Project risk can be regarded as a combination of probabilities of an event and its possible outcomes that are achieved within the lifecycle of some project. It covers threats and uncertain circumstances that may have an impact to a project as a whole or to certain results of the project in particular.
Project risks are usually combined into a single factor that negatively affects success of the project. Such a factor should be considered during the planning phase in order to increase the likelihood of successful project completion. Risks are opposite to opportunities which are another factor having a positive impact to the project. So when we talk about project success, we mean estimated probabilities of occurring both negative and positive factors (risks and opportunities).
Project risks are managed under an appropriate process. The risk management process is initiated during the planning phase of a project and performed throughout the entire lifecycle until the project is successfully completed and its product is delivered to the customer. The process has the following steps:
- Identification. It is to identify possible events and circumstances having negative or positive effects to the project.
- Analysis. This step is to analyze identified risks and opportunities and then find ways for mitigating or eliminating the risks and exploiting the opportunities.
- Estimation. It is about estimating every analyzed risk and opportunity in order to develop a system of measurements for further monitoring and control.
- Control. The final step is to track status of every risk and opportunity, measure their impact to the project, and take corrective actions in case some risk or opportunity gets out of control.