Risk Management — Preparing for the Unknown

Risk management is the process of identifying, analyzing, and responding to project risks. Risks can be threats (negative) or opportunities (positive).

Risk management process:

1. Plan Risk Management — how to approach risk

2. Identify Risks — document all risks (risk register)

3. Qualitative Analysis — prioritize by probability × impact

4. Quantitative Analysis — numerical analysis (Monte Carlo, decision trees)

5. Plan Responses — choose strategies

6. Implement Responses — put plans in action

7. Monitor Risks — track throughout project

Risk response strategies for threats:

Avoid — eliminate the risk by changing plan

Transfer — shift impact to third party (insurance, contract)

Mitigate — reduce probability or impact

Accept — acknowledge but don't act (passive or active with contingency reserve)

Risk response strategies for opportunities:

Exploit — ensure opportunity occurs

Enhance — increase probability or impact

Share — partner to capture

Accept — take advantage if it occurs naturally

Residual risk: Risk remaining after response. Secondary risk: New risk created by a response.

Reference:

Wikipedia: Risk Management

https://en.wikipedia.org/wiki/Risk_management