Fundamentals of Risk Management

Project risk 
management
Introduction to project risk management
Projects will be undertaken by organizations for a number of reasons. When alterations 
to strategy are being planned, a project (programme of work) or series of projects 
will often be necessary in order to implement the revised strategy. Also, improve-
ments to operational core processes will require changes that will be implemented
by undertaking a project. Selection of projects and programmes of work define the 
tactics of the organization for the implementation of strategy.
It is important to draw a distinction between project risk management, which is 
about delivering the project on time, within budget and to quality, and the reason 
why the project was undertaken. Project risk management is concerned about the 
risks embedded within delivery of the project. There are also the risks of the project 
and whether the project is the correct allocation of funds. The risks of the project
can be identified by asking whether: 1) the full benefits of the project will actually
be delivered; and 2) this particular project represents the best tactics for delivering 
strategy.
The London Olympics 2012 are an example of a major project that was delivered 
on time, within budget and quality. Whether staging the Olympic Games in London 
in 2012 was a correct decision and whether the legacy of the Olympic buildings
and other infrastructure will be delivered is a much broader issue. This question can 
only be answered by reference to the overall strategic plan for the City of London 
and the UK economy, and answering the question whether staging the Olympic 
Games in London in 2012 was the correct tactic for delivering the overall strategy 
for the City of London.
Project risk management should be seen as an extension of conventional project 
planning. The main requirements for any project are that it is delivered on time, 
within budget and to specification or performance. Risk is often defined in terms of 
uncertainty or deviation from the expected/required outcomes. It is in relation to 
project risk management that the definition of risk being represented by uncertainty 
is most relevant. Within project management, variability of outcomes is very undesir-
able. Therefore, the focus of risk management in projects is often on the reduction in 
the variability of outcomes and the management of control risks.