4.4.4 A Practical Risk Management Planning Approach

Though the concept of risk exposure is rich, a simple practical way of doing risk planning is to simply categorize risks and the impacts in a few levels and then use it for prioritization. This approach is used in many organizations. Here we discuss a simple approach used in an organization [58]. In this approach, the probability of a risk occurring is categorized as low, medium, or high. The risk impact can also be classified as low, medium, and high. With these ratings, the following simple method for risk prioritization can be specified:

Table 4.3: Risk management plan for a project.

1. For each risk, rate the probability of its happening as low, medium, or high.
2. For each risk, assess its impact on the project as low, medium, or high.
3. Rank the risks based on the probability and effects on the project; for example, a high-probability, high-impact item will have higher rank than a risk item with a medium probability and high impact. In case of conflict, use judgment.
4. Select the top few risk items for mitigation and tracking.

An example of this approach is given in Table 4.3, which shows the various ratings and the risk mitigation steps [58]. As we can see, the risk management plan, which is essentially this table, can be very brief and focused. For monitoring the risks, one way is to redo risk management planning at milestones, giving more attention to the risks listed in the project plan. During risk monitoring at milestones, reprioritization may occur and mitigation plans for the remainder of the project may change, depending on the current situation and the impact of mitigation steps taken earlier.