Project risk management involves identifying, assessing, quantifying, modeling, and managing risks that may face a project. Complex projects face the challenge of accurately estimating costs and completion times, or even of failing to deliver outcomes as planned. Even the simplest projects always have some element of risk.
Ways are needed to identify and manage risks to prevent project failure. A risk plan is the way to lessen the chance of adverse outcomes.
The project risk management plan is the fundamental instrument for identifying elements and activities of project risk management, establishing risk breakdown structures, quantifying the extent of risk, and planning a mitigation strategy.
The initial step in planning for project risk management is developing the risk register. A risk register is a detailed inventory of things that could go wrong. The risk register provides a plan to follow the project through completion.
Assigning probabilities and consequences to the many items in the risk register is in itself challenging. Contemporary lessons from cognitive psychology and behavioral economics provide insights into how to do so.
Finally, the project manager must consider the best responses to risk including how to avoid, mitigate, plan contingencies, or transfer the risk. There are many ways to re-organize the project and ownership of risk, as well as adjust how the project objective is achieved.
