Fundamentals of Risk Management

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Project risk management
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There will be uncertainties within any project related to events, conditions and 
circumstances. The requirements of project risk management are to identify the 
events that could give rise to uncertainty and respond to the event appropriately.
The style of risk management most relevant to project risk management is control 
management.
As well as managing the risks and uncertainties in a project, the project manager 
should also be looking for opportunities that may arise when certain developments 
within the project are more favourable than expected. Project risk management 
should take account of these positive developments and ensure that the structure for 
managing risks in projects is sufficiently flexible for the opportunities to be recog-
nized and benefits obtained.
For example, consider a project of building a new road where one of the bridges 
can be completed well ahead of schedule because of favourable ground conditions. 
There may be an opportunity to build the benefit of this early completion into the 
future project plan, so that this gain is not lost in the overall timescale for delivery
of the final completed project. For a project as large as building Olympic venues,
the ground conditions and the level of ground contamination represent significant 
variables that can have a huge impact on time and cost.
Development of project risk management
Project risk management is a type of control management. Projects may relate to the 
delivery of a finite, specific or tactical development or process enhancement, such as new:
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construction;
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products;
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IT systems;
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technology;
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markets.
Projects and enhancements are fundamentally important to organizations. Most 
projects are undertaken either to keep ahead of competitors or to catch up with 
them. In the context of risk management, the project itself may be considered to be 
a risk reduction exercise that is designed to achieve specific management objectives. 
The only purpose in spending money on business enhancement projects is to achieve 
a business or value-for-money advantage.
Project risk management is a well-developed discipline, with risk control and
(especially) event management as the risk management activities that are most im-
portant. Project risk management is one of the more sophisticated and successful 
areas for the application of risk management tools and techniques.
The requirement for all projects is that they are delivered within the defined cost, 
time and quality parameters. Quality is the relationship between specification and 
performance. Some projects require that the outcomes comply with a certain specifi-
cation, such as a new floor in a restaurant that has to be constructed from specified 
materials. Other projects may require a desired level of performance, such as specifying 

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