Risk Management is the process of identifying, analyzing, and either accepting or mitigating risks that may be associated with a particular project; given what it does, it is an imperative feature of any project, working as a means of enabling better decisions, furthering major projects, and allowing for higher quality decisions to be made (Marks, 2011). The value of a risk management program occurs based on several different factors; if one of these is implemented in an inappropriate manner, the risk management process or approach may fail. The risks must be identified, the probability of the risk occurring must be determined, ways of reducing the risk must be decided upon, and measures must be taken to reduce the possibility and probability of the risks themselves (Jones, 2009).
An example of risk management application would be the creation of a new customer support chat system, knowing that if the program goes live all at once, completely replacing the old system, if it breaks, it could cause the entirety of the customer support system to go down, creating many unhappy customers. The key to ensuring that this does not happen is to use the old customer support chat system simultaneously with the new, having half the employees beta test the new program, reporting any bugs that they find, while the other half utilizes the old system to ensure that the system will not go down entirely if the new system crashes.
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Cost estimation for a project must factor in risk management into its numbers, looking at the probability of a risk occurring, and determining how much extra it would cost in time, money and manpower to fix each particular risk, and making room in the budget based upon those contingency factors. It is better to plan for the possibility of correcting an issue rather than have an issue come up and be unprepared in any one of those three areas.
- Jones, P. (2009, June 08). Risk management explained. Retrieved from http://ezinearticles.com/
- Marks, N. (2011, April 29). Explaining the value of risk management. Retrieved from http://normanmarks.wordpress.com/
