Question

Final Exam Review Explain the Risk Management Process (4 tasks) and explain the 4 ways to respond to risk and provide an example of each. ** This question will be on the final exam

Answer 1

Identification, evaluation, and control of financial, legal, strategic, and security threats to an organization's assets and profits are done through risk management.

What is the risk management process?

A strategy for evaluating risks and opportunities, how they could impact a project or organization, and how to deal with them is known as the risk management process.

The 4 essential steps of the Risk Management Process are:

Identify the risk: Finding all the occurrences that could potentially have a negative (risk) or good (opportunity) impact on the project's goals is the first stage in the risk management process.

Assess the risk: Assessments of risk and opportunity might be qualitative or quantitative. Based on the likelihood and significance of the event, a qualitative assessment examines the level of criticality. In a quantitative analysis, the event's financial impact or benefit are examined.

Risk treatment: An organization must first prepare a treatment plan that details its strategy for managing hazards. The goal of the risk treatment strategy is to lessen the likelihood that the risk will materialize (preventive action) and/or to lessen the impact of the risk (mitigation action). The goal of a treatment plan for an opportunity is to boost the chance that it will materialize and/or to boost its advantages. A response strategy is established for the project based on the type of risk or opportunity.

Monitor and Report on the risk: It is important to monitor and report on risks, opportunities, and their management strategies. The severity of the risk or opportunity will determine how frequently this occurs. Creating a monitoring and reporting framework will guarantee that the right venues for escalation exist and that the right risk responses are being implemented.

What are the four ways to respond to risk?

Risk reduction

This method typically entails creating a different plan of action with a higher chance of success but a larger price tag.

A project team can minimize the danger of working with a new supplier whose reliability is unknown by selecting a supplier with a track record instead of a new provider who provides considerable price incentives.

Accepting and sharing risks

This strategy entails taking the risk and working with others to share accountability for risky behaviors.

By creating a joint venture with a business established in a particular country, for instance, many companies working on foreign projects will lower the political, legal, and employment risks connected with overseas ventures.

Risk mitigation

Risk mitigation entails making an investment to lower the risk associated with a project.

For instance, businesses frequently purchase a fixed exchange rate while working on overseas projects to lessen the risk posed by exchange rate swings.

Risk transfer

Risk transfer is a risk management technique that transfers project risk to a third party.

The purchase of insurance is a well-known example of risk transfer. The insurance provider assumes the risk instead of the project.

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