Risk Analysis as you might have seen in the previous chapter is very vital to efficient project risk management and as you might have guessed will have loads of benefits. The purpose of this chapter is to elaborate on Goals and Benefits of this process.
Goal of Risk Analysis
The goal of risk analysis is to analyze a risk and gather more information about the risk like its probability, impact, priority etc. so that we can appropriately address them.
The above is a very generalistic goal description of this process.
But, before we can analyze risks, we must first define the standard for risk impact and probability. This activity is called Risk Assessment. Everyone in the team including the stakeholders must be on the same page on how we gauge a risks probability or impact. We should not proceed to the risk analysis stage without this information.
I have used the term “Should Not” instead of “Cannot” in the previous statement about proceeding to risk analysis without risk assessment. Are you curious why I did that? Well, you can always proceed to risk analysis without this information. Nobody can stop you. But, how effectively you can analyze risks without this information is a very big question mark here. That is why I have said “Should Not”
Since Risk Assessment is a distinct subset of this risk analysis activity, let us first take a look at its benefits and then we will list down the benefits of risk analysis.
Benefits of Risk Assessment:
1. Allows the risk management team to focus on higher priority risks
2. Makes sure that everyone is on the same page in terms of dealing with risks
3. Forces organizations to define the guidelines for risk assessment and analysis
4. It considers risk impact and probability jointly
Benefits of Risk Analysis:
The benefits of Risk Analysis include everything we saw as benefits of risk assessment plus
1. Provides clarity on the damage or the opportunities about the risk
2. Increases the confidence level of the team in dealing with risks
3. Arms us with enough information to deal with those risks in the best possible way
4. Allows us to control risks with a greater success rate
5. We can take better informed decisions about handling risks
6. We can create better responses for the risks
7. Helps us foresee what may happen in future which can help us decide better
Do you remember that I talked about “Uncertainties” and their correlation to risks in one of our earlier chapters titled “Managing Uncertainty”? Uncertainties directly result in risks. Risk Analysis deals with reducing this uncertainty by analyzing and identifying more and more information thereby reducing the uncertainty about things which in turn reduces the risks.
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