Risk Identification | Reactive vs Proactive Risk Management |Types of Risks with real life examples

Summary

This video introduces the concept of risk management in project management. It defines risk as an uncertain event that can positively or negatively affect a project’s objectives. The video explores types of risk—business, technical, and project risks—illustrated by real-world examples like Ford's Edsel and the Challenger Shuttle disaster. It also compares proactive and reactive risk strategies, emphasizing the importance of foreseeing and managing risks to minimize potential damage. The video aims to equip students with foundational knowledge of identifying and addressing risks to ensure project success.

Takeaways

• 😀 A risk is an uncertain event or condition that, if it occurs, can have a positive or negative impact on a project's objectives.
• 😀 Risks are uncertain problems that have not yet materialized but may cause issues in the future.
• 😀 Proactive strategies aim to avoid or mitigate risks before they occur, such as wearing a helmet or seatbelt to prevent accidents.
• 😀 Reactive strategies are implemented after a risk occurs to minimize damage, such as using insurance to cover losses from an accident.
• 😀 Risk management involves identifying, assessing, and controlling potential risks to ensure successful project execution.
• 😀 A risk management plan is a document that helps project managers foresee risks, estimate their impact, and define appropriate responses.
• 😀 Business risks involve issues like creating a product that no one wants or losing financial support from stakeholders.
• 😀 Technical risks are related to quality concerns, such as poor design, implementation, or maintenance of a product or service.
• 😀 Project risks involve schedule delays, cost overruns, and resource issues that can negatively impact the project's success.
• 😀 Real-world examples, like the Denver International Airport luggage system, Ford’s Edsel car, and the Challenger Space Shuttle disaster, demonstrate different types of risks.
• 😀 Managing risks effectively helps improve project quality, maintain credibility, and avoid significant financial or operational losses.

Q & A

What is the definition of risk in project management?

A risk is an uncertain event or condition that, if it occurs, can have either a positive or negative impact on a project's objectives. Risks are potential future issues that need to be anticipated and managed.

What is the difference between proactive and reactive risk management strategies?

Proactive strategies involve identifying and addressing potential risks in advance, aiming to prevent issues before they occur. Reactive strategies come into play after a risk has occurred, focusing on minimizing damage and managing the consequences.

Can risks have positive effects on a project?

Yes, risks can have positive effects. For example, the process of managing risks can lead to improvements or upgrades in the system, which could help a project or business grow and avoid larger issues in the future.

What is the purpose of a Risk Management Plan?

A Risk Management Plan is a document created by a project manager to foresee potential risks, assess their impact, and define responses. It helps in predicting, estimating, and controlling risks to ensure successful project completion.

What is an example of a business risk?

A business risk occurs when a product fails to meet market needs or when financial commitments are not fulfilled. For instance, a project might be completed but then found that no one wants the product, or investors pull out their funding.

What is a technical risk in project management?

Technical risk concerns the quality of the project's design, implementation, and maintenance. Issues like poor design or implementation problems can cause technical failures, such as delays or functional defects in the project.

What is a project risk?

Project risk is related to factors such as delays, budget overruns, resource shortages, or customer dissatisfaction. It affects the overall project schedule, cost, and quality of delivery.

Can you explain the concept of reactive risk management with an example?

Reactive risk management occurs after a risk has materialized. An example would be if a company faces a major issue after an employee leaves unexpectedly. The company may respond by quickly reallocating resources or finding a temporary solution to minimize the damage.

How can proactive risk management be illustrated in daily life?

In daily life, proactive risk management can be seen in practices like wearing a helmet while riding a bike, using a seatbelt in a car, or taking insurance. These actions aim to prevent or minimize the consequences of a potential accident before it happens.

What happened with the Denver International Airport's luggage handling system and what risk type was it?

The Denver International Airport invested in a sophisticated luggage handling system that turned out to be far more complex than expected. The project was delayed by 16 months and incurred higher costs, making it a classic example of project risk.