[see, many aspects of risk management are covered in more detail in 'The Complete Risk Management package‘].
This is a simple system that provides a good visual idea of where risk lies and reflects the information existing in the Risk Log.
Other mechanisms for showing risk simply may be preferred by the Project Board.
The graphic above shows that we have evaluated a total of 10 risks and ‘graded’ them as to whether their probability of occurrence is High, Medium or Low and whether the impact is also High, Medium or Low. This puts each of the risks into boxes.
So, we have risk no. 8 is ‘High’ on both counts and risks 2 and 7 are judged to be High probability, Medium impact and Medium Probability, High impact respectively.
As an organisation we may decide that the any risk tolerance is contained in the boxes that are ‘green’. Whilst the organisation cannot tolerate risks in the ‘buff’ boxes. Hence, the blue line represents our tolerance boundary.
Exactly where this ‘blue tolerance line’ is set requires agreement with of the Project Manager with the Executive.
Anything in the ‘buff’ coloured boxes should be referred to the Project Board. any changes in the risk information that may cause a risk either to move into the ‘buff’ coloured boxes or to be removed from them should be referred to the Project Board.
Risk is part of project management and not an add on.
As such the project budget must include a sum to cover actions required under risk management.
It is often forgotten that a budget is required for the initial stages of risk assessment and evaluation.
If this is not done well there can be serious problems.
It is up to all concerned to have a commitment to risk management.