**8. Risk management**

Risk is an exposure to a situation that is usually associated with unfavorable outcome [10]. Project risk is an uncertain event or conditions that, if occurs, has a positive or a negative effect on at least on one of the project objectives. The possible result of a risk is either loss or gain. If left unaddressed or ignored, specifically, the negative risk, it could potentially interfere with the successful completion of the project and may result in time and cost overruns, or diminished quality of the product or service. Risk is integral to a project as it is a new effort that is associated with unknowns and uncertainties. In general, when you try something new, risk is inevitable.

It is important to make a distinction between a risk and a problem. A problem is identified and known in a current time-frame and it is a certain event. Therefore, it demands an immediate solution. A risk is a probable and a potential event that may occur in future. Even when a risk event takes place, its consequences are uncertain [10]. A risk is also known or unknown event. Risks are problems that have not occurred yet. A risk can become a problem if it is not planned or managed. Occurrence and assessment of a project risk is a combination of an event which is unanticipated or unwanted, likelihood of its occurrence and its impact on project execution. So, identifying, analyzing, and responding are the essential elements of risk planning.

Managing project risk is inevitable and important to project performance. Risk management is the art and science of identifying, analyzing, and responding to risk factors throughout the life of a project and in the best interest of project objectives and metrics for project success. The purpose of risk management is to address risks associated with projects in a systematic manner. If not addressed comprehensively and completely, risks can lead to failure of projects in terms of cost, scope, and project deliverables [11]. The goal of risk management is to maximize the results of positive events and minimize the consequences of negative events. Sources of a risk in a project can be understood from the risk breakdown structure (**Figure 5**).

**Figure 5.** *Risk breakdown structure.*

A formal or informal approach to planning and managing risks within a project depends on the impact of risks on project objectives such as financial targets, timely and successful completion of the project. However, it is critical that we understand the formalized approach to risk management. In taking a more formal approach to this process, the PMBOK defines risk management as consisting of (1) Plan risk management (2) Identify risks, (3) Perform qualitative risk analysis, (4) Perform quantitative risk analysis, (5) Plan risk responses, and (6) Control risks. In this learning module, we will focus on the first five of these processes, leaving (6) control risk to be covered later in the program. Various strategies for managing risk are:

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*DOI: http://dx.doi.org/10.5772/intechopen.93766*

• Accept: absorb the potential damages

• Mitigate: develop protective measures

• Transfer: re-route the risk to someone else

• Avoid: use an entirely different approach

**9. Importance of project teams**

they were being forced to do the work.

between these two goals is minimized [7].

which provides vision and ability to cope with change.

objectives under difficult and demanding work environments [12].

The risk management plan is a complex process, influenced significantly by organizational and project context, the cultural and operational styles of the performing organizations, as well as the individual perceptions and risk tolerances of management and of the other project stakeholders. Understanding management and stakeholder risk tolerances is critical: customers, sponsors and senior management are expected to have different perceptions of what constitute acceptable risks. Risk management plan should address each of the above considerations in a manner, which is relevant to the individual project and its unique environment.

Projects are executed in teams. In general, projects are managed using teams in a work environment that is complex for two reasons: first, each project is unique, and second, conditions for team selection and motivation are often far from ideal [3]. In addition to uniqueness and complexity, unfamiliarity is often described as one of the characteristics of projects and as a result, projects are often associated with change. Consequently, successful project performance requires strong leadership,

Projects, by definition, are unique and are often associated with uncertainties and unknowns. It is reasonable to assume that in project management, it is not if the plans will change, it is when, what will change, and by how much. If anything is constant in a project, it is the change. When changes are significant in a project, which is often the case, leadership role assumes greater importance. Leadership has its efforts directed towards convincing people about the need to change, aligning them to a new direction, and motivating people to work together to achieve project

Motivating the project team involves getting the team members to do the tasks that need to be done, not because they have to do them but because they understand the value of their work to the overall success of the project and they want to do them. If people want to do what we need to have them do, their commitment is bound to be greater, and the job is likely to be accomplished much better than if

Project managers must understand the personal aspirations of project team members and support them. The project manager's leadership skills play an important role in motivating and guiding the project team to grow as professionals while accomplishing project goals at the same time. In essence, project managers should ensure that both personal and project goals are accomplished and that the conflict

The project manager's job is to get others to do what the project manager needs them to do, not because they have to but because they want to. Empowerment means providing freedom to people (not control) so that they can successfully do what they want to do. This is very different from making them do what you want them to do. Empowerment makes sense on projects. Projects typically employ a multidisciplinary approach, requiring subject matter experts from different

#### *Project Management Concepts DOI: http://dx.doi.org/10.5772/intechopen.93766*

*Operations Management - Emerging Trend in the Digital Era*

are the essential elements of risk planning.

It is important to make a distinction between a risk and a problem. A problem is identified and known in a current time-frame and it is a certain event. Therefore, it demands an immediate solution. A risk is a probable and a potential event that may occur in future. Even when a risk event takes place, its consequences are uncertain [10]. A risk is also known or unknown event. Risks are problems that have not occurred yet. A risk can become a problem if it is not planned or managed. Occurrence and assessment of a project risk is a combination of an event which is unanticipated or unwanted, likelihood of its occurrence and its impact on project execution. So, identifying, analyzing, and responding

Managing project risk is inevitable and important to project performance. Risk management is the art and science of identifying, analyzing, and responding to risk factors throughout the life of a project and in the best interest of project objectives and metrics for project success. The purpose of risk management is to address risks associated with projects in a systematic manner. If not addressed comprehensively and completely, risks can lead to failure of projects in terms of cost, scope, and project deliverables [11]. The goal of risk management is to maximize the results of positive events and minimize the consequences of negative events. Sources of a risk in a project can be understood from the risk breakdown structure (**Figure 5**).

A formal or informal approach to planning and managing risks within a project depends on the impact of risks on project objectives such as financial targets, timely and successful completion of the project. However, it is critical that we understand the formalized approach to risk management. In taking a more formal approach to this process, the PMBOK defines risk management as consisting of (1) Plan risk management (2) Identify risks, (3) Perform qualitative risk analysis, (4) Perform quantitative risk analysis, (5) Plan risk responses, and (6) Control risks. In this learning module, we will focus on the first five of these processes, leaving (6) control risk to be covered later in the program. Various strategies for

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**Figure 5.**

*Risk breakdown structure.*

managing risk are:


The risk management plan is a complex process, influenced significantly by organizational and project context, the cultural and operational styles of the performing organizations, as well as the individual perceptions and risk tolerances of management and of the other project stakeholders. Understanding management and stakeholder risk tolerances is critical: customers, sponsors and senior management are expected to have different perceptions of what constitute acceptable risks. Risk management plan should address each of the above considerations in a manner, which is relevant to the individual project and its unique environment.
