PM_584_Week_4_Individual_Assignment_Risk_Management_Planning...

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1PROJECT RISK MANAGEMENTPM 584 – Risk Management PlanningUniversity of Phoenix
2PROJECT RISK MANAGEMENTRisk Management Planning Risk identification is only significant to project success if it results in concrete plans with responsible parties named and resources assigned. The next step after identifying and prioritizingrisks is to determine whether to address those risks through prevention, mitigation, risk sharing, insurance, or retention. Then the project manager must update the risk register with the management approach and the recommended course of action. Finally, to ensure project success, those risks with the highest priority must have a detailed risk management action plan. Forms of Risk Management Once the project manager and stakeholders have identified the high priority risks associated with a project, they must make decisions about how to manage each risk. According to Cooper, Grey, Raymond and Walker (2006), there are five broad categories of risk management: risk prevention, impact mitigation, risk sharing, insurance, and risk retention.Risk PreventionWith risk prevention strategies, the organization attempts to minimize risk exposure by reducing the likelihood that a risk will occur (Cooper et. al., 2006). Forms of risk prevention include regular inspections and audits, skills advancement and training, formal quality assurance procedures, additional planning, preventative maintenance, and addressing the risk in a contract with a vendor or business partner (Cooper et. al., 2006). One of the risks from the RCMD Scenario which can be addressed through risk prevention is the risk of the enterprise resource program (ERP) being unable to accommodate better than 85 percent of the company’s current
3PROJECT RISK MANAGEMENTbusiness processes and terminology. This risk must be addressed in the contract with the vendor. Doing so achieves both risk prevention and risk sharing with the same measure. Impact Mitigation Impact mitigation strategies are often appropriate ways to manage external risks over which the organization has no control. When it is not possible to reduce the likelihood of a risk occurring, minimizing the impact of the risk through risk mitigation is an appropriate management approach (Cooper et. al., 2006). Forms of impact mitigation include contingency planning, crisis management plans, contractual terms, regular audits and checks, formal quality assurance processes, and structural barriers (Cooper et.al, 2006). One of the risks in the RCMD ERP implementation project that must be addressed through impact mitigation is the risk of raw material price increases and the potential negative impact on cash flow and project funding. This is a factor over which one has no control, but a contingency plan triggered by raw material cost

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