DTU ProjectLab - User contributions [en-gb]

Talk:Risk Profile in General Contracting

2015-09-29T13:48:22Z

Ch.filis:

==s141931, reviewer 1==
* Obviously, the article is missing and only the summary is present. It is therefore difficult and pointless to make an evaluation. However, it seems you have an idea about correct 'wiki' formatting, and the topic itself sounds to be relevant and promising, good luck in executing!

KB1991, reviewer 2:
* What there is written so far is good.
* Good introduction that describes the topic briefly, but the last part has been written twice.
* The structure looks fine both regards to the formatting and the red threat.
* Would have been nice to read more of the article ☺

==Review 2: s150905==

The idea behind this article seem really interesting, but most of the article itself is missing
* The sketched structure appears to be just a draft of the final one, and if the one I see now is the final one I think is not satisfactory for a good work
* The lack of text and imagines make impossible to me to do some actual consideration about the work

== '''Reviewer 3, 150477''' ==

The article has been accessed the 22/09/2015 at 21 p.m.

* The abstract sounds interesting and your parts constructed in a logical way.
* The last part has been written twice, be careful!
* Relevant topic with Risks in Construction.
* Impatient to read your article (i am civil engineering student ;-)
* Difficult actually to evaluate your article properly.

==Reviewer 3 (s141573)==
The topic is really interesting and it also seems very actual in construction projects.

I like the introduction which I find clear and well structured, keep attention a part is repeated twice!

However, it's hard to give a feedback since most part of the article is missing.

Looking forward for the final article!

=='''Reviewer 1,s141709'''==

'''Formal Aspects'''
* Good structure
* Probably need for more images to help the reader

'''Content Aspects'''
* Nice and understandable flow. I liked the general introduction and then the emphasis on your subject
* No grammar or syntax mistakes
* The advantages and disadvantages section would go better in the part where you focus on (risk profile in general contracting)
* The main part of your article should be more extensive and analytical to help the reader understand more of this method.

Talk:Risk Profile in General Contracting

2015-09-29T13:44:09Z

Ch.filis:

Talk:Risk Profile in General Contracting

2015-09-29T13:39:10Z

Ch.filis:

Project Risk Management and Project Risk Management Processes

2015-09-27T19:50:49Z

Ch.filis: /* The Scope of Project Risk Management */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref name="Georges Dionne (2013)">Risk Management:History, Definition and Critique by Georges Dionne (2013)</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref name="Georges Dionne (2013)"></ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref name="Dr David Hillson">Project Risk Management,Future Developments by Dr David Hillson(2011)</ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project<ref name="Uncertainties">Dr. Oddmund Granli (2009), Project risk/uncertainty management</ref>, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project<ref name="Uncertainty Management">Agnar Johansen (2014), Uncertainty Management</ref>. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats<ref name="Opportunity/Threats Management">Eric Mcconnell (2010), Opportunity/Threats Management</ref>
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them involves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework<ref name="Project Risk Management"> Project Risk Management by Chapman-Ward 2nd edition</ref> which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management(PRM)<ref name="Project Risk Management"></ref> is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to<ref name="Techniques for managing risks"> Techniques for managing risks, Keith Anderson-Calvin Hastings-Lester Sherman (2012)</ref> :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors<ref name="Risk Project Management"> Project Risk Management, Methodology and Applications by Marco de Santis (2014)</ref> :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits<ref name="Benefits"> Benefits of Risk Management in Projects, Programs and Portfolios Kenneth K.(2008)</ref> in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decisions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility within a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements<ref name="Risk Project Management"></ref> illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification<ref name="Risk Identification"> Risk Identification in Project Management by Donna Ritter (2014)</ref> is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan<ref name="Processes"> Processes step by step in Project Management.David Hillson (2013)</ref> needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress<ref name="Processes"></ref> of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating<ref name="Processes"></ref> the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen risks or problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. For this purpose, project managers and project teams need to deal with these risks in a direct and effective way in order to ensure the final performance of the project. '''Root Cause Analysis'''<ref name="Root"> Root Cause Analysis and Corrective Actions by Gareth Byatt (2011)</ref> is a critical process which identifies how, what and why an event occurred so that actions can be taken to prevent future occurrences. Unfortunately, the actions taken by the project teams in order to solve a problem often only address the problem itself and not the underlying causes. As a result, the source of the risks or problems is not solved which implies that the risks or problems will reoccur during the project's life cycle or in the future. Hence, the effective implementation of a root cause analysis requires '''Corrective Actions''' to be taken which aim to deal exclusively with the causes of the problems or risks. The corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations<ref name="Limitations"> Limitations, Risk Project Managemet by Tara Dugan(2010)</ref>. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it requires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

*'''Subjective Judgement:''' People perceive things in a different way, in the sense that everyone can see things from his perspective. Specifically, in projects some people identify some factors as risks, while others can see opportunities behind those factors.

*'''Update risks in real time:''' Risks are evolving in time, due to the fact that projects take place under different circumstances every time. However, managers fail to update and revaluate these risks periodically and the project's performance can be negatively affected.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-27T18:34:32Z

Ch.filis: /* Uncertainty in Project Management */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref name="Georges Dionne (2013)">Risk Management:History, Definition and Critique by Georges Dionne (2013)</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref name="Georges Dionne (2013)"></ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref name="Dr David Hillson">Project Risk Management,Future Developments by Dr David Hillson(2011)</ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project<ref name="Uncertainties">Dr. Oddmund Granli (2009), Project risk/uncertainty management</ref>, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project<ref name="Uncertainty Management">Agnar Johansen (2014), Uncertainty Management</ref>. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats<ref name="Opportunity/Threats Management">Eric Mcconnell (2010), Opportunity/Threats Management</ref>
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them involves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework<ref name="Project Risk Management"> Project Risk Management by Chapman-Ward 2nd edition</ref> which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management(PRM)<ref name="Project Risk Management"></ref> is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to<ref name="Techniques for managing risks"> Techniques for managing risks, Keith Anderson-Calvin Hastings-Lester Sherman (2012)</ref> :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors<ref name="Risk Project Management"> Project Risk Management, Methodology and Applications by Marco de Santis (2014)</ref> :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits<ref name="Benefits"> Benefits of Risk Management in Projects, Programms and Portfolios Kenneth K.(2008)</ref> in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements<ref name="Risk Project Management"></ref> illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification<ref name="Risk Identification"> Risk Identification in Project Management by Donna Ritter (2014)</ref> is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan<ref name="Processes"> Processes step by step in Project Management.David Hillson (2013)</ref> needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress<ref name="Processes"></ref> of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating<ref name="Processes"></ref> the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen risks or problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. For this purpose, project managers and project teams need to deal with these risks in a direct and effective way in order to ensure the final performance of the project. '''Root Cause Analysis'''<ref name="Root"> Root Cause Analysis and Corrective Actions by Gareth Byatt (2011)</ref> is a critical process which identifies how, what and why an event occurred so that actions can be taken to prevent future occurrences. Unfortunately, the actions taken by the project teams in order to solve a problem often only address the problem itself and not the underlying causes. As a result, the source of the risks or problems is not solved which implies that the risks or problems will reoccur during the project's life cycle or in the future. Hence, the effective implementation of a root cause analysis requires '''Corrective Actions''' to be taken which aim to deal exclusively with the causes of the problems or risks. The corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations<ref name="Limitations"> Limitations, Risk Project Managemet by Tara Dugan(2010)</ref>. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it requires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

*'''Subjective Judgement:''' People perceive things in a different way, in the sense that everyone can see things from his perspective. Specifically, in projects some people identify some factors as risks, while others can see opportunities behind those factors.

*'''Update risks in real time:''' Risks are evolving in time, due to the fact that projects take place under different circumstances every time. However, managers fail to update and revaluate these risks periodically and the project's performance can be negatively affected.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-27T17:12:47Z

Ch.filis: /* Root Cause Analysis and Corrective Actions */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref name="Georges Dionne (2013)">Risk Management:History, Definition and Critique by Georges Dionne (2013)</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref name="Georges Dionne (2013)"></ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref name="Dr David Hillson">Project Risk Management,Future Developments by Dr David Hillson(2011)</ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project<ref name="Uncertainties">Dr. Oddmund Granli (2009), Project risk/uncertainty management</ref>, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project<ref name="Uncertainty Management">Agnar Johansen (2014), Uncertainty Management</ref>. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats<ref name="Opportunity/Threats Management">Eric Mcconnell (2010), Opportunity/Threats Management</ref>
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework<ref name="Project Risk Management"> Project Risk Management by Chapman-Ward 2nd edition</ref> which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management(PRM)<ref name="Project Risk Management"></ref> is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to<ref name="Techniques for managing risks"> Techniques for managing risks, Keith Anderson-Calvin Hastings-Lester Sherman (2012)</ref> :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors<ref name="Risk Project Management"> Project Risk Management, Methodology and Applications by Marco de Santis (2014)</ref> :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits<ref name="Benefits"> Benefits of Risk Management in Projects, Programms and Portfolios Kenneth K.(2008)</ref> in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements<ref name="Risk Project Management"></ref> illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification<ref name="Risk Identification"> Risk Identification in Project Management by Donna Ritter (2014)</ref> is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan<ref name="Processes"> Processes step by step in Project Management.David Hillson (2013)</ref> needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress<ref name="Processes"></ref> of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating<ref name="Processes"></ref> the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen risks or problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. For this purpose, project managers and project teams need to deal with these risks in a direct and effective way in order to ensure the final performance of the project. '''Root Cause Analysis'''<ref name="Root"> Root Cause Analysis and Corrective Actions by Gareth Byatt (2011)</ref> is a critical process which identifies how, what and why an event occurred so that actions can be taken to prevent future occurrences. Unfortunately, the actions taken by the project teams in order to solve a problem often only address the problem itself and not the underlying causes. As a result, the source of the risks or problems is not solved which implies that the risks or problems will reoccur during the project's life cycle or in the future. Hence, the effective implementation of a root cause analysis requires '''Corrective Actions''' to be taken which aim to deal exclusively with the causes of the problems or risks. The corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations<ref name="Limitations"> Limitations, Risk Project Managemet by Tara Dugan(2010)</ref>. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it requires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

*'''Subjective Judgement:''' People perceive things in a different way, in the sense that everyone can see things from his perspective. Specifically, in projects some people identify some factors as risks, while others can see opportunities behind those factors.

*'''Update risks in real time:''' Risks are evolving in time, due to the fact that projects take place under different circumstances every time. However, managers fail to update and revaluate these risks periodically and the project's performance can be negatively affected.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-27T16:52:22Z

Ch.filis: /* Root Cause Analysis and Corrective Actions */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref name="Georges Dionne (2013)">Risk Management:History, Definition and Critique by Georges Dionne (2013)</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref name="Georges Dionne (2013)"></ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref name="Dr David Hillson">Project Risk Management,Future Developments by Dr David Hillson(2011)</ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project<ref name="Uncertainties">Dr. Oddmund Granli (2009), Project risk/uncertainty management</ref>, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project<ref name="Uncertainty Management">Agnar Johansen (2014), Uncertainty Management</ref>. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats<ref name="Opportunity/Threats Management">Eric Mcconnell (2010), Opportunity/Threats Management</ref>
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework<ref name="Project Risk Management"> Project Risk Management by Chapman-Ward 2nd edition</ref> which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management(PRM)<ref name="Project Risk Management"></ref> is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to<ref name="Techniques for managing risks"> Techniques for managing risks, Keith Anderson-Calvin Hastings-Lester Sherman (2012)</ref> :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors<ref name="Risk Project Management"> Project Risk Management, Methodology and Applications by Marco de Santis (2014)</ref> :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits<ref name="Benefits"> Benefits of Risk Management in Projects, Programms and Portfolios Kenneth K.(2008)</ref> in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements<ref name="Risk Project Management"></ref> illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification<ref name="Risk Identification"> Risk Identification in Project Management by Donna Ritter (2014)</ref> is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan<ref name="Processes"> Processes step by step in Project Management.David Hillson (2013)</ref> needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress<ref name="Processes"></ref> of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating<ref name="Processes"></ref> the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen risks or problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. For this purpose, project managers and project teams need to deal with these risks in a direct and effective way in order to ensure the final performance of the project.'''Root Cause Analysis'''<ref name="Root"> Root Cause Analysis and Corrective Actions by Gareth Byatt (2011)</ref> is a critical process which identifies how,what and why an event occurred so that actions can be taken to prevent future occurrences. Unfortunately, the actions taken by the project teams in order to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations<ref name="Limitations"> Limitations, Risk Project Managemet by Tara Dugan(2010)</ref>. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it requires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

*'''Subjective Judgement:''' People perceive things in a different way, in the sense that everyone can see things from his perspective. Specifically, in projects some people identify some factors as risks, while others can see opportunities behind those factors.

*'''Update risks in real time:''' Risks are evolving in time, due to the fact that projects take place under different circumstances every time. However, managers fail to update and revaluate these risks periodically and the project's performance can be negatively affected.

= References =
<references/>

Talk:Project Risk Management and Project Risk Management Processes

2015-09-27T16:11:14Z

Ch.filis: /* Reviewer 2: s141573 */

Josefs says: Hello, I like your idea and topic. But I suggest to chose a focus area, otherwise, your article may end up a bit generic, and not as interesting as it could be because it is too broad. E.g. the root cause areas, or the process or...

==Review 1: s150905==

Hi, the article appears complete, with a clear topic and its satisfied all the characteristic of the Wiki-article.

Formal aspects
* The part dedicated for the description of the method is clear but i think there is something missing to make the reader more confident with the topic
* It presents a little lack of punctuation and a few spelling errors
* I like the use of the images that help the reader understand better each part

'''Answer:'''
*Spelling and grammar errors have been corrected after your comment.

Content
* The article is less than the required words and, while you read it, you feel like there is something missing.
* In my opinion the whole article appear a little generic
* The link between all the parties of the article are not so clearly liked.
* the references used appear to be really focused on the topic

'''Answer:'''My answer refers to the first 3 bullets
*The artcle starts with the history of the methodoly and then presents that in every project there are uncertainties(as an introduction to the purpose of this methodology). Afterwards, the sources of these uncertainties are explained and then follows the methodology of project risk management( why and how is it applied ). After the extensive analysis of the methodology and its processes, i decided to present a more "focused" process that could be used in project risk management that could enhance the effectiveness of the methodology. Moreover, a model that explains in detail how this proposed process could help is also presented.My point is that all the parts are built on each other and every part is connected to each other. To sum up i agree that the methodology itself is general because it is not a so "expertised" method and because it is not linked with a specific type of project management(For example project risk management in constructions projects). However, the article explains the methodology in an extensive way and in the end proposes a more specific process to give the reader the opportunity to understand the dynamics and the importance of this methodology.
Thank you very much for your comments and good luck with your article!!!

== Reviewer 3: s142911==

*Nice! Seems like you are already close to finish it. I like the structure.

*The text has a nice flow. The writing style is good as well.

*You are following properly the “methods” structure, maybe I would discuss a bit more the limitation section.

*I would reduce a bit the length of the overview. I think it should give a quick idea of what the article is about.

* Regarding figures: do you think figure 1 and 2 are necessary? If so, I would put it on the side rather than below the text.

*Before using an acronym, be sure to have already indicated it after its full name. i.e. Project Risk Management(PRM).

*Regarding the source, remember to add them the figures. In addition, remember to add a brief summary of each source, and write them following a common structure: i.e. Author, year, Title, editors.

*Since project risk management is a wide topic, you could add some aspect or go more in depth in aspect which are already in it.

'''Answer:'''
* 2 more limitations of the methodology have been added after your comment.
* The figures 1 and 2 are necessary because they present useful information as far as important milestones of the methodology and the areas of the uncertainties in projects are concerned. Moreover if i place them on the side, the overall image of the section will be influenced due to the size of the pictures.
* I corrected the acronym as you mentioned
* I agree that the topic is wide and thats why i decided to focus on the root cause analysis and the corrective actions (with an extra problem solving model), in order to present a specific method to enhance the effectiveness of the project risk management.

Thank you very much for your review. Good luck to you too!!!

== Reviewer 2: s141573==
Good introduction of the theory and how you created the context of the article.

I furthermore found a good flow of concepts all along the reading.

However sometimes it appears generic, I’d suggest to go more directly to the point and have always in mind to connect the theory to the project management.

The section root causes appears disconnected from the rest of the text, maybe explain better the impact of non- identified risks and highlight the importance of corrective actions.

Good luck with the course!

'''Answer:'''

As i explained before, the method has been explained in a detailed way in the article but however, the method itself is not an "expertised" one(is a method that can be implemented in every kind of project). Moreover, the methodology is totally connected with the project management as the article describes how(processes section) the method is implemented in projects. As far as the section of root cause analysis is concerned, it is also tottaly connected with the rest of the article in the sense that is a more specific approach in order to enhance the effectiveness of the risk management by trying to focus not only on the possible risks but on the causes of those risks. I made some changes after your comments in order to present it in a more clear way.

Thank your for the review and good luck with the course!!!

Talk:Project Risk Management and Project Risk Management Processes

2015-09-27T15:30:20Z

Ch.filis: /* Reviewer 2: s141573 */

Josefs says: Hello, I like your idea and topic. But I suggest to chose a focus area, otherwise, your article may end up a bit generic, and not as interesting as it could be because it is too broad. E.g. the root cause areas, or the process or...

==Review 1: s150905==

Hi, the article appears complete, with a clear topic and its satisfied all the characteristic of the Wiki-article.

Formal aspects
* The part dedicated for the description of the method is clear but i think there is something missing to make the reader more confident with the topic
* It presents a little lack of punctuation and a few spelling errors
* I like the use of the images that help the reader understand better each part

'''Answer:'''
*Spelling and grammar errors have been corrected after your comment.

Content
* The article is less than the required words and, while you read it, you feel like there is something missing.
* In my opinion the whole article appear a little generic
* The link between all the parties of the article are not so clearly liked.
* the references used appear to be really focused on the topic

'''Answer:'''My answer refers to the first 3 bullets
*The artcle starts with the history of the methodoly and then presents that in every project there are uncertainties(as an introduction to the purpose of this methodology). Afterwards, the sources of these uncertainties are explained and then follows the methodology of project risk management( why and how is it applied ). After the extensive analysis of the methodology and its processes, i decided to present a more "focused" process that could be used in project risk management that could enhance the effectiveness of the methodology. Moreover, a model that explains in detail how this proposed process could help is also presented.My point is that all the parts are built on each other and every part is connected to each other. To sum up i agree that the methodology itself is general because it is not a so "expertised" method and because it is not linked with a specific type of project management(For example project risk management in constructions projects). However, the article explains the methodology in an extensive way and in the end proposes a more specific process to give the reader the opportunity to understand the dynamics and the importance of this methodology.
Thank you very much for your comments and good luck with your article!!!

== Reviewer 3: s142911==

*Nice! Seems like you are already close to finish it. I like the structure.

*The text has a nice flow. The writing style is good as well.

*You are following properly the “methods” structure, maybe I would discuss a bit more the limitation section.

*I would reduce a bit the length of the overview. I think it should give a quick idea of what the article is about.

* Regarding figures: do you think figure 1 and 2 are necessary? If so, I would put it on the side rather than below the text.

*Before using an acronym, be sure to have already indicated it after its full name. i.e. Project Risk Management(PRM).

*Regarding the source, remember to add them the figures. In addition, remember to add a brief summary of each source, and write them following a common structure: i.e. Author, year, Title, editors.

*Since project risk management is a wide topic, you could add some aspect or go more in depth in aspect which are already in it.

'''Answer:'''
* 2 more limitations of the methodology have been added after your comment.
* The figures 1 and 2 are necessary because they present useful information as far as important milestones of the methodology and the areas of the uncertainties in projects are concerned. Moreover if i place them on the side, the overall image of the section will be influenced due to the size of the pictures.
* I corrected the acronym as you mentioned
* I agree that the topic is wide and thats why i decided to focus on the root cause analysis and the corrective actions (with an extra problem solving model), in order to present a specific method to enhance the effectiveness of the project risk management.

Thank you very much for your review. Good luck to you too!!!

== Reviewer 2: s141573==
Good introduction of the theory and how you created the context of the article.

I furthermore found a good flow of concepts all along the reading.

However sometimes it appears generic, I’d suggest to go more directly to the point and have always in mind to connect the theory to the project management.

The section root causes appears disconnected from the rest of the text, maybe explain better the impact of non- identified risks and highlight the importance of corrective actions.

Good luck with the course!

'''Answer:'''
As i explained before, the project risk management methodology

Talk:Project Risk Management and Project Risk Management Processes

2015-09-26T14:37:14Z

Ch.filis: /* Review 1: s150905 */

Talk:Project Risk Management and Project Risk Management Processes

2015-09-26T14:36:24Z

Ch.filis: /* Reviewer 3: s142911 */

Josefs says: Hello, I like your idea and topic. But I suggest to chose a focus area, otherwise, your article may end up a bit generic, and not as interesting as it could be because it is too broad. E.g. the root cause areas, or the process or...

==Review 1: s150905==

Hi, the article appears complete, with a clear topic and its satisfied all the characteristic of the Wiki-article.

Formal aspects
* The part dedicated for the description of the method is clear but i think there is something missing to make the reader more confident with the topic
* It presents a little lack of punctuation and a few spelling errors
* I like the use of the images that help the reader understand better each part

'''Answer:'''
*Spelling and grammar errors have been corrected after your comment.

Content
* The article is less than the required words and, while you read it, you feel like there is something missing.
* In my opinion the whole article appear a little generic
* The link between all the parties of the article are not so clearly liked.
* the references used appear to be really focused on the topic

'''Answer:'''My answer refers to the first 3 bullets
*The artcle starts with the history of the methodoly and then presents that in every project there are uncertainties(as an introduction to the purpose of this methodology). Afterwards, the sources of these uncertainties are explained and then follows the methodology of project risk management( why and how is it applied ). After the extensive analysis of the methodology and its processes, i decided to present a more "focused" process that could be used in project risk management that could enhance the effectiveness of the methodology. Moreover, a model that explains in detail how this proposed process could help is also presented.My point is that all the parts are built on each other and every part is connected to each other. To sum up i agree that the methodology itself is general because it is not a so "expertised" method and because it is not linked with a specific type of project management(For example project risk management in constructions projects). However, the article explains the methodology in an extensive way and in the end proposes a more specific process to give the reader the opportunity to understand the dynamics and the importance of this methodology.
Thank you very much for your comments!!!

== Reviewer 3: s142911==

*Nice! Seems like you are already close to finish it. I like the structure.

*The text has a nice flow. The writing style is good as well.

*You are following properly the “methods” structure, maybe I would discuss a bit more the limitation section.

*I would reduce a bit the length of the overview. I think it should give a quick idea of what the article is about.

* Regarding figures: do you think figure 1 and 2 are necessary? If so, I would put it on the side rather than below the text.

*Before using an acronym, be sure to have already indicated it after its full name. i.e. Project Risk Management(PRM).

*Regarding the source, remember to add them the figures. In addition, remember to add a brief summary of each source, and write them following a common structure: i.e. Author, year, Title, editors.

*Since project risk management is a wide topic, you could add some aspect or go more in depth in aspect which are already in it.

'''Answer:'''
* 2 more limitations of the methodology have been added after your comment.
* The figures 1 and 2 are necessary because they present useful information as far as important milestones of the methodology and the areas of the uncertainties in projects are concerned. Moreover if i place them on the side, the overall image of the section will be influenced due to the size of the pictures.
* I corrected the acronym as you mentioned
* I agree that the topic is wide and thats why i decided to focus on the root cause analysis and the corrective actions (with an extra problem solving model), in order to present a specific method to enhance the effectiveness of the project risk management.

Thank you very much for your review. Good luck to you too!!!

== Reviewer 2: s141573==
Good introduction of the theory and how you created the context of the article.

I furthermore found a good flow of concepts all along the reading.

However sometimes it appears generic, I’d suggest to go more directly to the point and have always in mind to connect the theory to the project management.

The section root causes appears disconnected from the rest of the text, maybe explain better the impact of non- identified risks and highlight the importance of corrective actions.

Good luck with the course!

Project Risk Management and Project Risk Management Processes

2015-09-26T12:45:30Z

Ch.filis: /* Limitations of the methodology */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref name="Georges Dionne (2013)">Risk Management:History, Definition and Critique by Georges Dionne (2013)</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref name="Georges Dionne (2013)"></ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref name="Dr David Hillson">Project Risk Management,Future Developments by Dr David Hillson(2011)</ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project<ref name="Uncertainties">Dr. Oddmund Granli (2009), Project risk/uncertainty management</ref>, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project<ref name="Uncertainty Management">Agnar Johansen (2014), Uncertainty Management</ref>. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats<ref name="Opportunity/Threats Management">Eric Mcconnell (2010), Opportunity/Threats Management</ref>
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework<ref name="Project Risk Management"> Project Risk Management by Chapman-Ward 2nd edition</ref> which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management(PRM)<ref name="Project Risk Management"></ref> is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to<ref name="Techniques for managing risks"> Techniques for managing risks, Keith Anderson-Calvin Hastings-Lester Sherman (2012)</ref> :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors<ref name="Risk Project Management"> Project Risk Management, Methodology and Applications by Marco de Santis (2014)</ref> :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits<ref name="Benefits"> Benefits of Risk Management in Projects, Programms and Portfolios Kenneth K.(2008)</ref> in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements<ref name="Risk Project Management"></ref> illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification<ref name="Risk Identification"> Risk Identification in Project Management by Donna Ritter (2014)</ref> is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan<ref name="Processes"> Processes step by step in Project Management.David Hillson (2013)</ref> needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress<ref name="Processes"></ref> of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating<ref name="Processes"></ref> the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions'''<ref name="Root"> Root Cause Analysis and Corrective Actions by Gareth Byatt (2011)</ref> is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations<ref name="Limitations"> Limitations, Risk Project Managemet by Tara Dugan(2010)</ref>. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it requires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

*'''Subjective Judgement:''' People perceive things in a different way, in the sense that everyone can see things from his perspective. Specifically, in projects some people identify some factors as risks, while others can see opportunities behind those factors.

*'''Update risks in real time:''' Risks are evolving in time, due to the fact that projects take place under different circumstances every time. However, managers fail to update and revaluate these risks periodically and the project's performance can be negatively affected.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-26T12:19:57Z

Ch.filis: /* Limitations of the methodology */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref name="Georges Dionne (2013)">Risk Management:History, Definition and Critique by Georges Dionne (2013)</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref name="Georges Dionne (2013)"></ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref name="Dr David Hillson">Project Risk Management,Future Developments by Dr David Hillson(2011)</ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project<ref name="Uncertainties">Dr. Oddmund Granli (2009), Project risk/uncertainty management</ref>, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project<ref name="Uncertainty Management">Agnar Johansen (2014), Uncertainty Management</ref>. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats<ref name="Opportunity/Threats Management">Eric Mcconnell (2010), Opportunity/Threats Management</ref>
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework<ref name="Project Risk Management"> Project Risk Management by Chapman-Ward 2nd edition</ref> which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management(PRM)<ref name="Project Risk Management"></ref> is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to<ref name="Techniques for managing risks"> Techniques for managing risks, Keith Anderson-Calvin Hastings-Lester Sherman (2012)</ref> :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors<ref name="Risk Project Management"> Project Risk Management, Methodology and Applications by Marco de Santis (2014)</ref> :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits<ref name="Benefits"> Benefits of Risk Management in Projects, Programms and Portfolios Kenneth K.(2008)</ref> in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements<ref name="Risk Project Management"></ref> illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification<ref name="Risk Identification"> Risk Identification in Project Management by Donna Ritter (2014)</ref> is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan<ref name="Processes"> Processes step by step in Project Management.David Hillson (2013)</ref> needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress<ref name="Processes"></ref> of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating<ref name="Processes"></ref> the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions'''<ref name="Root"> Root Cause Analysis and Corrective Actions by Gareth Byatt (2011)</ref> is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations<ref name="Limitations"> Limitations, Risk Project Managemet by Tara Dugan(2010)</ref>. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it requires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-26T12:12:14Z

Ch.filis: /* History */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref name="Georges Dionne (2013)">Risk Management:History, Definition and Critique by Georges Dionne (2013)</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref name="Georges Dionne (2013)"></ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref name="Dr David Hillson">Project Risk Management,Future Developments by Dr David Hillson(2011)</ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project<ref name="Uncertainties">Dr. Oddmund Granli (2009), Project risk/uncertainty management</ref>, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project<ref name="Uncertainty Management">Agnar Johansen (2014), Uncertainty Management</ref>. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats<ref name="Opportunity/Threats Management">Eric Mcconnell (2010), Opportunity/Threats Management</ref>
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework<ref name="Project Risk Management"> Project Risk Management by Chapman-Ward 2nd edition</ref> which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management(PRM)<ref name="Project Risk Management"></ref> is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to<ref name="Techniques for managing risks"> Techniques for managing risks, Keith Anderson-Calvin Hastings-Lester Sherman (2012)</ref> :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors<ref name="Risk Project Management"> Project Risk Management, Methodology and Applications by Marco de Santis (2014)</ref> :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits<ref name="Benefits"> Benefits of Risk Management in Projects, Programms and Portfolios Kenneth K.(2008)</ref> in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements<ref name="Risk Project Management"></ref> illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification<ref name="Risk Identification"> Risk Identification in Project Management by Donna Ritter (2014)</ref> is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan<ref name="Processes"> Processes step by step in Project Management.David Hillson (2013)</ref> needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress<ref name="Processes"></ref> of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating<ref name="Processes"></ref> the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions'''<ref name="Root"> Root Cause Analysis and Corrective Actions by Gareth Byatt (2011)</ref> is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations<ref name="Limitations"> Limitations, Risk Project Managemet by Tara Dugan(2010)</ref>. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it erquires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-26T12:04:49Z

Ch.filis: /* History */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref name="Georges Dionne (2013)">Risk Management:History, Definition and Critique by Georges Dionne (2013)</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref name="Georges Dionne (2013)"></ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref name="Dr David Hillson">Project Risk Management,Future Developments by Dr David Hillson(2011)</ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management<ref name="Georges Dionne (2013)"></ref>

==Uncertainty in Project Management==
The uncertainties in any project<ref name="Uncertainties">Dr. Oddmund Granli (2009), Project risk/uncertainty management</ref>, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project<ref name="Uncertainty Management">Agnar Johansen (2014), Uncertainty Management</ref>. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats<ref name="Opportunity/Threats Management">Eric Mcconnell (2010), Opportunity/Threats Management</ref>
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework<ref name="Project Risk Management"> Project Risk Management by Chapman-Ward 2nd edition</ref> which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management(PRM)<ref name="Project Risk Management"></ref> is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to<ref name="Techniques for managing risks"> Techniques for managing risks, Keith Anderson-Calvin Hastings-Lester Sherman (2012)</ref> :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors<ref name="Risk Project Management"> Project Risk Management, Methodology and Applications by Marco de Santis (2014)</ref> :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits<ref name="Benefits"> Benefits of Risk Management in Projects, Programms and Portfolios Kenneth K.(2008)</ref> in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements<ref name="Risk Project Management"></ref> illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification<ref name="Risk Identification"> Risk Identification in Project Management by Donna Ritter (2014)</ref> is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan<ref name="Processes"> Processes step by step in Project Management.David Hillson (2013)</ref> needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress<ref name="Processes"></ref> of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating<ref name="Processes"></ref> the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions'''<ref name="Root"> Root Cause Analysis and Corrective Actions by Gareth Byatt (2011)</ref> is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations<ref name="Limitations"> Limitations, Risk Project Managemet by Tara Dugan(2010)</ref>. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it erquires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>

Talk:Project Risk Management and Project Risk Management Processes

2015-09-26T12:01:16Z

Ch.filis: /* Review 1: s150905 */

Josefs says: Hello, I like your idea and topic. But I suggest to chose a focus area, otherwise, your article may end up a bit generic, and not as interesting as it could be because it is too broad. E.g. the root cause areas, or the process or...

==Review 1: s150905==

Hi, the article appears complete, with a clear topic and its satisfied all the characteristic of the Wiki-article.

Formal aspects
* The part dedicated for the description of the method is clear but i think there is something missing to make the reader more confident with the topic
* It presents a little lack of punctuation and a few spelling errors
* I like the use of the images that help the reader understand better each part

'''Answer:'''
*Spelling and grammar errors have been corrected after your comment.

Content
* The article is less than the required words and, while you read it, you feel like there is something missing.
* In my opinion the whole article appear a little generic
* The link between all the parties of the article are not so clearly liked.
* the references used appear to be really focused on the topic

'''Answer:'''My answer refers to the first 3 bullets
*The artcle starts with the history of the methodoly and then presents that in every project there are uncertainties(as an introduction to the purpose of this methodology). Afterwards, the sources of these uncertainties are explained and then follows the methodology of project risk management( why and how is it applied ). After the extensive analysis of the methodology and its processes, i decided to present a more "focused" process that could be used in project risk management that could enhance the effectiveness of the methodology. Moreover, a model that explains in detail how this proposed process could help is also presented.My point is that all the parts are built on each other and every part is connected to each other. To sum up i agree that the methodology itself is general because it is not a so "expertised" method and because it is not linked with a specific type of project management(For example project risk management in constructions projects). However, the article explains the methodology in an extensive way and in the end proposes a more specific process to give the reader the opportunity to understand the dynamics and the importance of this methodology.
Thank you very much for your comments!!!

== Reviewer 3: s142911==

*Nice! Seems like you are already close to finish it. I like the structure.

*The text has a nice flow. The writing style is good as well.

*You are following properly the “methods” structure, maybe I would discuss a bit more the limitation section.

*I would reduce a bit the length of the overview. I think it should give a quick idea of what the article is about.

* Regarding figures: do you think figure 1 and 2 are necessary? If so, I would put it on the side rather than below the text.

*Before using an acronym, be sure to have already indicated it after its full name. i.e. Project Risk Management(PRM).

*Regarding the source, remember to add them the figures. In addition, remember to add a brief summary of each source, and write them following a common structure: i.e. Author, year, Title, editors.

*Since project risk management is a wide topic, you could add some aspect or go more in depth in aspect which are already in it.

== Reviewer 2: s141573==
Good introduction of the theory and how you created the context of the article.

I furthermore found a good flow of concepts all along the reading.

However sometimes it appears generic, I’d suggest to go more directly to the point and have always in mind to connect the theory to the project management.

The section root causes appears disconnected from the rest of the text, maybe explain better the impact of non- identified risks and highlight the importance of corrective actions.

Good luck with the course!

Talk:Project Risk Management and Project Risk Management Processes

2015-09-26T11:59:48Z

Ch.filis: /* Review 1: s150905 */

Josefs says: Hello, I like your idea and topic. But I suggest to chose a focus area, otherwise, your article may end up a bit generic, and not as interesting as it could be because it is too broad. E.g. the root cause areas, or the process or...

==Review 1: s150905==

Hi, the article appears complete, with a clear topic and its satisfied all the characteristic of the Wiki-article.

Formal aspects
* The part dedicated for the description of the method is clear but i think there is something missing to make the reader more confident with the topic
* It presents a little lack of punctuation and a few spelling errors
* I like the use of the images that help the reader understand better each part

'''Answer:'''
*Spelling and grammar errors have been corrected after your comment.

Content
* The article is less than the required words and, while you read it, you feel like there is something missing.
* In my opinion the whole article appear a little generic
* The link between all the parties of the article are not so clearly liked.
* the references used appear to be really focused on the topic

'''Answer:'''My answer refers to the first 3 bullets
*The artcle starts with the history of the methodoly and then presents that in every project there are uncertainties(as an introduction to the purpose of this methodology). Afterwards, the sources of these uncertainties are explained and then follows the methodology of project risk management( why and how is it applied ). After the extensive analysis of the methodology and its processes, i decided to present a more ''focused'' process that could be used in project risk management that could enhance the effectiveness of the methodology. Moreover, a model that explains in detail how this proposed process could help is also presented.My point is that all the parts are built on each other and every part is connected to each other. To sum up i agree that the methodology itself is general because it is not a so "expertised" method and because it is not linked with a specific type of project management(For example project risk management in constructions projects). However, the article explains the methodology in an extensive way and in the end proposes a more specific process to give the reader the opportunity to understand the dynamics and the importance of this methodology.
Thank you very much for your comments!!!

== Reviewer 3: s142911==

*Nice! Seems like you are already close to finish it. I like the structure.

*The text has a nice flow. The writing style is good as well.

*You are following properly the “methods” structure, maybe I would discuss a bit more the limitation section.

*I would reduce a bit the length of the overview. I think it should give a quick idea of what the article is about.

* Regarding figures: do you think figure 1 and 2 are necessary? If so, I would put it on the side rather than below the text.

*Before using an acronym, be sure to have already indicated it after its full name. i.e. Project Risk Management(PRM).

*Regarding the source, remember to add them the figures. In addition, remember to add a brief summary of each source, and write them following a common structure: i.e. Author, year, Title, editors.

*Since project risk management is a wide topic, you could add some aspect or go more in depth in aspect which are already in it.

== Reviewer 2: s141573==
Good introduction of the theory and how you created the context of the article.

I furthermore found a good flow of concepts all along the reading.

However sometimes it appears generic, I’d suggest to go more directly to the point and have always in mind to connect the theory to the project management.

The section root causes appears disconnected from the rest of the text, maybe explain better the impact of non- identified risks and highlight the importance of corrective actions.

Good luck with the course!

Talk:Project Risk Management and Project Risk Management Processes

2015-09-26T11:47:30Z

Ch.filis: /* Review 1: s150905 */

Talk:Project Risk Management and Project Risk Management Processes

2015-09-26T11:45:55Z

Ch.filis: /* Review 1: s150905 */

Project Risk Management and Project Risk Management Processes

2015-09-26T09:19:13Z

Ch.filis: /* The Scope of Project Risk Management */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref name="Georges Dionne (2013)">Risk Management:History, Definition and Critique by Georges Dionne (2013)</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref name="Georges Dionne (2013)"></ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref name="Dr David Hillson">Project Risk Management,Future Developments by Dr David Hillson(2011)</ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project<ref name="Uncertainties">Dr. Oddmund Granli (2009), Project risk/uncertainty management</ref>, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project<ref name="Uncertainty Management">Agnar Johansen (2014), Uncertainty Management</ref>. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats<ref name="Opportunity/Threats Management">Eric Mcconnell (2010), Opportunity/Threats Management</ref>
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework<ref name="Project Risk Management"> Project Risk Management by Chapman-Ward 2nd edition</ref> which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management(PRM)<ref name="Project Risk Management"></ref> is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to<ref name="Techniques for managing risks"> Techniques for managing risks, Keith Anderson-Calvin Hastings-Lester Sherman (2012)</ref> :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors<ref name="Risk Project Management"> Project Risk Management, Methodology and Applications by Marco de Santis (2014)</ref> :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits<ref name="Benefits"> Benefits of Risk Management in Projects, Programms and Portfolios Kenneth K.(2008)</ref> in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements<ref name="Risk Project Management"></ref> illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification<ref name="Risk Identification"> Risk Identification in Project Management by Donna Ritter (2014)</ref> is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan<ref name="Processes"> Processes step by step in Project Management.David Hillson (2013)</ref> needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress<ref name="Processes"></ref> of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating<ref name="Processes"></ref> the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions'''<ref name="Root"> Root Cause Analysis and Corrective Actions by Gareth Byatt (2011)</ref> is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations<ref name="Limitations"> Limitations, Risk Project Managemet by Tara Dugan(2010)</ref>. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it erquires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-26T09:12:59Z

Ch.filis: /* History */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref name="Georges Dionne (2013)">Risk Management:History, Definition and Critique by Georges Dionne (2013)</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref name="Georges Dionne (2013)"></ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref name="Dr David Hillson">Project Risk Management,Future Developments by Dr David Hillson(2011)</ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project<ref name="Uncertainties">Dr. Oddmund Granli (2009), Project risk/uncertainty management</ref>, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project<ref name="Uncertainty Management">Agnar Johansen (2014), Uncertainty Management</ref>. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats<ref name="Opportunity/Threats Management">Eric Mcconnell (2010), Opportunity/Threats Management</ref>
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework<ref name="Project Risk Management"> Project Risk Management by Chapman-Ward 2nd edition</ref> which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management<ref name="Project Risk Management"></ref> is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to<ref name="Techniques for managing risks"> Techniques for managing risks, Keith Anderson-Calvin Hastings-Lester Sherman (2012)</ref> :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors<ref name="Risk Project Management"> Project Risk Management, Methodology and Applications by Marco de Santis (2014)</ref> :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits<ref name="Benefits"> Benefits of Risk Management in Projects, Programms and Portfolios Kenneth K.(2008)</ref> in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements<ref name="Risk Project Management"></ref> illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification<ref name="Risk Identification"> Risk Identification in Project Management by Donna Ritter (2014)</ref> is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan<ref name="Processes"> Processes step by step in Project Management.David Hillson (2013)</ref> needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress<ref name="Processes"></ref> of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating<ref name="Processes"></ref> the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions'''<ref name="Root"> Root Cause Analysis and Corrective Actions by Gareth Byatt (2011)</ref> is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations<ref name="Limitations"> Limitations, Risk Project Managemet by Tara Dugan(2010)</ref>. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it erquires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-26T09:07:41Z

Ch.filis: /* History */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref name="Georges Dionne (2013)">Risk Management:History, Definition and Critique by Georges Dionne (2013)</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref name="Georges Dionne (2013)"></ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref name="Georges Dionne (2013)"></ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project<ref name="Uncertainties">Dr. Oddmund Granli (2009), Project risk/uncertainty management</ref>, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project<ref name="Uncertainty Management">Agnar Johansen (2014), Uncertainty Management</ref>. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats<ref name="Opportunity/Threats Management">Eric Mcconnell (2010), Opportunity/Threats Management</ref>
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework<ref name="Project Risk Management"> Project Risk Management by Chapman-Ward 2nd edition</ref> which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management<ref name="Project Risk Management"></ref> is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to<ref name="Techniques for managing risks"> Techniques for managing risks, Keith Anderson-Calvin Hastings-Lester Sherman (2012)</ref> :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors<ref name="Risk Project Management"> Project Risk Management, Methodology and Applications by Marco de Santis (2014)</ref> :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits<ref name="Benefits"> Benefits of Risk Management in Projects, Programms and Portfolios Kenneth K.(2008)</ref> in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements<ref name="Risk Project Management"></ref> illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification<ref name="Risk Identification"> Risk Identification in Project Management by Donna Ritter (2014)</ref> is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan<ref name="Processes"> Processes step by step in Project Management.David Hillson (2013)</ref> needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress<ref name="Processes"></ref> of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating<ref name="Processes"></ref> the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions'''<ref name="Root"> Root Cause Analysis and Corrective Actions by Gareth Byatt (2011)</ref> is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations<ref name="Limitations"> Limitations, Risk Project Managemet by Tara Dugan(2010)</ref>. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it erquires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>

Talk:Responsibility Assignment Matrix (RACI Matrix)

2015-09-23T06:35:13Z

Ch.filis:

Kristine:
Very interesting subject. You seem to have a very specific tool and a good idea of how you want to structure your article. Looking forward to reading the finished version of your article.

Charles: Comments for the reviewers: the spreadsheet example can't be uploaded and the internal links of the Wiki have not been set up yet.

Gaetangarnotel - Reviewer n°1 

Hi Charles, 
Here are my main advice for your article. Of course, it is just my point of view to try to give you some ways of improvement: 
* In the overview, you have small details to fix: first, the bold text is a bit weird since it happens only once in the article. Second, you ask rhetorical questions (Why?) which seems a bit too oral to fit in a Wiki article. Maybe you should go back to a more written language, at least in this part.
* "Use and examples": As before, get rid of the oral forms of expression like in "Here is (finally) the explanation of the RACI acronym".
* Thanks for putting my name in your table :) I like the idea of learning through an example instead of having a heavy theoretical part. Maybe you good actually elaborate a bit more on it, by giving a real-life example (Construction project, project at Thales that you led etc..). I think that the example of the simulation game at the end is not sufficient to make the reader understand. Moreover, I've actually been a bit surprised that we begin with an example. You maybe should prepare a bit more the reader saying that instead of getting into theory straightly, we'll learn through an example. Doing so, you avoid the surprise that some people could have.
* For the part, "Using the template", you should introduce what this part is going to be about. It may be an overall comment: you should lead the reader a bit more so we understand your way of thinking.
* I really like the fact that you tried to put this method into perspective by giving alternatives. If you could add some tips for the reader to choose the right method in a clever way, it would be perfect.
* I would see more limitations. With all the alternatives you pointed out, I think that more limitations has forced the different companies to create their own model.
* In the conclusion, you may need a bit more. Summarize all you have said and what the reader should have learnt thanks to your article. 
As a conclusion, your article is quite good even though some ways of improvement exist. Hope my advice will help you improve it.

'''Ch.filis, Reviewer 3:'''
Hello Charles,
I find the method that you described in your article really interesting. However, I have some comments on some parts of the article:

'''Formal Aspects:'''
*I think there are parts in your article that need a bit more attention as far as the grammar and syntax are concerned. Moreover I think that the language that you used is a little bit informal for a wiki article.
*The structure of your article is in a way that is easy to read and follow as your parts have a good connection and flow
*More figures or tables could have been used in order to enhance the “visual result” of your article. Moreover it is a way to gather many information and present them to the reader in a more pleasant way

'''Content Aspects:'''
*The “how to use the method” is really analytical and describes the steps in an extensive and understandable way
*The example with the game simulation is kind of helpful, but it should describe in more detail the specific parts of the game where the method contributed to the project
*You should focus a lot more on where is this method applicable and its impacts on the project management. It is a very important part for the reader to understand exactly the purpose of this method
*I also feel that you should have mentionned more limitations and in a more descriptive way

Talk:Responsibility Assignment Matrix (RACI Matrix)

2015-09-22T19:24:07Z

Ch.filis:

Kristine:
Very interesting subject. You seem to have a very specific tool and a good idea of how you want to structure your article. Looking forward to reading the finished version of your article.

Charles: Comments for the reviewers: the spreadsheet example can't be uploaded and the internal links of the Wiki have not been set up yet.

Gaetangarnotel - Reviewer n°1 

Hi Charles, 
Here are my main advice for your article. Of course, it is just my point of view to try to give you some ways of improvement: 
* In the overview, you have small details to fix: first, the bold text is a bit weird since it happens only once in the article. Second, you ask rhetorical questions (Why?) which seems a bit too oral to fit in a Wiki article. Maybe you should go back to a more written language, at least in this part.
* "Use and examples": As before, get rid of the oral forms of expression like in "Here is (finally) the explanation of the RACI acronym".
* Thanks for putting my name in your table :) I like the idea of learning through an example instead of having a heavy theoretical part. Maybe you good actually elaborate a bit more on it, by giving a real-life example (Construction project, project at Thales that you led etc..). I think that the example of the simulation game at the end is not sufficient to make the reader understand. Moreover, I've actually been a bit surprised that we begin with an example. You maybe should prepare a bit more the reader saying that instead of getting into theory straightly, we'll learn through an example. Doing so, you avoid the surprise that some people could have.
* For the part, "Using the template", you should introduce what this part is going to be about. It may be an overall comment: you should lead the reader a bit more so we understand your way of thinking.
* I really like the fact that you tried to put this method into perspective by giving alternatives. If you could add some tips for the reader to choose the right method in a clever way, it would be perfect.
* I would see more limitations. With all the alternatives you pointed out, I think that more limitations has forced the different companies to create their own model.
* In the conclusion, you may need a bit more. Summarize all you have said and what the reader should have learnt thanks to your article. 
As a conclusion, your article is quite good even though some ways of improvement exist. Hope my advice will help you improve it.

'''Ch.filis, Reviewer 2:'''
Hello Charles,
I find the method that you described in your article really interesting. However, I have some comments on some parts of the article:

'''Formal Aspects:'''
*I think there are parts in your article that need a bit more attention as far as the grammar and syntax are concerned. Moreover I think that the language that you used is a little bit informal for a wiki article.
*The structure of your article is in a way that is easy to read and follow as your parts have a good connection and flow
*More figures or tables could have been used in order to enhance the “visual result” of your article. Moreover it is a way to gather many information and present them to the reader in a more pleasant way

'''Content Aspects:'''
*The “how to use the method” is really analytical and describes the steps in an extensive and understandable way
*The example with the game simulation is kind of helpful, but it should describe in more detail the specific parts of the game where the method contributed to the project
*You should focus a lot more on where is this method applicable and its impacts on the project management. It is a very important part for the reader to understand exactly the purpose of this method
*I also feel that you should have mentionned more limitations and in a more descriptive way

Talk:Responsibility Assignment Matrix (RACI Matrix)

2015-09-22T19:23:25Z

Ch.filis:

Kristine:
Very interesting subject. You seem to have a very specific tool and a good idea of how you want to structure your article. Looking forward to reading the finished version of your article.

Charles: Comments for the reviewers: the spreadsheet example can't be uploaded and the internal links of the Wiki have not been set up yet.

Gaetangarnotel - Reviewer n°1 

Hi Charles, 
Here are my main advice for your article. Of course, it is just my point of view to try to give you some ways of improvement: 
* In the overview, you have small details to fix: first, the bold text is a bit weird since it happens only once in the article. Second, you ask rhetorical questions (Why?) which seems a bit too oral to fit in a Wiki article. Maybe you should go back to a more written language, at least in this part.
* "Use and examples": As before, get rid of the oral forms of expression like in "Here is (finally) the explanation of the RACI acronym".
* Thanks for putting my name in your table :) I like the idea of learning through an example instead of having a heavy theoretical part. Maybe you good actually elaborate a bit more on it, by giving a real-life example (Construction project, project at Thales that you led etc..). I think that the example of the simulation game at the end is not sufficient to make the reader understand. Moreover, I've actually been a bit surprised that we begin with an example. You maybe should prepare a bit more the reader saying that instead of getting into theory straightly, we'll learn through an example. Doing so, you avoid the surprise that some people could have.
* For the part, "Using the template", you should introduce what this part is going to be about. It may be an overall comment: you should lead the reader a bit more so we understand your way of thinking.
* I really like the fact that you tried to put this method into perspective by giving alternatives. If you could add some tips for the reader to choose the right method in a clever way, it would be perfect.
* I would see more limitations. With all the alternatives you pointed out, I think that more limitations has forced the different companies to create their own model.
* In the conclusion, you may need a bit more. Summarize all you have said and what the reader should have learnt thanks to your article. 
As a conclusion, your article is quite good even though some ways of improvement exist. Hope my advice will help you improve it.

Ch.filis, Reviewer 2
Hello Charles,
I find the method that you described in your article really interesting. However, I have some comments on some parts of the article:

'''Formal Aspects:'''
*I think there are parts in your article that need a bit more attention as far as the grammar and syntax are concerned. Moreover I think that the language that you used is a little bit informal for a wiki article.
*The structure of your article is in a way that is easy to read and follow as your parts have a good connection and flow
*More figures or tables could have been used in order to enhance the “visual result” of your article. Moreover it is a way to gather many information and present them to the reader in a more pleasant way

'''Content Aspects:'''
*The “how to use the method” is really analytical and describes the steps in an extensive and understandable way
*The example with the game simulation is kind of helpful, but it should describe in more detail the specific parts of the game where the method contributed to the project
*You should focus a lot more on where is this method applicable and its impacts on the project management. It is a very important part for the reader to understand exactly the purpose of this method
*I also feel that you should have mentionned more limitations and in a more descriptive way

Talk:V-Model

2015-09-22T17:52:53Z

Ch.filis:

Anna: Very nice topic and method you have chosen. I don't have a lot of comments as it seems that you are well within the requirements for the article and that you have already created a great structure including the application and limitations.

s150905, Review 1:
Hi, the illustration of the method is really engaging and interesting for the subject

Formal aspects
* The article follow the right method’s structure.
* The few images used are very focused and understandable.
* There is a lack in blank spaces and paragraphs’ division in the section, which might help the reader.

Content
* The introduction is very clear and illustrative.
* The topic clearly developed, underling the essential aspects in a precise way.
* The method description maybe seems sometimes a little much specific and the reader could find difficulties in following the parts depicted; but here the example you have made could act as a helper.
* Not all the references appear to be of high quality

Ch.filis, Review 2: Hello, and straight to the point. Really analytical explanation and description of the method. I had the opportunity while reading it, to understand how the methods works.

'''Formal Aspects:'''
*The article has a logical flow and every part is “built” on another
*I could not notice any obvious grammar mistakes
*The images illustrate your writings in a clear and understandable way

'''Content Aspects:'''
*The introduction describes the model in a clear way
*Analysis in depth for all the phases required in order to formulate the model
*Not so clear how the model was used in the industry
*Understandable description of the model’s limitations and advantages as well
*Quite few references for so extensive analysis but probably the author’s experience can cover parts of the subject

Project Risk Management and Project Risk Management Processes

2015-09-21T23:49:02Z

Ch.filis: /* Limitations of the methodology */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref name="Georges Dionne (2013)">Risk Management:History, Definition and Critique</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref name="Georges Dionne (2013)"></ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref name="Georges Dionne (2013)"></ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project<ref name="Uncertainties">Dr. Oddmund Granli (2009), Project risk/uncertainty management</ref>, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project<ref name="Uncertainty Management">Agnar Johansen (2014), Uncertainty Management</ref>. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats<ref name="Opportunity/Threats Management">Eric Mcconnell (2010), Opportunity/Threats Management</ref>
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework<ref name="Project Risk Management"> Project Risk Management by Chapman-Ward 2nd edition</ref> which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management<ref name="Project Risk Management"></ref> is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to<ref name="Techniques for managing risks"> Techniques for managing risks, Keith Anderson-Calvin Hastings-Lester Sherman (2012)</ref> :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors<ref name="Risk Project Management"> Project Risk Management, Methodology and Applications by Marco de Santis (2014)</ref> :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits<ref name="Benefits"> Benefits of Risk Management in Projects, Programms and Portfolios Kenneth K.(2008)</ref> in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements<ref name="Risk Project Management"></ref> illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification<ref name="Risk Identification"> Risk Identification in Project Management by Donna Ritter (2014)</ref> is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan<ref name="Processes"> Processes step by step in Project Management.David Hillson (2013)</ref> needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress<ref name="Processes"></ref> of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating<ref name="Processes"></ref> the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions'''<ref name="Root"> Root Cause Analysis and Corrective Actions by Gareth Byatt (2011)</ref> is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations<ref name="Limitations"> Limitations, Risk Project Managemet by Tara Dugan(2010)</ref>. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it erquires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-21T23:46:25Z

Ch.filis: /* Root Cause Analysis and Corrective Actions */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref name="Georges Dionne (2013)">Risk Management:History, Definition and Critique</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref name="Georges Dionne (2013)"></ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref name="Georges Dionne (2013)"></ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project<ref name="Uncertainties">Dr. Oddmund Granli (2009), Project risk/uncertainty management</ref>, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project<ref name="Uncertainty Management">Agnar Johansen (2014), Uncertainty Management</ref>. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats<ref name="Opportunity/Threats Management">Eric Mcconnell (2010), Opportunity/Threats Management</ref>
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework<ref name="Project Risk Management"> Project Risk Management by Chapman-Ward 2nd edition</ref> which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management<ref name="Project Risk Management"></ref> is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to<ref name="Techniques for managing risks"> Techniques for managing risks, Keith Anderson-Calvin Hastings-Lester Sherman (2012)</ref> :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors<ref name="Risk Project Management"> Project Risk Management, Methodology and Applications by Marco de Santis (2014)</ref> :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits<ref name="Benefits"> Benefits of Risk Management in Projects, Programms and Portfolios Kenneth K.(2008)</ref> in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements<ref name="Risk Project Management"></ref> illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification<ref name="Risk Identification"> Risk Identification in Project Management by Donna Ritter (2014)</ref> is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan<ref name="Processes"> Processes step by step in Project Management.David Hillson (2013)</ref> needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress<ref name="Processes"></ref> of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating<ref name="Processes"></ref> the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions'''<ref name="Root"> Root Cause Analysis and Corrective Actions by Gareth Byatt (2011)</ref> is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it erquires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-21T23:43:21Z

Ch.filis: /* Project Risk Management Processes */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref name="Georges Dionne (2013)">Risk Management:History, Definition and Critique</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref name="Georges Dionne (2013)"></ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref name="Georges Dionne (2013)"></ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project<ref name="Uncertainties">Dr. Oddmund Granli (2009), Project risk/uncertainty management</ref>, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project<ref name="Uncertainty Management">Agnar Johansen (2014), Uncertainty Management</ref>. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats<ref name="Opportunity/Threats Management">Eric Mcconnell (2010), Opportunity/Threats Management</ref>
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework<ref name="Project Risk Management"> Project Risk Management by Chapman-Ward 2nd edition</ref> which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management<ref name="Project Risk Management"></ref> is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to<ref name="Techniques for managing risks"> Techniques for managing risks, Keith Anderson-Calvin Hastings-Lester Sherman (2012)</ref> :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors<ref name="Risk Project Management"> Project Risk Management, Methodology and Applications by Marco de Santis (2014)</ref> :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits<ref name="Benefits"> Benefits of Risk Management in Projects, Programms and Portfolios Kenneth K.(2008)</ref> in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements<ref name="Risk Project Management"></ref> illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification<ref name="Risk Identification"> Risk Identification in Project Management by Donna Ritter (2014)</ref> is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan<ref name="Processes"> Processes step by step in Project Management.David Hillson (2013)</ref> needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress<ref name="Processes"></ref> of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating<ref name="Processes"></ref> the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions''' is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it erquires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-21T23:31:45Z

Ch.filis: /* Benefits of effective Project Risk Management */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref name="Georges Dionne (2013)">Risk Management:History, Definition and Critique</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref name="Georges Dionne (2013)"></ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref name="Georges Dionne (2013)"></ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project<ref name="Uncertainties">Dr. Oddmund Granli (2009), Project risk/uncertainty management</ref>, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project<ref name="Uncertainty Management">Agnar Johansen (2014), Uncertainty Management</ref>. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats<ref name="Opportunity/Threats Management">Eric Mcconnell (2010), Opportunity/Threats Management</ref>
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework<ref name="Project Risk Management"> Project Risk Management by Chapman-Ward 2nd edition</ref> which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management<ref name="Project Risk Management"></ref> is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to<ref name="Techniques for managing risks"> Techniques for managing risks, Keith Anderson-Calvin Hastings-Lester Sherman (2012)</ref> :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors<ref name="Risk Project Management"> Project Risk Management, Methodology and Applications by Marco de Santis (2014)</ref> :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits<ref name="Benefits"> Benefits of Risk Management in Projects, Programms and Portfolios Kenneth K.(2008)</ref> in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions''' is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it erquires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-21T23:25:38Z

Ch.filis: /* Project Risk Management features */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref name="Georges Dionne (2013)">Risk Management:History, Definition and Critique</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref name="Georges Dionne (2013)"></ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref name="Georges Dionne (2013)"></ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project<ref name="Uncertainties">Dr. Oddmund Granli (2009), Project risk/uncertainty management</ref>, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project<ref name="Uncertainty Management">Agnar Johansen (2014), Uncertainty Management</ref>. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats<ref name="Opportunity/Threats Management">Eric Mcconnell (2010), Opportunity/Threats Management</ref>
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework<ref name="Project Risk Management"> Project Risk Management by Chapman-Ward 2nd edition</ref> which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management<ref name="Project Risk Management"></ref> is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to<ref name="Techniques for managing risks"> Techniques for managing risks, Keith Anderson-Calvin Hastings-Lester Sherman (2012)</ref> :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors<ref name="Risk Project Management"> Project Risk Management, Methodology and Applications by Marco de Santis (2014)</ref> :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions''' is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it erquires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-21T23:24:41Z

Ch.filis: /* Project Risk Management features */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref name="Georges Dionne (2013)">Risk Management:History, Definition and Critique</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref name="Georges Dionne (2013)"></ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref name="Georges Dionne (2013)"></ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project<ref name="Uncertainties">Dr. Oddmund Granli (2009), Project risk/uncertainty management</ref>, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project<ref name="Uncertainty Management">Agnar Johansen (2014), Uncertainty Management</ref>. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats<ref name="Opportunity/Threats Management">Eric Mcconnell (2010), Opportunity/Threats Management</ref>
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework<ref name="Project Risk Management"> Project Risk Management by Chapman-Ward 2nd edition</ref> which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management<ref name="Project Risk Management"></ref> is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to<ref name="Techniques for managing risks"> Techniques for managing risks, Keith Anderson-Calvin Hastings-Lester Sherman (2012)</ref> :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors<ref name="Project Risk Management"> Project Risk Management, Methodology and Applications by Marco de Santis (2014)</ref> :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions''' is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it erquires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-21T23:21:43Z

Ch.filis: /* Why do we need Risk Management ? */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref name="Georges Dionne (2013)">Risk Management:History, Definition and Critique</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref name="Georges Dionne (2013)"></ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref name="Georges Dionne (2013)"></ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project<ref name="Uncertainties">Dr. Oddmund Granli (2009), Project risk/uncertainty management</ref>, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project<ref name="Uncertainty Management">Agnar Johansen (2014), Uncertainty Management</ref>. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats<ref name="Opportunity/Threats Management">Eric Mcconnell (2010), Opportunity/Threats Management</ref>
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework<ref name="Project Risk Management"> Project Risk Management by Chapman-Ward 2nd edition</ref> which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management<ref name="Project Risk Management"></ref> is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to<ref name="Techniques for managing risks"> Techniques for managing risks, Keith Anderson-Calvin Hastings-Lester Sherman (2012)</ref> :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions''' is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it erquires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-21T23:17:24Z

Ch.filis: /* The Scope of Project Risk Management */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref name="Georges Dionne (2013)">Risk Management:History, Definition and Critique</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref name="Georges Dionne (2013)"></ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref name="Georges Dionne (2013)"></ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project<ref name="Uncertainties">Dr. Oddmund Granli (2009), Project risk/uncertainty management</ref>, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project<ref name="Uncertainty Management">Agnar Johansen (2014), Uncertainty Management</ref>. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats<ref name="Opportunity/Threats Management">Eric Mcconnell (2010), Opportunity/Threats Management</ref>
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework<ref name="Project Risk Management"> Project Risk Management by Chapman-Ward 2nd edition</ref> which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management<ref name="Project Risk Management"></ref> is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions''' is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it erquires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-21T23:13:28Z

Ch.filis: /* Uncertainty in Project Management */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref name="Georges Dionne (2013)">Risk Management:History, Definition and Critique</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref name="Georges Dionne (2013)"></ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref name="Georges Dionne (2013)"></ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project<ref name="Uncertainties">Dr. Oddmund Granli (2009), Project risk/uncertainty management</ref>, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project<ref name="Uncertainty Management">Agnar Johansen (2014), Uncertainty Management</ref>. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats<ref name="Opportunity/Threats Management">Eric Mcconnell (2010), Opportunity/Threats Management</ref>
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework<ref name="Project Risk Management"> Project Risk Management by Chapman-Ward 2nd edition</ref> which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions''' is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it erquires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-21T23:12:05Z

Ch.filis: /* The six Ws framework for the roots of uncertainty */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref name="Georges Dionne (2013)">Risk Management:History, Definition and Critique</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref name="Georges Dionne (2013)"></ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref name="Georges Dionne (2013)"></ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project<ref name="Uncertainties">Dr. Oddmund Granli (2009), Project risk/uncertainty management</ref>, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project<ref name="Uncertainty Management">Agnar Johansen (2014)</ref>. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats<ref name="Opportunity/Threats Management">Eric Mcconnell (2010)</ref>
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework<ref name="Project Risk Management"> Project Risk Management by Chapman-Ward 2nd edition</ref> which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions''' is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it erquires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-21T23:10:59Z

Ch.filis: /* The six Ws framework for the roots of uncertainty */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref name="Georges Dionne (2013)">Risk Management:History, Definition and Critique</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref name="Georges Dionne (2013)"></ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref name="Georges Dionne (2013)"></ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project<ref name="Uncertainties">Dr. Oddmund Granli (2009), Project risk/uncertainty management</ref>, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project<ref name="Uncertainty Management">Agnar Johansen (2014)</ref>. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats<ref name="Opportunity/Threats Management">Eric Mcconnell (2010)</ref>
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework<ref name="Project Risk Management">Chapman-Ward 2nd edition</ref> which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions''' is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it erquires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-21T23:07:45Z

Ch.filis: /* Uncertainty in Project Management */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref name="Georges Dionne (2013)">Risk Management:History, Definition and Critique</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref name="Georges Dionne (2013)"></ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref name="Georges Dionne (2013)"></ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project<ref name="Uncertainties">Dr. Oddmund Granli (2009), Project risk/uncertainty management</ref>, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project<ref name="Uncertainty Management">Agnar Johansen (2014)</ref>. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats<ref name="Opportunity/Threats Management">Eric Mcconnell (2010)</ref>
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions''' is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it erquires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-21T22:52:47Z

Ch.filis: /* History */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref name="Georges Dionne (2013)">Risk Management:History, Definition and Critique</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref name="Georges Dionne (2013)"></ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref name="Georges Dionne (2013)"></ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions''' is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it erquires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-21T22:50:34Z

Ch.filis: /* History */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref name=''Georges Dionne (2013)''>Risk Management:History, Definition and Critique</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref name=''Georges Dionne (2013)''></ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref name=''Georges Dionne (2013)''></ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions''' is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it erquires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-21T22:48:11Z

Ch.filis: /* History */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref name=''Gearges Dionne (2013)''>Risk Management:History, Definition and Critique</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref name=''Gearges Dionne (2013)''></ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref name=''Gearges Dionne (2013''></ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions''' is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it erquires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-21T22:46:42Z

Ch.filis: /* History */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref name=''Gearges Dionne (2013)''>Risk Management:History, Definition and Critique</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref name=''Gearges Dionne (2013)''</ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref name=''Gearges Dionne (2013''</ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions''' is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it erquires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-21T22:38:48Z

Ch.filis: /* History */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref>Gearges Dionne (2013).''Risk Management:History, Definition and Critique</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref>Gearges Dionne (2013)</ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref>Gearges Dionne (2013</ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions''' is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it erquires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-21T22:34:44Z

Ch.filis: /* History */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents </ref>Gearges Dionne (2013).''Risk Management:History, Definition and Critique</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref>Gearges Dionne (2013).''Risk Management:History, Definition and Critique</ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref>Gearges Dionne (2013).''Risk Management:History, Definition and Critique</ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions''' is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it erquires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-21T22:32:17Z

Ch.filis: /* History */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref>Gearges Dionne (2013).''Risk Management:History, Definition and Critique</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref>Gearges Dionne (2013).''Risk Management:History, Definition and Critique</ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref>Gearges Dionne (2013).''Risk Management:History, Definition and Critique</ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions''' is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it erquires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-21T22:28:28Z

Ch.filis: /* History */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref>Gearges Dionne (2013).''Risk Management:History, Definition and Critique</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref>Gearges Dionne (2013).''Risk Management:History, Definition and Critique<ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref>Gearges Dionne (2013).''Risk Management:History, Definition and Critique</ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions''' is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it erquires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-21T22:24:33Z

Ch.filis: /* History */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref>Gearges Dionne (2013).''Risk Management:History, Definition and Critique</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent <ref>Gearges Dionne (2013).''Risk Management:History, Definition and Critique</ref> was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation <ref>Gearges Dionne (2013).''Risk Management:History, Definition and Critique</ref> had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions''' is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it erquires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-21T22:20:00Z

Ch.filis: /* History */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref>Gearges Dionne (2013).''Risk Management:History, Definition and Critique</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions''' is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it erquires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-21T22:18:08Z

Ch.filis: /* History */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents <ref>S1 Cleland, David I. and Roland Gareis, Global Project Management Handbook, McGraw-Hill Professional, 2006</ref> . Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions''' is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it erquires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>

Project Risk Management and Project Risk Management Processes

2015-09-21T22:15:49Z

Ch.filis: /* History */

The '''Risk Management''' is a methodology which aims to control the uncertainties that may occur in a project.The methodology started to be studied after the World War II, when large companies with diversified portfolios began to be developped and the need for insurance against the risks started to grow. Project and Risk managers must eliminate the uncertainties, in order to ensure that the project will achieve its goals. The uncertainties and the risks can be related to the duration of activities, to the absence of adequate resources, to the time and cost or other external factors, that can cause undesired effects to the project's performance. In order to manage these risks effectively and efficiently there are processes that can be implemented to deal with risks. The processes include 2 different phases:the 1st phase is the '''risk analysis''' which identifies,analyzes and prioritizes the risks of a project. The 2nd phase is the '''risk management''' which includes the development of the risk management planning, the evaluation of the progress and the reevaluation of the existing or potential risks. To enhance the effectiveness of the project risk management methodology and its processes a root cause analysis and its corrective actions can be implemented, in order to ensure that the causes of the problems during the project will not reoccur later in the project or future projects

==History==
Risk Management began to be studied after World War II, in order to protect individuals and companies from various losses associated with accidents</ref>. Several sources ('''Crockford 1982, Harrington and Neihaus 2003, Williams and Heins 1995''') date the origin of modern risk management to 1955-1964. During the 1950s, new forms of risk management emerged due to the fact that the risk of several new businesses was high and impossible to be insured. Specifically, in the 1960s new planning activities started to be developped such as risk prevention or self-protection and self insurance activities against different kind of losses or risks. Later in the 1970s, financial risk managenent was a first priority for many companies including banks and insurers. The reason was that many companies were exposed to risks that were related to price fluctuations such as interest rates, exchange rates or prices of the raw materials. The next decade, the use of derivatives as risk management tool expanded rapidly as companies intensified their financial risk management. Companies also developped internal risk management models and capital calculations formulas to deal with anticipated risks, as the international risk regulation had already began.

The table below presents some of the most important milestones in the history of risk management.

[[File:Table.png|400px|]]
 '''Fig. 1''': Milestones in the history of Risk Management

==Uncertainty in Project Management==
The uncertainties in any project, are the facts that can cause negative or positive effect on the objectives of the project. Most of the project management activities aim to manage the uncertainties that may occur from the earliest stages of the project's life cycle. The lack of available information or knowledge are considered to be some of the basic reasons that cause uncertainties in a project. Although they can affect the project's final performance, uncertainties stem from factors that cannot be anticipated or measured. Some examples include unforseen tasks, unexpected resource requirements and faulty allocations of time. However, uncertainties can be positive as '''opportunities''' and negative as '''threats'''. Risk Management is considered to be the methodology that undertakes the management of both threats and opportunities. Traditionally, managers focus on identifying, evaluating and managing threats
( or as some call it, '''risks'''). Nevertheless, the last decade there has been a stronger focus on how to manage the opportunities facing a project. The uncertainties can occur throughout the project's life cycle, but also in the pre-execution stages when they contribute to uncertainty in five areas.

The table below illustrates the five areas of uncertainty

[[File:Tables.png|400px]]
 '''Fig. 2''': Areas of uncertainty

All these areas are really important and they affect the project's final performance. As the list goes down the areas become fundamentally more important to the project's performance. For instance the variability associated with estimates involves the other four areas and each of them invloves dependencies on later areas in the list.

===The six Ws framework for the roots of uncertainty===
[[File:Figure.png|290px|thumb|right|'''Fig. 3''' :The six Ws framework for the roots of uncertainties]]

The most important issues that risk management aims to address are related to objectives and relationships between project's parties. Such issues need to be taken into consideration very early in the project and throughout the project's life cycle. For this purpose Chris Chapman[https://www.sbs.ac.uk/academic-profiles/chris-chapman#] and Stephen Ward[http://www.southampton.ac.uk/risk/about/staff/scw.page] offer a six Ws framework which is based on the following questions:

'''1. Who''' - who are the parties ultimately involved ? (parties)

'''2. Why''' - what do the parties want to achieve ? (motives)

'''3. What''' - what is it the parties are interested in ? (design)

'''4. Whichway''' - how is it to be done ? (activities)

'''5. Wherewithal''' - what resources are required ? (resources)

'''6. When''' - when does it have to be done ? (timetable)

Answering these questions which are associated with the uncertainty, is fundamental in order to achieve effective identification and management of both theats and opportunities that may occur during the project's life cycle. In figure 3, the flow lines show how the roots of uncertainties influence the project. The arrows indicate the knock-on effects of the uncertainties on each entity. In the earliest stages of the project's life cycle, uncertainty is considered to be in its highest level. The complex part in many projects is to highlight the nature of the important roots of uncertainties. Nevertheless, we can identify that the '''what, whichway and wherewithal''' describe the quality of the project, therefore the lower part of '''figure 3''' corresponds to the cost-time-quality triad which is really important for the project's performance.

==The Scope of Project Risk Management==

Project Risk Management is the systematic process of identifying, analyzing and responding to project risks, in order to take advantage of the impact of positive events that may occur and to decrease the probability of negative events to occur. The project risk management is based on an integrated analysis of all the sources of uncertainty that outlined above. Really effective '''PRM''' will develop plans that will address all the six Ws questions. The '''PRM''' includes important processes that must be designed and planned at the highest level within a company. The project managers are responsible for the management of the risks, while at the same time they have to gain the support of the stakeholders as far as the risk identification, the planning and the implementation of the responses are concerned.

===Why do we need Risk Management ?===

Nowdays, risks are part of every firm's financial and economic activity. The risk management is a process in a project's life cycle that aims to reduce the possibilities of its failure and increase the possibilities for its success. However, there are unexpected events that may occur, that can bring benefits or do harm in a project. A more rigorous approach to risk management at all levels of the business can contribute to :

'''-''' Secure project/business objectives

'''-''' Improve project/business performance

'''-''' Facilitate improves customer service

'''-''' Learn from past experiences

'''-''' Focus on due diligence

'''-''' Address changing markets

'''-''' Fulfil corporate governance regulations

Risks can turn into opportunities, but also can cause negative impacts in the project's performance. Most of the effort of business and project management is focused on the elements that could bring success to the project. However, the last few years it is believed that spending time focusing on the elements that could cause failure, can yield important benefits.

===Project Risk Management features===

Project Risk Management promotes an original way of thinking among the business. It ensures that during a project's life cycle all the risks that will be generated, have to be evaluated objectively in order to select the best actions that will mitigate the risks and increase the possibility of success. An '''effective''' project risk management should satisfy some basic factors :

* Consider both downside risks (threats) and upside risks (opportunities).

* Challenge project participants and draw from their expertise.

* Promote innovative thinking.

* Focus management attention on key areas of risk.

* Incorporate a standard risk management framework, while remaining flexible to adopt to project specific issues.

* Allow for the ongoing management of risk with continuity through all phases of the project development.

===Benefits of effective Project Risk Management===

The risk management has a great impact on a project's performance. The correlation between project processes and their outcomes have been investigated over the last years. There is a general agreement that risk management is one of the most influential processes for providing benefits in terms of project time, cost and quality. Moreover, using risk management in an effective way will enhance the ability of stakeholders to make better decissions in order to achieve mission and goals. It also provides managers with useful tools to anticipate changes and to allocate appropriate resources. Specifically, project risk management enhances the flexibility withing a business, while at the same time enables a better compliance management system for the company.

==Project Risk Management Processes==

[[File:Figures.png|330px|thumb|right|'''Fig. 4''' :Project Risk Management Processes]]

In general, project risk management is a process that aims to identify and manage the events that could negatively affect projects. Risks measure a project's inability to achieve its objectives withinh specified constrains. Constains may include cost, schedule, and technical performance objectives. The importance of risk management can be measured, based on two different components. The first one is the '''probability''' of failing to achieve specified objectives, while the second is the '''impact''' of failing to achieve these objectives. The risk management processes designed for projects are characterized by the six elements illustrated in figure 4. This process is iterative and continuously performed throughout the project's life cycle. The first part of the whole process includes three elements and addresses the '''risk analysis''' part. The other part addresses the '''risk management''' of the project and includes the last three elements.

'''Elements in the two parts :'''

* '''Risk Analysis :''' Identify Risks --> Analyze Risks --> Prioritize Risks

* '''Risk Management :''' Develop Management Plans --> Evaluate Progress --> Reevaluate Risk Exposure

===Risk Analysis===

'''Risk Identification :''' Risk Identification is the process of determining events that could potentially prevent the project from achieving its objectives. For effective risk identification, it is required that you have defined the scope of the project. Moreover, the involvement of as many as possible stakeholders in the process will contribute to the achievement of better results. Specifically, there are tools that managers can use in order to enhance the effectiveness of this important process. Tools such as :

- documentation reviews, checklist and project assumption analysis

- information gathering techniques : brainstorming, nominal group, interviews, root cause analysis

- diagramming techniques : process/system flow charts, influence diagrams

- SWOT

- expert judgment

'''Analyze Risks :''' This element of the process can be divided to two sub-stages: the first one is the qualitative analysis that focuses on identification and subjective assessment of risks and the second one is the quantitative analysis that focuses on the objective assessment of the risks. A '''qualitative''' analysis allows managers to identify the risk sources or factors. This procedure is usually associated with some form of assessment which includes the description of each risk and its impact or a subjective labelling of each risk. In general, the main idea is to identify key risks which will then be analysed and managed in more detail. On the other hand, the '''quantitative''' analysis involves more sophisticated techniques, usually requiring computer software. This procedure includes the measurement of uncertainties in cost and time estimates and also the probabilistic combination of individual uncertainties. An initial quantitative analysis is essential, as it brings valuable benefits in terms of understanding the project and its problems.

'''Prioritize Risks :''' In the risk prioritization element, all the identified risks, their impact assessments and their probabilities to occur are processed in order to create a most-to-least critical rank of identified risks. The major purpose of this element is to provide an input to the 'management phase' where resources need to me managed and allocated.

===Risk Management===

'''Develop Management Plan :''' After the risk analysis phase a management plan needs to be developped for each risk. Like the previous elements, risk management planning is a continuous process that includes the monitoring of risk handling actions. The risk management planning process must identify '''what''' actions are needed, '''when''' these actions need to be completed and '''who''' is responsible for their implementation and resolution.

'''Evaluate Progress :''' This element of the process is focused on assessing the progress of the risk-handling actions defined in a risk's management plan. During the project, it allows re-evaluation of the situation in order to ensure a successful outcome. In general, it provides businesses the opportunity to continuously improve their performance, their planning and estimating, and risk management process itself

'''Reevaluate Risk Exposure :''' This activity aims to identify and assess new risks and exposures, while reevaluating the existing risks and exposures as the project progresses. The intent of this activity is also to look towards the next set of key project events and to identify specific risks that may occur and affect the project's performance.

==Root Cause Analysis and Corrective Actions==

During the project's life cycle all the major processes aim to reduce the project risks. However, for the unforseen problems that may occur throughout the project, the risk management considers to be too late since it has already been completed and the lessons learned is too early since that is conducted in the end of the project. '''Corrective actions''' is a critical process which deals with problems that may occur during the project. Unfortunately, actions taken to solve a problem often only address the problem itself and not the underlying causes. In other words, solving only a problem and not its causes implies that the problem probably will reoccur later in the project or future projects. Corrective actions consist of two major phases :

[[File:Figuresx.png|570px|thumb|right|'''Fig. 5''' :Ten-step problem solving model]]

* '''Diagnosis :''' Investigation to identify the root causes of the problem

* '''Solution :''' Taking actions to prevent the causes from reoccurring

A ten-step problem solving model will be presented to provide a more detailed breakdown of these steps. Steps 1 to 5 are for the problem diagnosis and from 6 to 10 for the solution.

'''1. Define the problem'''

'''2. Understand the process'''

'''3. Identify possible causes'''

'''4. Collect data'''

'''5. Analyze data'''

'''6. Identify possible solutions'''

'''7. Select solutions'''

'''8. Implement solutions'''

'''9. Evaluate the effects'''

'''10. Institutionalize the change'''

==Limitations of the methodology==

The effective implementation of a project management methodology requires the recognition of its limitations. As far as the project risk management is concerned, there are basic reasons why businesses would not choose this methodology for projects :

* '''Lack of data :''' Many risk assessment analysis techniques involve gathering data. Unfortunately, creating accurate models or simulations that will be able to predict events that may occur is a procedure that requires extensive data collection, which can be expensive and not completely reliable.

* '''Insufficient Analysis Expertise and Time :''' Using computer software to simulate activities that can cause negative impacts on a project, has become a more cost-time efficient method. However, it erquires high level of skills and knowledge to intepret the results correctly. Complex projects with many variables require trained personnel, who may not be assigned to the project.

* '''Training :''' A part of the time that is spent on research and development will have to be allocated for training to ensure proper execusion of the project risk management.

* '''Motivation :''' Employees that are already associated to their mundane activities need to adjust to new measures.

= References =
<references/>