Project risk management is one of the most relevant components of project management. It is the process of identifying, analysing and then responding to any risk that arises over the life cycle of a programme or project, to help strategy execution stay on track and meet its goals.

Risk management is reactive and proactive. It should be part of the planning process to figure out the risks that might happen during the project life-cycle and how to control these risks if they in fact occur.

A risk is anything that could potentially affect the timeline, performance, or budget of a project. Risks are potentialities, and in a project management context, if they become reality, they become classified as issues that must be addressed. Therefore, risk management is the process of identifying, categorising, prioritising, and planning risks before they become problems.

Usually, project risk management process is organized in the following steps:

• Context analysis, in which the objectives of the RM process are defined;
• Identification of possible risks;
• Qualitative and/or quantitative risk analysis to determine the probability and consequence of occurrence of identified risks;
• Risk response planning to identify how to manage risks;
• Risk treatment to implement the planned actions;
• Monitoring and control of risk to observe the incidence of risks and if treatment is effective or not.

The risk management process should be adapted to the characteristics of the company and the programme.

As an example, in large-scale programmes, risk management strategies might include extensive detailed planning for each risk to ensure that mitigation strategies are in place if issues arise. For smaller projects, risk management might mean a simple and prioritised list of high, medium, and low priority risks.

Risk can be either positive or negative, although most people assume risks are inherently the latter.

Where a negative risk implies something unwanted that has the potential to irreparably damage an initiative, positive risks are opportunities that can affect the execution of the strategy in beneficial ways. Risk management aims to eliminate negative risks and take full advantage of positive risks.

As an example, a positive risk could be related to a programme that could be completed early, or with more customers than planned, or a delay in shipping that might open up a potential window for better marketing opportunities. However, positive risk can quickly turn to negative risk and vice versa, so it is fundamental to plan for all eventualities.

When a positive risk appears, there are different strategies that could be adopted. It is important to quickly understand whether the risk is something that could be exploited, increasing the likelihood that that risk occurs, and if specific actions and resources are needed to take full advantage of the risk. In a certain situation, there may be nothing to do considering the context of the specific project.

An effective application of project risk management throughout the life cycle of a programme or project enhances strategy execution and helps the programme meet its goals.