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Understanding Risk andRisk Management

RAJAT MADAN

PGDFM - I

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RiskA course of action or inaction takenunder conditions of uncertainty which

exposes the risk taker to possibleloss, or gain to reach a desiredOutcome.

An undesirable situation orcircumstance that is likely to cause aharm or a loss

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RISK

isEverywhere

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Risk is all around us

To live is to risk dying

To laugh is to risk appearing thefool

To hope is to risk despair

To love is to risk not being loved inreturn

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Can

WeEliminate

Risk?

Can

We

AvoidRisk?

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Types of Personal Risk Physical risk

Emotional risk

Financial risk

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Why People take Risks Profit

Rewards

Excitement

Benefits

Stupidity

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Risk Guiding Principles Learning and personal growth

requires taking risks

Take only these risks, where you

can handle the loss

Adjust risks that are too much to

gamble with Accept that the price of risk is an

occasional failure

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Risk toleranceThe amount of risk that is

acceptable to the individual,

organization or client

It may be different from theindividuals working in that

organization

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Understanding Risk Risk happens as a result of a cause

If it happens ( Probability)

it will result in (an impact oreffect).

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Uncertainty, Opportunity,

RiskStart of

project

Completion

of the Project

Unknown

Or

Uncertainty

Unfavorable

Risk

Favorable

Opportunity

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Risk and Uncertainty RiskThe outcome can be described withinestablished confidence limits

UncertaintyUncommon state of nature characterizedby absence of any information related tothe desired outcome.Complete absence of information

Nothing is known about the outcomeYou can not assign probabilities to uncertainty CertaintyAll information for making the rightdecision is available..

The outcome is predictable withreasonable certainty

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What is Risk Management? It is the systematic process of

identifying, analyzing and responding to

project risks. It includes actions tomaximizing the positive events andminimizing the negative ones.

The preparation for possible events inadvance rather than responding as theyhappen.

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What is the Goal of Project

Risk Management?

To forecast the various sources ofrisk

to a project, especially those withthe most

serious impact, and seek to reducetheir

Consequences or probabilities.

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y s anagemen simportant?

It offers significant improvement to the

final project

Projects have better chances of success

It improves the project schedule and

cost

Stakeholders and team members will

better understand the nature of the

project

It helps to define the strengths and the

weaknesses of the project

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Risk Management

Processes1. Risk management planning

2. Risk identification

3. Qualitative risk analysis

4. Quantitative risk analysis

5. Risk response planning6. Risk monitoring and control

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Risk ManagementPlanning

Deciding how to approach risk

Management for a particular project

How

What

When How much time

How much money

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Risk Identification

What are the things that could

go wrong ?

What are the possible causes forthings going wrong ?

If it does go wrong, what could bethe consequences be ?

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Qualitative Risk Analysis

Performing analysis of risk and

condition to prioritize the risk that

have major impact on the project.

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Quantitative Risk Analysis

Evaluating risks and riskinteraction to

assess the range of possibleproject

outcomes

Measuring the probability and the

consequence of risk andestimating its

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Risk ResponseDevelopment

Developing procedures andtechniques

to enhance opportunities andreduce

threats to the project objectives

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Risk Monitoring andControl

Monitoring of residual risks andnew risk that may come up

during the project execution Execute the risk reduction planand

Evaluate the effectiveness of

the risk responses developedduring the project planningstage

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I hope it will help you in yourfollowing examination.

THANK YOU