A risk management plan is a term used to describe a key project management process. A risk management plan allows project managers to anticipate potential risks and reduce their negative impact. Therefore, a risk management program must be intertwined with organizational strategy. To link them together, risk management leaders must first define the organization's risk appetite, that is, also include risk control oversight, cost-benefit analysis, and financial effects analysis.
In fact, the goal of any risk management program is not to eliminate all risks, but to preserve and increase business value by making intelligent risk decisions. Having well-defined roles, responsibilities and templates in a documented policy is crucial for a comprehensive risk management strategy. Some project managers are more proactive and develop elaborate risk management programs for their projects. In defining the role of the chief risk officer, Forrester Research makes a distinction between transactional CROs that are often found in traditional risk management programs and transformational CROs that adopt an ERM approach.
In addition to focusing on internal and external threats, enterprise risk management (ERM) emphasizes the importance of managing positive risk. The focus on risk management during the COVID-19 pandemic has led many companies not only to reexamine their risk practices, but also to explore new techniques, technologies and processes for managing risk. In addition, the personality and management style of the project manager influence levels of risk preparedness. However, any project involves many risks that, without risk assessment and mitigation strategies, may surprise you and your project management team.
For all members of the risk management team and project stakeholders to efficiently understand the risk assessment matrix, assign an overall risk score by multiplying the impact level score by the risk probability score. Contingency planning includes discovering new risks during project milestones and reevaluating existing risks to see if the conditions for those risks are met. Identifying sources of risk by category is another method for exploring potential risk in a project. As the world continues to face COVID-19, companies and their boards of directors are rethinking their risk management programs.
Banks and insurance companies, for example, have long had large risk departments normally led by a chief risk officer (CRO), a position that is still relatively uncommon outside the financial sector. This approach helps the project team identify known risks, but it can be restrictive and less creative in identifying unknown risks and risks that are not easily found in the WBS.