Understanding Risk and

Risk Management

RAJAT MADAN
PGDFM - I
Risk
A course of action or inaction taken
under conditions of uncertainty which
exposes the risk taker to possible
loss, or gain to reach a desired
Outcome.

An undesirable situation or
circumstance that is likely to cause a
harm or a loss
 RISK
is
Everywhere
 Risk is all around us
• To live is to risk dying
• To laugh is to risk appearing the
fool
• To hope is to risk despair
• To love is to risk not being loved in
return
 Can
Can
We
We Avoid
Eliminate Risk?
Risk?
Types of Personal Risk
 Physical risk

 Emotional risk

 Financial risk
Why People take Risks
 Profit
• Rewards
• Excitement
• Benefits
• Stupidity
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
Risk tolerance
The amount of risk that is
acceptable to the individual,
organization or client

It may be different from the

individuals working in that
organization
Understanding Risk
 Risk happens as a result of a cause

 If it happens ( Probability)

 it will result in (an impact or

effect).
 Uncertainty, Opportunity,
Risk
Start of Completion
project of the Project

Unfavorable
Risk
Unknown
Or
Uncertainty
Favorable
Opportunity
Risk and Uncertainty
 Risk
The outcome can be described within
established confidence limits
 Uncertainty
Uncommon state of nature characterized
by absence of any information related to
the desired outcome.
Complete absence of information
Nothing is known about the outcome
You can not assign probabilities to uncertainty
 Certainty
All information for making the right
decision is available..
The outcome is predictable with
reasonable certainty
What is Risk Management?
 It is the systematic process of
identifying, analyzing and responding to
project risks. It includes actions to
maximizing the positive events and
minimizing the negative ones.

• The preparation for possible events in

advance rather than responding as they
happen.
What is the Goal of Project
Risk Management?

To forecast the various sources of

risk
to a project, especially those with
the most
serious impact, and seek to reduce
their
Consequences or probabilities.
Why Risk Management is
important?

 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
Risk Management
Processes
1. Risk management planning
2. Risk identification
3. Qualitative risk analysis
4. Quantitative risk analysis
5. Risk response planning
6. Risk monitoring and control
Risk Management
Planning
Deciding how to approach risk
Management for a particular project
 How

 What

 When

 How much time

 How much money

Risk Identification
 What are the things that could
go wrong ?
 What are the possible causes for
things going wrong ?
 If it does go wrong, what could be
the consequences be ?
Qualitative Risk Analysis
Performing analysis of risk and
condition to prioritize the risk that
have major impact on the project.
Quantitative Risk Analysis
Evaluating risks and risk
interaction to
assess the range of possible
project
outcomes
• Measuring the probability and the
consequence of risk and
estimating its
Risk Response
Development
Developing procedures and
techniques
to enhance opportunities and
reduce
threats to the project objectives
Risk Monitoring and
Control
 Monitoring of residual risks and
new risk that may come up
during the project execution
• Execute the risk reduction plan
and
• Evaluate the effectiveness of
the risk responses developed
during the project’ planning
stage
I hope it will help you in your
following examination.

THANK YOU