To what degree is it really possible to meaningfully manage risks in project management?

MANAGING PROJECT RISKS

Running Head : MANAGING PROJECT RISKS

MANAGING PROJECT RISKS

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Managing Project Risks

Introduction

Uncertainty is a common feature of life . of us have lived our lives knowing exactly what is going to happen tomorrow , or the day after . In previous ages , this fact is apparently easier to accept . This is due to the less demanding nature of business and other activities inside a man 's life

However , for a project manager who lived in the 21st century uncertainty is the horror

of life . People today -especially business people- tend to adopt the `achievement oriented ' frame of mind , which mean that they became less tolerant to excuses and therefore , less tolerant to uncertainties . There is increasing need to define the things that causes life to be uncertain , especially when managing a business project where superiors and investors demanding for immediate and guaranteed results

The truth is obviously simple . Nothing of this world is certain However , this simple fact does not -or perhaps should not- prevent business owner and investors to demand efforts from project managers to minimize the impact of uncertainties within each project . Risks -because of uncertainty- have been an increasingly unacceptable factor in managing a business project , and this has put increasing burden on the shoulders of project managers

However , it is interesting to find out to what extent efforts of managing risks could really be possible . What sort of activities should project managers perform in to meaningfully manage risks within their projects ? Within this , we are discussing risks and risk management within a business project . I am using several literatures and case studies to elaborate how modern perspectives define `sufficient risk management ' in managing a project

The Nature of Risk and The Need for Risk Management

As implied before , risks have strong correlation with uncertainty . In a more careful definition , risks are unforeseen events , which can negatively influence the undertaking of a project . Despite being created by uncertainties , risks themselves are a certainty ` (Managing Risks 2005 . Risks exist in every project and every task known to staffs whether they are related to time , money or human resources . Having realized this reality , risk management has been an inseparable part of project management today

An article by Bruce Chadbourne stressed the importance of having a properly manage risk management programs . He illustrated that the absence of a well-managed risk management program will bring the project manager into the situation where mayhem erupts as each managerial decision is made . On the other hand , a well-managed risk management program will provide managers with the knowledge to predict future problems and methods to deal with them

Furthermore , the need for a sound-risk-management system also comes from the following activities

Project Selection

Investors and sponsors of the project generally needed to understand the risk and opportunities generated by a project . The general tools to assess risk and opportunities are the Net Present Value (NPV calculation , and Internal Rate of Return (IRR ) calculation Nevertheless...