Importance Of Risk Assessment In A Project

Risk assessment in projects
Introduction
Risks are a common day to day phenomena and in projects the risks exist too. Assessing risks on a project helps to ensure good flow of the project that will translate to its success. In other words, risk assessment helps in managing the risk. Risk management is a method of controlling the uncertainties in a project, that is, anything that may stop the project from achieving its goals. The aim of risk management is to minimize uncertainties and ensure that the project is delivered on time. Project and risk managers must allocate resources to mitigate those risks with a high probability of occurrence. The gain from the use of these resources should exceed any consequences of inactivity. A successful
The porters five force model is one tool that can be used to assess and manage risks in projects. Supplier power in the model looks at how easy it is for suppliers to raise prices and what factors in the economy might influence that action. Buyer power relates to the ability of the customer base to force the project owners to lower the prices. Competitive rivalry examines the strength of the competition and how they can affect the success of the project. Threat of substitution is the likelihood that the customers will find another source for the product or a different product that delivers the same results as those intended by the project. Threat of new entry involves new competitors and the development of new projects similar to the current one. After examination of these forces, project managers must also make a detailed list of more general financial, strategic, hazard and operations risks (Duff, this risk assessment tool provides the opportunity to examine and evaluate complex interactions of competitors in an industry in a structured way (Porter, 1979). In other words, managers are able to compare their project to those other projects in the industry and are able to improve them (Grundy, 2006).
Risk assessment matrix
Risk assessment matrix is a project management tool that allows a single page – quick view of the probable risks evaluated in terms of the likelihood or probability of the risk and the severity of the consequences. A risk management matrix is the second step in the process of risk management, and it follows the first step of filling up a risk assessment form to determine the potential risks. It helps to further provide the project team with a quick view of the risks and the priority with which each of these risks needs to be handled. Rare Unlikely Possible Likely Almost certain
Severe Medium high Extreme Extreme