Risk Management

Isorisk Chart

Risk Management is the focused management of risks to the acheivement of an organizations operational objectives, and involves the following four activities:

  1. Risk Identification,
  2. Risk Prioritization,
  3. Risk Mitigation, and
  4. Risk Tracking/Reporting.

Effective Risk Management implementation is continuous and iterative, requiring a on-going process of risk identification, prioritization, mitigation and reporting.


Risk Identification

The objective of Risk Identification is to identify all possible risks to the project in a timely and proactive manner. Risk Identification methods should have the following attributes:

  1. they should examine all areas of the project in a systematic manner,
  2. they should be proactive rather than reactive, and
  3. they should synthesize risk information from all available sources of risk information.


Risk Prioritization

The objective of Risk Prioritization is to prioritize the identified risks for mitigation. Both qualitative and quantitative methods can be used to categorize the risks as to their relative severity and potential impact on the project. To effectively compare identified risks, and to provide a proactive perspective, the risk prioritization method should consider the following factors:

  1. the probability of the risk occurring,
  2. the consequence of the risk, and
  3. the cost and resources required to mitigate the risk.

The Risk Factor Product prioritization methodology consists of identifying project risks, assessing the probability of each risk's occurrence and the consequence of each risk's occurrence, and prioritization of the identified risks by calculating the Risk Factor (RF) Product for each risk, and mitigation of the highest risks to resolution.

Once the probability of failure (Pf) and consequence of failure (Cf) factors have been determined, they can be plotted on an isorisk contour chart to graphically portray their relative importance and impact on the project as demonstrated in the figure, below.

Note that the location of Risk Items on the Isorisk Contour Chart (shown above) provides insight as to the most cost effective manner by which they may be mitigated. Risk A is best mitigated by a strategy that reduces the criticality of the risks occurrence, while Risk B is best mitigated by a strategy that reduces the probability of the risks occurrence.

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