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Everything we do, everyday of our lives, carries an element of risk. Mostly we do not think about these too much, but when we do, we plan to manage those risks and put in place contingency plans in case the risk comes to pass. For example, we might identify that there is a risk that our home might be burgled and our goods stolen. We manage that risk by ensuring we lock doors and windows when we go out and by perhaps putting expensive goods in safes. Our contingency plan is to purchase insurance so that we can afford to replace any goods if they are stolen. This same process of managing risks needs to be in place with projects in the work environment.

A risk is something that may or may not happen, such as being burgled. It is something we can conceive may come to pass but we do not know for certain that it will. Usually, but not always, it is the adverse nature of risks that concern us and it is these that we have to manage. Within the context of a project, there are events that may come to pass which could jeopardise the successful completion of the project. It is the project manager's responsibility to ensure these risks are identified and managed.

The first stage of risk management is to identify the risk, and this is usually done by discussing the project with stakeholders and establishing their concerns. The risks identified are then categorised by type, eg financial risk, business risk etc Having identified and categorised the risk, a log of the risks is established so that they can be clearly understood by all those involved.

Each risk is then assessed as to how likely it is that the risk will come to pass and also how much impact that risk will have on the project if it does come to pass. Usually a simple classification of high, medium or low is used to measure each of these aspects of risk. This allows the project manager to concentrate his efforts on managing the risks for those areas that are most important. So a high risk of something happening that will have a high level of adverse impact on a project will be a higher priority than a risk which is unlikely to happen and if it did would have little adverse impact.

The project manager will identify ways in which to minimise both the likelihood of a risk occurring and the impact it will have. Mostly the risk cannot be entirely mitigated and so a contingency plan is established to deal with the consequences should the risk occur. Such fore planning helps to ensure that when something bad happens, everyone knows what to do and the incident can be managed out swiftly and effectively.

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