Risks are the effects of uncertainty on the objectives of a given undertaking. It also involves the possibility of incurring some danger or losses during the implementation of a certain activity. Risk activities involves the actions that can be taken to control, manage or avoid the occurrences of risks in a given environment.
In Lehman (2007), there is a detailed account of several types of risks in different business environments. Risks covered include risks incurred in the mortgage industry and those that occur in a project implementation environment (technology projects). Risks in the mortgage industry include:
i. Interest-rate risks
ii. Default risk
However in technology projects, adequate risk analysis and mitigation activities have to be performed. Project managers should use a structured process to assess the risk of a project for it to be mitigated and project failure avoided.
According to CC Pace, there are two major areas of project risk management namely:
Risk analysis -consists of risk assessment and risk reduction. Risk assessment involves determining what could cause the project to fail and the consequences that may come alongside it. Risk reduction involves the processes that can be done in order to ensure that the chances of a risk occurring are lowered.
Risk control – involves tracking and reporting of the risks. Risk tracking here involves monitoring the risks and looking for any new risks that may occur whereas risk reporting involves communicating the results of risk analysis and risk tracking.
According to Thomsett, there are five generic types of risks that projects are likely to face. They include:
Project risk – these include factors that are likely to cause a project to fail
Business risk – This category involves the impacts on or exposures t the organization if a project fails.
Benefit realization risk – This includes the factors that are likely to cause the business not to get the project benefits even if the project implementation is successful.
Support risk – These include factors that could cause the organization to use more cost in order to support whichever project they are implementing.
Personal risk – These are the impacts that an individual is likely to get in his/her life if the project fails or succeeds.
Bill Lehman (2007) The Pace of the future: Project Risk Management.