined as the “system to identify risks and reduce their negative effects on the projects by developing response strategies” (Alises, et al., 2014, p. 9), PRM can be viewed as the combination of measures applied in a variety of areas (e.g., financial, time management related, etc.) in order to increase the efficacy of the project.
It should be noted that the present-day concept of the project management needs to encompass a range of issues from a variety of domains, including the organisational, financial, and production related ones. Specifically, the costs to be taken in the course of the product management, the resources required and the budget necessary for carrying out the task successfully need to be addressed from the economic perspective. The issues concerning the responsibilities distribution, hierarchy among the project members, time management and the related concerns belongs to the organisational issues. Finally, the production process, its key strategies aimed at improving the quality of the result, must be enhanced so that the risks could be reduced to the minimum.
Expected Outcomes of a Project Review: Suggestions
As it has been stressed above, the provision of a decent risk management strategy requires that a range of aspects of a project performance should be evaluated. For these purposes, splitting the existing risks into the systematic and the unsystematic ones will help facilitate a smooth risk management evaluation run. In addition, the objective risk, which basically involves the estimation of the “relative variation of actual loss from expected loss” (Rejda and McNamara, 2012, p. 3), should be identified prior to running the analysis of the project risk management approach. The above-mentioned step will help locate the key aspects, which will need a more detailed analysis and, thus, will contribute to a more detailed check. As far as the project performance evaluation, simply stating the results cannot be considered an adequate response to the endeavours of the people involved. Therefore, it will be crucial to adopt the basic principles of the transformative leadership approach and enhance the staff’s motivation by using praise and financial incentives in case they are needed for boosting the process.
By adopting an efficient risk management approach, one is capable of keeping every single element of the project in balance and, therefore, promote efficacy within the team. For these purposes, regular audits should be viewed as an option. While the specified approach may not supply the complete information on the performance of the project, it will help identify the problem areas, which need to be addressed, at the same time locating the progress made and creating the premises for a comparison between the previous performance and the current one.
The Project Performance Evaluation concept, which is also a desirable addition to the array of strategies used by the project manager, in its turn, allows for addressing the design of the project, therefore, locating the interior factors, which may affect the performance of the team members. It should be born in mind, though, that the adoption of the specified approach may trigger unforeseen side effects, as the above-mentioned concept is still in development and has not been used widely yet: “engineering project performance evaluation is a new managerial endeavour that has great implications for FM&T, but has not yet been adopted and used” (Cao and Hoffman, 2010, p. 157). Nevertheless, the specified approach will allow for embracing several variables of the project, including the cost, the technical outputs, and the customer satisfaction. The fact that the technique in question helps assess latter, in fact, can be viewed as the key asset of the Project Performance Evaluation. Defining the variables that influence the company both from within and from the outside, the chosen method will be used as the basis for identifying a new strategy for meeting the requirements of both the customers and the company.
Speaking of which, this is the point, at which the Project Quality Management factors in. As it has been stressed above, running constant checks on the progress is essential for improving the quality of the output, as well as defining the further strategy for the project to take. Thus, the significance of the quality of the final product is very high. Although audits can be used for identifying obvious problems in the project and the product, a few less obvious reasons for concern may slip through the cracks, therefore, growing into larger problems. Hence, a more thorough approach towards promoting quality is required. It is essential that the Project Quality Management will allow for tying different aspects of the company’s performance together, linking the organisational processes and the ones that are related to the actual production and provision of the corresponding services of the required quality.
ALISES, A., MOLINA, R., GÓMEZ, R., PERY, P. and CASTILO, C. (2014) Overtopping hazards to port activities: Application of a new methodology to risk management (POrt Risk MAnagement Tool). Reliability Engineering and System Safety 123 (1). pp. 8–20.
REJDA, G. E. AND MCNAMARA, M. J. (2012) Principles of risk management. 12th edn. Upper Saddle River, NJ: Pearson.
CAO, Q. AND HOFFMAN, J. J. (2010). A case study approach for developing a project performance evaluation system. International Journal of Project Management 29 (2011). pp. 155–164.