Executive managers are responsible for making decisions that ultimately benefit the corporation’s shareholders. Whether it is a non-profit organisation, profitable company, a governmental organization or an education-focused business, the executives should have one goal in mind – maximize benefits to the organization and to their shareholders. To do that, the company must minimize negative outcome risks while maximizing the opportunities that positive outcome risks may present.
All projects begin with goals. The point of the project is to meet and satisfy the goals the stakeholders agreed on when the project was undertaken. Risk is what prevents you from meeting those goals.
For management to make sound decisions, they need information for risk identification and analysis in determining a go or no-go decision regarding any project. Risk management, unfortunately, is probably one of the most often skipped project management knowledge areas on small-to-medium-sized projects. Many project managers take the attitude that they’ll deal with the risks when and if it occur. They do not see the need or benefit to take the time to identify and plan for risks before starting the work on the project.
Risk can be classified into five groups or categories:
- Business Risk – The exposure the organisation faces upon project failure;
- Project Risk – The factors which could cause a project to fail;
- Production System Risk – The risks the organisation faces in continuing support of the system, product and business processes delivered by the project;
- Benefits Realisation Risk – The factors which could lead to a lack of benefits realisation and
- Personal Risk – The impact on your personal career and life if the project fails or succeeds.