NAME : KWANELE BHEBHE

STUDENT NO : L0191124R

PART : 2:2

FORMAT : BLOCK

FACULTY : HUMANITIES AND SOCIAL SCIENCES

PROGRAMME : DEVELOPMENT STUDIES

MODULE : PROJECT PLANNING AND MANAGEMENT

COURSE CODE : HSDS 2224

QUESTION : EXPLAIN THE IMPORTANCE OF RISK

MANAGEMENT IN PROJECT MANAGEMENT
From time immemorial, businesses and communities having been engaging in the
implementation of various projects that meet their needs and objectives, and the practice has
increased significantly throughout the years. Most recently, with the advent of the novel
COVID pandemic, projects of various sorts have been implemented to reduce the effects of
the virus which include reduced profit margins (for profit-making businesses), increased
poverty and food insecurity (for non-profit businesses, i.e. Non-government organizations).
With this in mind, in order to meet set goals, it has been important for risk management to be
used as a mechanism to reduce the impact of any hazards that may hinder the progress of the
project. Having thus said, the ensuing essay will therefore seek to elaborate on the importance
of risk management in the practice of project management.

Firstly, it would be wise to define some of the key terms associated with the discussion at
hand. A project can be simply defined as a group of actions and resources aimed at producing
a certain result while taking into account time, quality, and cost restrictions, and which
frequently entails change. (Lake; 1997). Project management, on the other hand, is the
application of information, skills, tools, and procedures to project activities in order to fulfil
project objectives. The process of planning and organizing an organization's resources in
order to complete a given task, event, or duty. Project management is usually a one-time task
rather than a continuous one, and the resources controlled include both human and financial
capital. Engineering projects are frequently related with project management because they
typically contain a "full" set of components that must be finished and put in a specific order
in order to create a working result, but this does not mean that projects that are not
engineering related do not have to take part in the project management practice.

Another concept worth defining is that of risk management. Risk management is the process
of recognizing, analyzing, and responding to risk factors during the course of a project's life
cycle and in the best interests of the project's goals. Risk management that is done correctly
takes control of potential future events and is proactive rather than reactive. Effective risk
management strategies enables one to recognize the strengths, weaknesses, opportunities, and
dangers that any project faces. One can be prepared to respond to unforeseen situations if
they plan ahead. Defining how any risks will be handled is sure to guarantee how you can
recognize, minimize, or eliminate problems as they arise to ensure the success of your
project. Risk management is therefore vital to successful project managers since
accomplishing project goals is dependent on planning, preparation, results, and evaluation, all
of which contribute to achieving strategic goals. Before delving into some of the important
aspects of project risk management, a brief understanding and appreciation of the risk
management process would be suffice.

Figure 1: Risk Management Process (Source – Invensis; 2021)

 Risk identification - According to Invensis (2012), it is critical to identify all of the

many types of hazards that an organization may encounter. These hazards can be
manually recorded, but if the firm has deployed a risk management platform, the risk
identification process becomes much easier. The obtained data is immediately entered
into the project management system.

 Risk Analysis - Risk analysis aids businesses in determining how to respond to these
threats based on their severity. It also aids in comprehending the relationship between
the risk and the number of business components it will touch. Simply said, the larger
the risk to an organization, the more business components are at danger.

 Evaluating the Risk - Dinu (2015) states that, after a thorough study of the risks,
they must be prioritized and graded in order of severity. When firms employ a risk
 management solution, the solution already has several risk categories built in, which
categorizes the risk according to its severity.

 Treating the Risk - It's time to act when the dangers have been assessed and
prioritized. Every threat to the organization or the project must be mitigated or
avoided. If risk treatment is done manually, team members must contact each
stakeholder individually to discuss the issues. Typically, these discussions are spread
out over email, several documents, and numerous phone calls, lengthening and
complicating the process. This would entail going into the field to resolve any
outstanding concerns for development organizations.

 Monitoring and Reviewing the Risk - Over time, organizations will find that some
hazards cannot be eradicated and will remain pervasive. External risks, such as market
and environmental concerns, are examples of ongoing risks. To make the mitigation
procedure more effective, these hazards need to be regularly monitored (Junkes et al;
2015)

With the process being explained, it is at this stage where the discussion focuses on the main
thesis – the relevance of the process to the field of project management.

IMPORTANCE

1. Assists in attainment of set financial obligations - A project's success does not

necessarily imply that it was completed on time and under budget (Carvalho; 2015).
The execution of a project within budget restrictions is one factor that determines its
success. Regardless of whether it is a for-profit or non-profit organization, all
businesses must adhere to tight financial restrictions that may have been established to
ensure the success of the executed project. According to Lewis (2013), NGOs must
demonstrate that money donated to them by donors was spent for the purpose stated in
the proposal documents. Only with proper risk management and monitoring can a
project be completed on time and on budget, since all risks are avoided, and there are
no longer any chances of a catastrophic mishap disturbing the budget and planning. It
 is simple to raise the likelihood of success by lowering and eliminating negative risks,
allowing projects to be finished on time, by establishing risk management strategies
for the organization. This enables project managers and workers to keep to the budget
and meet their objectives. Initiatives will face difficulties if risk management
techniques are not in place. Chapman (2003) articulates that effective risk
management strategies allow your company to optimize profits while lowering
spending on non-profitable operations. Effective leaders focus continual effort based
on outcomes obtained through diligent research, notwithstanding the odds.

2. Aids in the Successful Finishing of a Project - It is wise to wonder what would

happen if one didn't manage the risks in their project. Consider the following
scenario: someone develops a project and starts working on it without first analyzing
if it poses any dangers, such as security. Assume they're in the middle of a project and
are unable to complete it due to a security concern. In the end, they would spent the
project's huge expense, labour, and resources for little. This is prevented by risk
management. All project-related risks are managed through proper risk management,
ensuring project completion.

3. Communicating with Stakeholders - To ensure that projects run smoothly, effective

project managers communicate their plans to project sponsors, stakeholders, and team
members. This sets expectations for people who provide funding and are impacted by
the outcomes. It ensures that the project runs smoothly from beginning to end, with no
gaps in between. By detecting, preventing, and dealing with possible hazards ahead of
time, one can ensure that their people can respond successfully when situations
develop and demand action.

4. Prioritizing Risks – Some risks have a larger likelihood of affecting project progress
than others. To accomplish so, Glaener (2019) assesses risk tendencies and develops
contingencies. This prioritization technique assists the project management team in
managing risks that have a high possibility of occurring and a bigger influence on
project growth.
 5. Helps in Exploring New Opportunities - Risk management not only aids in the
analysis of hazards, but also aids in the exploration of new opportunities for a
company. Employees consider other superior alternatives that deliver comparable or
better results with less risk and provide additional opportunity for an organization to
thrive when faced with one risk. Risk management in project management allows a
corporation to think in three dimensions, which allows it to create more innovative
options.

Therefore, in summation, it can be said that risk management is, in reality, a necessary
component of any endeavour. By recognizing and assessing risks, managers can create a plan
to manage or prevent them. This will help keep the project on track and on pace to meet its
objectives. Risk management should thus be a continual action in order to alter the set
strategies of desired change logics as needed. By following these rules, you may effectively
manage risk in your projects and ensure their success.
REFERENCES

Carvalho, M.M.D. and Rabechini Junior, R., (2015). Impact of risk management on project
performance: the importance of soft skills. International Journal of Production
Research, 53(2), pp.321-340.

Chapman, C. and Ward, S., (2003). Project risk management processes, techniques and
insights. John Wiley & Sons Ltd.

Cooper, D.F., Grey, S., Raymond, G. and Walker, P., (2005). Project risk management
guidelines. Wiley.

Dinu, A.M., (2015). The importance of risk management in projects. Calitatea, 16(S3),

p.162.

Junkes, M.B., Tereso, A.P. and Afonso, P.S., (2015). The importance of risk assessment in
the context of investment project management: a case study. Procedia Computer Science, 64,
pp.902-910.