Engineering Risk management is the identification, assessment and prioritization of risks, followed by a coordinated and economical application of resources to minimize or control the probability of occurrence and the impact of negative events, as well as to maximize the realization of opportunities.
What is Project Risk?
Uncertain events or Conditions Effect on the Project Objectives
(Positive / Negative Effect)
Types of Risk
- Business (risk to overall business)
- Delivery (risk to project delivery)
- Technical (specific to particular technology)
What is considered a risk?
Risks can come from uncertainty in financial markets, project failures, legal actions, regulatory liabilities, accidents, and natural disasters as well as simple human error.
Risk management also faces difficulties allocating resources. This is the idea of opportunity cost. Resources spent on risk management could have been spent on more profitable activities. Again, ideal risk management minimizes spending and minimizes the negative effects of risks.
Engineering Risk management Analysis
Risk analysis is the process of systematically evaluating each identified, approved risk to estimate the probability of occurrence (likelihood) and consequence of occurrence (impact), and then converting the results to a corresponding risk level or rating.
There is no best analysis approach for a given risk category. Risk scales and a corresponding matrix, simulations, and probabilistic risk assessments are often used for technical risks, while decision trees, simulations and payoff matrices are used for cost risk; and simulations are used for schedule risk. Risk analysis approaches are sometimes grouped into qualitative and quantitative methods. A structured, repeatable methodology should be used in order to increase analysis accuracy and reduce uncertainty over time.
Engineering Risk management Risk management should:
- Create value
- Be an integral part of organizational processes
- Be part of decision-making
- Explicitly address uncertainty
- Be systematic and structured
- Be based on the best available information
- Be tailored
- Take into account human factors
- Be transparent and inclusive
- Be dynamic, iterative and responsive to change
- Be capable of continual improvement and enhancement
- Risk Management for Engineers by Dr. Attia Gomaa