A Risk Management Plan is a document that a project manager prepares to foresee risks, estimate impacts, and define responses to issues. It also contains a risk assessment matrix.
A risk is "an uncertain event or condition that, if it occurs, has a positive or negative effect on a project's objectives." Risk is inherent with any project, and project managers should assess risks continually and develop plans to address them. The risk management plan contains an analysis of likely risks with both high and low impact, as well as mitigation strategies to help the project avoid being derailed should common problems arise. Risk management plans should be periodically reviewed by the project team to avoid having the analysis become stale and not reflective of actual potential project risks.
Most critically, risk management plans include a risk strategy. Broadly, there are four potential strategies, with numerous variations. Projects may choose to:
- Avoid risk — Change plans to circumvent the problem;
- Control/Mitigate risk; — Reduces impact or likelihood (or both) through intermediate steps;
- Accept risk — Take the chance of negative impact (or auto-insurance), eventually budget the cost (e.g. via a contingency budget line);
- Transfer risk — Outsource risk (or a portion of the risk - Share risk) to third party/ies that can manage the outcome. This is done e.g. financially through insurance contracts or hedging transactions, or operationally through outsourcing an activity.
(Mnemonic: SARA for Share Avoid Reduce Accept, or A-CAT for "Avoid, Control, Accept, or Transfer")
Risk management plans often include matrices.
Famous quotes containing the words risk, management and/or plan:
“If you think it will only add one sprig to the wreath the country twines to bind the brows of my hero, I will run the risk of being sneered at by those who criticize female productions of all kinds. ...Though a female, I was born a patriot.”
—Annie Boudinot Stockton (1736–1801)
“No officer should be required or permitted to take part in the management of political organizations, caucuses, conventions, or election campaigns. Their right to vote and to express their views on public questions, either orally or through the press, is not denied, provided it does not interfere with the discharge of their official duties. No assessment for political purposes on officers or subordinates should be allowed.”
—Rutherford Birchard Hayes (1822–1893)
“We saw the machinery where murderers are now executed. Seven have been executed. The plan is better than the old one. It is quietly done. Only a few, at the most about thirty or forty, can witness [an execution]. It excites nobody outside of the list permitted to attend. I think the time for capital punishment has passed. I would abolish it. But while it lasts this is the best mode.”
—Rutherford Birchard Hayes (1822–1893)