Identifying and managing risks is a critical responsibility of project managers. Risk is defined as the probability of a specified threat and the subsequent impact that the event produces (Vaidyanathan, 2013). Risks can also bring about either positive or negative outcomes for a project or organization. A project manager must identify potential risks and evaluate each one to determine the severity and likelihood of each event. Only by completing the risk management process, a project manager can determine what approach would work best to avoid, mitigate, and/or transfer the risk.
While management of projects and project portfolios have similarities and difference, the same can be said about risks within both areas. Project risks include categories …show more content…
With portfolio management, more focus is applied to the acceptance of the organization’s tolerance of risk throughout the project lifespan, financial and industry statuses, and the acceptance of risk for the organization (Vaidyanathan, 2013). The health, stability, and financial status play an important role in risk tolerance for an organization. While a project manager is influenced by these organizational factors, the amount of risk a project manager with accept within an endeavor is dictated by their style, the visibility of the project, skills he or she possesses, and the expectations of the stakeholders (Vaidyanathan, 2013). All of these factors impact the approach a project manager utilizes in managing, assessing, and executing a project. Since there are differences in how risks are assessed, managed, and evaluated, different approaches should be used in addressing risks for projects and …show more content…
The most common approaches are accepting, mitigating, transferring, or avoiding the risk. Risk acceptance is utilized when there not an action that can address a potential issue or that the probability or impact is small (Phillips, 2014). With risks that cannot be addressed by other means, a contingency plan should be developed to minimize the overall effect on a project or portfolio (Phillips, 2014). Mitigation employs two basic strategies in managing risks: reduce the possibility of the event will occur and/or minimize the impact of the adverse event (Larson & Gray, 2014). Transferring risks involves shifting the effects of the risk to another party to manage, like using insurance, fixed-price contracts, or guarantees (Phillips, 2014). While this option does not prevent the issue from occurring, the overall impacts are shouldered by another organization. Finally, avoiding risk involves altering the project plan to eliminate the risk or the cause of the issue (Larson & Gray, 2014). Each approach may not be suitable for each risk identified. It is the responsibility of the project manager or portfolio manager/team to determine which approach will work best for the issue and the overall management of the project, portfolio, or
While management of projects and project portfolios have similarities and difference, the same can be said about risks within both areas. Project risks include categories …show more content…
With portfolio management, more focus is applied to the acceptance of the organization’s tolerance of risk throughout the project lifespan, financial and industry statuses, and the acceptance of risk for the organization (Vaidyanathan, 2013). The health, stability, and financial status play an important role in risk tolerance for an organization. While a project manager is influenced by these organizational factors, the amount of risk a project manager with accept within an endeavor is dictated by their style, the visibility of the project, skills he or she possesses, and the expectations of the stakeholders (Vaidyanathan, 2013). All of these factors impact the approach a project manager utilizes in managing, assessing, and executing a project. Since there are differences in how risks are assessed, managed, and evaluated, different approaches should be used in addressing risks for projects and …show more content…
The most common approaches are accepting, mitigating, transferring, or avoiding the risk. Risk acceptance is utilized when there not an action that can address a potential issue or that the probability or impact is small (Phillips, 2014). With risks that cannot be addressed by other means, a contingency plan should be developed to minimize the overall effect on a project or portfolio (Phillips, 2014). Mitigation employs two basic strategies in managing risks: reduce the possibility of the event will occur and/or minimize the impact of the adverse event (Larson & Gray, 2014). Transferring risks involves shifting the effects of the risk to another party to manage, like using insurance, fixed-price contracts, or guarantees (Phillips, 2014). While this option does not prevent the issue from occurring, the overall impacts are shouldered by another organization. Finally, avoiding risk involves altering the project plan to eliminate the risk or the cause of the issue (Larson & Gray, 2014). Each approach may not be suitable for each risk identified. It is the responsibility of the project manager or portfolio manager/team to determine which approach will work best for the issue and the overall management of the project, portfolio, or