What is a Risk?
A risk is any uncertain event or condition that, if it occurs, will
have an effect on your objectives.
Your objectives as a manager are the goals you are trying to
achieve, such as the smooth running of an organization or of a
program within that organization, or perhaps the successful completion
of a project on time and within budget.
Managing risk doesn’t necessarily mean living without any
risk. After all, we take risks merely by getting out of bed in
the morning or by crossing a road. Managing risk means controlling
risks by reducing them to a level at which we feel comfortable,
consistent with the uncertainties inherent in what we are trying
to achieve.
While there are many ways of managing risk, there are five vital
components to any form of risk management:
Risk Context
Risk Identification
Risk Assessment
Response Planning
Monitoring & Control
Risk Context
Risk context is just another word for “whatever is important
to you”. For example, if you are not cost-constrained then
anything likely to increase costs probably won’t be of major
significance to you. However, if you are heavily cost-constrained,
then a lot of your effort will be directed towards controlling
costs. Most of the time we know what our risk context is –
but it helps to identify it explicitly.
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Risk Identification
You must know what the risks are before you can do anything about
them. Risk identification is the process of determining and recording
the events or conditions that could cause you trouble downstream
within your risk context.
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Risk Assessment
Some of the risks you identify could be only minor problems, barely
worth worrying about, while others could be a significant threat.
Sometimes it is obvious which is which, but you have to be careful
here. Quite often our lack of knowledge or outdated prejudices
can cause us to make faulty judgments about risks. You need a
consistent and objective process for assessing risks. More
info 
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Response Planning
Now you know what the risks are and how serious they are, what
are you going to do about them? Do you decide to live with them,
or take positive action to reduce them? If the latter, what sort
of action is best for you? While you don’t want to neglect
a significant risk, neither do you want to spend more time and
energy on it than the risk is worth.
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Monitoring & Control
This where the rubber hits the road. Having identified and assessed
a risk and planned a response to it, you need to ensure that the
right things are happening at the right time. If you have only
one or two risks to worry about you can probably carry all this
in your head, but if, as often happens, you have many risks you
will need a consistent, well-documented process.
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