Project risk is defined as an uncertain event or condition that, if it occurs, has a positive or negative effect on one or more project objectives such as scope, schedule, cost, and quality.
The aim of project risk management is to identify and minimize the impact that risks have on a project. The challenge with risk management of any kind is that risks are uncertain events. In the management of projects, and the subsequent operations of the
project’s product, organizations attempt to reduce their exposure to these uncertain events through risk management. This is usually done through a formal management process which consists of the following steps: plan risk management, identify risks, perform qualitative risk analysis, perform quantitative risk analysis, plan risk responses, and control risks (Project Management Institute, 2009).
There is some debate as to the origins of the word risk, but it is commonly accepted that the ancient Greek word “ριζα” (pronounced “riza”) meaning “root, stone, cut of the firm land,” made its way to the Latin word riscus, which means “cliff.” The original Greek word was a metaphor for “difficulty to avoid in the sea,” and ancient mariners, picking their way through the numerous islands in the Mediterranean, Aegean, and Tyrrhenian seas, were quite familiar with the meaning and impact of the word. The word was later borrowed by the Italians as the word rischo and rischio, then by the French as risque, and on to Spanish as riesgo. In the 16th century, the word was adopted by middle-high-German as Rysigomeaning “to dare; to undertake; to hope for economic success.” It is believed that the Anglicized form comes from either the French or Italian words (Handzy, 2012).
Project risk management is a well-defined field of study, and numerous books and papers have been written about it. Risk analysis is broadly split into two areas (i.e., qualitative risk analysis, and quantitative risk analysis). Of these two, qualitative risk analysis is most common, and on many projects, it is the only risk analysis that is done. Quantitative risk assessments (QRAs) on projects are less common, often because insufficient data about the project are available to perform the assessment. In some cases, the effort required to perform the QRA may be too expensive relative to the total project value, and the project team may decide against it.
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