What is risk management? An introduction

A project team is developing a new keyboard. The project manager asks the team to identify potential risks that might arise during the development. This raises the question of why risks should be important at all, given that the production of a keyboard may seem like a relatively safe endeavour - after all, millions of people use keyboards every day.
 
Despite this assumption, it is important to be prepared for potential risks. This is where risk management comes in. It allows unforeseen problems to be identified at an early stage, thereby ensuring the success of the project.

Before looking at the concept of risk management, it is important to understand what a risk is. A risk can be defined in a number of ways. In project management a project risk is described as a possible negative deviation in the project process (relevant hazards) from the project plan due to the occurrence of unplanned or non-occurrence of planned events or circumstances (risk factors).
 
Risks can also be seen as an undertaking that may be associated with a disadvantage. They represent uncertainty and can affect the achievement of objectives. A risk is therefore an uncertain event that may or may not occur and therefore has a probability of occurring. If it does occur, both opportunities and threats can arise. Opportunities are positive deviations from the objective, while threats are negative. Risk management is needed to assess these risks.

Risk management is a systematic process based on the principles of identifying, assessing, handling, controlling, monitoring and documenting risks. The aim of this process is to identify risks at an early stage and to develop appropriate recommendations for dealing with them. This allows the customer to choose between different courses of action. Each step of the risk management process is transparent and can be documented, ensuring clarity and traceability.
 
As risks are unavoidable in any project, it is essential to identify them early and manage them appropriately. Threatening risks should be avoided or eliminated before they lead to serious problems, while opportunities arising from risks should be actively pursued. Relying on experience alone is not enough; a structured risk management approach is required to systematically identify and assess risks.
 
Although there are no standard guidelines for risk management, as each project has its own unique requirements and conditions, it is important to establish clear rules. A transparent and open communication process promotes acceptance and commitment among all stakeholders.

The primary objective of risk management is to ensure proper, technically sound, timely, legally secure and economically successful project delivery. It enables the early identification of negative deviations in the project process and allows proactive measures to be taken to minimise potential negative effects. At the same time, risk management seeks to balance risks and opportunities in order to achieve the best possible project outcome. This process is continuous and accompanies the entire project to ensure optimal responsiveness to change at all times.

The benefits of risk management are numerous. By focusing on the few risks that have the greatest impact on a project, scarce resources can be used efficiently. If these risks are identified early and successfully mitigated, potential problems can be avoided, saving time and effort. This increases the likelihood of delivering products on time, with the right content, to the required quality and within the planned budget. Improved planning and project execution also has a positive impact on employee motivation. An established risk culture allows calculated risks to be taken, which reduces the fear of uncertainty and helps people develop a better understanding of how to deal with challenges. As a result, opportunities can be actively pursued rather than focusing solely on mistakes and problems. In this way, risk management plays a key role in maintaining competitiveness and ensuring project success.
 
However, risk management also has its drawbacks. It can be costly, as it requires an additional area to be built up alongside existing structures, which ties up further resources. In addition, risk management is often resisted because a comprehensive analysis requires the disclosure of all risks, which can expose system weaknesses. In addition, many risks can only be assessed subjectively and there is often a lack of experience in dealing with such analyses, which can affect the acceptance of risk management. This can lead to risk management being perceived as an intrusion into day-to-day project work, complicating established workflows.

The benefits of risk management demonstrate how critical this process is to the success of a project. However, the challenges involved should not be underestimated. In particular, the fears and concerns of employees must be taken seriously. It is advisable to involve them in the process at an early stage to strengthen their position and minimise resistance. It is also important not to leave risk assessment to just one person, as different perspectives may interpret the same risk as a threat or an opportunity.
 
Successfully implemented risk management thus provides a solid foundation for project success. It is in this spirit that the staff collectively decide to embark on the path of risk management and apply it specifically to the project.