Whenever any project is planned, the plan should also incorporate a risk management plan because it is also a very important part of any project. Often, this step is often overlooked at the project planning stage. In case, everything works out fine at the time of implementation of the project such an approach does not create any problem. But, incase any problem arises, even a small issue could turn into an emergency as there is no well-developed plan is available to tackle such a situation.

There would be different types of Risk Management depending on the situation. Risk management that calculates credit worthiness of a loan would differ from risk management that plans for adverse situations or disasters. Other types of risk management would include calculation of the warranty period of a product, calculation of insurance rate etc. We would be discussing about risk management keeping planning for adverse events as our focus.

Before we start the procedure of risk management planning, we should be clear about how risk management actually works. We should understand that risk is the effect of any event, whether positive or negative. The value of risk could be calculated if we know the probability of any event happening and the impact of that event. To analyze the risk factor, we should consider another two factors of mitigation and contingency into our final calculation for exposure. Exposure is the amount of risk that could not be avoided in case such an event occurs. Exposure might also be referred to as threat, liability, severity or by many other names. But, all of them would be meaning the same thing. On the basis of this value, farther planning activity regarding risk management could be taken up. We will have to carry out a cost benefit analysis to find out whether the risk of implementing change would be higher or lower than the risk of not implementing the change.

The different steps involved in risk management is being enumerated below:

1.Define the scope of your project.

2.Get inputs from others regarding different risk factors involved in the project.

3.Identify the consequence of each risk factor. You will have to find out what would happen in case any of the risk factors actually occurs.

4.You will find some of the issues as quite irrelevant as far as the project is concerned. These factors are to be identified and to be removed from consideration.

5.After going through all these steps, it would be possible for you to list out the different risk factors involved.

6.After the risk factors have been identified, probability factor has to be assigned to each of them.

7.In this step, the impact of each risk factor is to be calculated.

8.Risks are then to be ranked as High, Medium and Low by their probable impact and the total risk is to be calculated.

9.On the basis of all the calculations of risk, a mitigation plan has to be developed for each of he risk factors. Along with mitigation plan, a contingency plan also has to be developed.

10.The risk management plan should be reviewed periodically and is to be modified according to the past experience.