Are You Sure Its a Risk?

Are You Sure It s a Risk?

caution

For those planning on taking the PMP exam, note that risk management planning and risk response planning are two distinct activities.

Before we end our review of managing project risks, it is worth mentioning that one common problem associated with project risk management is terminology and the proper labeling of risks. This is more of an academic issue, and generally the subtle differences are not key factors on projects. To make sure you avoid problems here, let's quickly review the definition of terms closely related to project risk and clarify those distinctions in Table 14.6

Table 14.6. Summary of Risk-related Terms

Term	Definition	Notes
Risk	An uncertain event that could negatively impact the project critical success factors, if it occurs	A threat Probability of occurrence must be between 0% and 100%
Issue	An active problem that could impact the project critical success factors	A risk event that has actually occurred
Constraint	A limit that must be planned around	Factual Constraints can introduce other risks
Assumption	Factor considered to be true, real, or certain	Assumptions can include accepted risks Assumptions can introduce other risks
Dependency	An external event that must occur for the project to accomplish its objectives	Identified during planning along with risks, constraints, and assumptions
Defect	A discrepancy between what is (actual) and what should be (expected) Mentioned here because planning and overall project management defects can become project risks if not identified and corrected	Detailed planning efforts are important here The key source for many unknown risks

The Absolute Minimum

At this point, you should have a solid understanding of the following:

• The essence of project management is "risk management."
• The level of risk management should be consistent with the size, importance, and risk level of the project.
• Managing risks is an integral part of project planning.
• Risk management is a continuous, iterative process throughout the project lifecycle.
• Project risks need to be identified, recorded, tracked, resolved, and communicated.
• Risk events that actually occur become project issues.
• The five risk response strategies include acceptance, avoidance, mitigation, transfer, and monitor.
• The best risk profiles are ones that are specific to your industry, organization, and project type.
• Unidentified or unacknowledged project planning defects are the most popular source of unknown risks.
• The best ways to control risk are through solid project management, effective project planning, and a relentless desire to protect the project.

Figure 14.1 summarizes the main points we reviewed in this chapter.

Figure 14.1. Overview of managing project risks.