1.a.Risk-tolerant helps an investor know how to allocate their assets (Shrier, 2015). Project managers ought to understand the risk level the company is willing to take to complete a certain project. First, he needs to understand the companies risk attitude, i.e., whether the company is a risk-averse company (invest less than its return), risk taker company (invest more than its return) or whether it's a risk-neutral company.
A project manager needs to understand the organization’s goals for him to determine the risk tolerance of a company. A company’s resources are directed according to the set goals, and hence project managers need to avoid costly mistakes by understanding the company's goals, as differing from those goal means differing from risk tolerance (Gerrans, Faff, & Hartnett, 2015)
A project manager must understand the risk-taking capacity of the company, i.e., the ability of the company to absorb/ stomach losses in an advance risk case. If a company cannot afford to cater for incurring losses, it would be wise for the project manager not to undertake the project.
A project manager must understand whether the company has risk management capabilities in determining the company’s tolerance. He should ask himself whether the organization have the sufficient and qualified personnel to manage risk or whether the company has effective controls for risk management.
b.Risk tolerance is determined at several levels in a company such as the top level management. This level consists of people like the CEO's, general managers and managing directors, and they deal with panning the goals/ activities and the investment choices of the business. If the activities are critical, it means more risk and hence the need to outline the risk tolerance levels (Bashir, Shaheen, Batool, Butt, & Javed, 2014)
Risk tolerance is also determined in middle-level management where professionals such as managers and assistant managers are found. The role of these managers is to plan the activities of the organization and the way they handle these activities determine the extent of risk. Finally, risk tolerance is also determined at the operation level where employees in these levels perform day to day activities and in doing these activities they put the organization at risk every other day hence the need for risk tolerance.
c.There are different ways by which a project manager can communicate risk appetite. First, he can use risk appetite statement that reflects acceptable level risk when performing their objectives, i.e., use of color graph indicating acceptable verses unacceptable risk levels.
The project manager can also communicate risk appetite by listing the categories of risks, e.g., using generic categories such as political, environment and economic or use of tailored risk categories such as data security and privacy, system design and system availability (Aven, 2013).
A project manager can communicate risk appetite by expressing these risks for organization objectives, e.g., in a health set up the organization runs within a low-risk range, and the health obligation will take priority over all the other business.
2.a.Risk identification is the process of determining and figuring out possible problems and uncertainties that might affect a project in future. A project manager ought to put up an entire possible project management plan to figure out the possible problems and all this is put together is called inputs to risk identification.
b.Tools and techniques of risk identification inputs help managers to identify risk and their impacts and also identify the best input data. Such tools and techniques include Delphi technique; this is a technique of gathering information from experts selected anonymously by use of a questionnaire, and their responses are compiled to reach a consensus.
A project manager can use risk identification analyses such as SWOT analysis (strength, weakness, opportunities, and threats) and helps the manager to identify the strengths and weaknesses and hence determining the risks (Reville, Dalal, Caston, Loughran, & Shetty, 2014). Other risk analyses include assumption analyses which review accuracy and consistency of a project and checklist analyses which are used to determine completeness of a project.
Root cause analysis and diagramming techniques. A project manager uses root cause analysis to identify the reasons that caused a certain risk while diagramming technique include flow chats or system diagrams that show the relationship in the variances.
Project managers can us brainstorming technique as a risk identification input (Taroun, 2014). Here, a project manager organizes a group of experts and they focus on risk identification and later come up with conclusions used in the project. Other techniques include the use of interview where the manager poses questions and uses the answers as solutions for solving risks (Haimes, 2015).
3.A project manager can use quality tools to identify and quantify project risks. A SWOT analysis helps to determine the strengths and the weaknesses of a project. The shortcomings in the analysis are such as bad publicity due to a projects failure and low recognition in the market while the threats include increase market share by competitors and new regulations, these help to identify risk and quantify the extent to which the risk might extend.
Stochastic simulation method (Monte Carlo simulations) helps to identify and quantify project risk (Pritchard, & PMP, 2014). These are computerized simulations which indicate the probabilities and whose objective is to find uncertainties of some dependent and independent variables and the relationship between the two can provide information on whether the risk is too high or low to proceed and the extent of contingencies.
The multivariate statistical method can help identify and quantify project risk. These are derived from historical data. Analysts build statistical models either linear or nonlinear based on data from past project and then compare the project with this model. Comparing with previous data helps to identify where the risk would be and the quantity of such risk and its consequences.
A project manager can use system dynamics models to detect and quantify risks in projects. This helps to understand a complex project system, i.e., nonlinear behavior using stock, table functions and feedbacks loops over time. Because feedback loops are used it can be used to evaluate impacts of various failure hence identifying the quality of risks and also the root causes of the project risk hence identifying a risk.
The additive model used in combination of risk factors can be used to identify and quantify risks in a project. This is the basis for PERT technique for determining risks in the completion of projects. This summation can include the addition of total cost or project duration derived from probability theory hence identifying and qualifying risks from dependable and undependable variables.
4.a.Risks are crises before they happen, a project manager can use several methods and tools to anticipate potential risks before they occur. Such methods include horizon scanning; this is a technique that looks at the future to try to see the possible risks by looking for the specters of the future, e.g., the economic condition that may affect a project, changes in technology and security terror and threat.
A project manager can us fault tree analysis; this tool identifies a possible root cause of the problem. Here, lines are drawn in the form of inverted tree then placed on top of a diagram identifying the causes that led to a certain event. This method not only anticipates risks but also searches for solutions to the problem.
A project manager can use direct observation; a team of experts is assigned to a certain project to observe any abnormal events not working in the appropriate alarming the managing team to take preventive measures.
Use of surveys and structured interviews (Smith, 2017). A project manager can interview colleagues and persons with more experience in project management by listening, taking notes and doing a follow-up on the questions. He/she can also conduct surveys and implement the results of the study and interviews to prevent future risks.
Incidence analysis. This involves examining events in a project, the previous unidentified risks are presented, and the project manager must identify the reasons that led to their occurrence, and this register of these events helps the project manager to avoid future risks.
b.A project manager must have several quality capability skills and experience in anticipating and mitigating risks. Such capabilities include; attention to details. A project manager must have an eye for details to identify potential hazards before they happen.
A project manager must have technical understanding capabilities of the technology involved in the project and know the implication on the project (Haimes, 2015).
A project manager must have a flexible capability by being able to quickly adjust his plans if he senses a risk and avoids such risk from happening.
A project manager must be an active listener during the interviews he will conduct and while brainstorming with the other experts in project management.
A project manager must have continuous learning capability (Smith, 2017). He/she will learn and understand a particular risk and know how to handle such risk in future.
5.A risk is a double-sided concept as it involves both negative (threats) and positives (opportunities) and a project manager must know that a risk does not have to be negative always. A project reputation risk can create an opportunity to oversee issues, e.g., a reputation risk that leaks on the internet can create a huge risk because of the speed and velocity of the social media at the same time this creates an opportunity to see the reaction of the stakeholder and also understand the competitor's dealings.
A project compliance risk creates an opportunity to save on cost. When a business is non-compliance with the regulations it conducts an audit to verify its compliance and to manage the regulation; a project manager then implements automated audit management software which leads to monitoring well their regulations and hence reduce audit cost and time.
Risk of losing project consumers can create an opportunity to increase profit ( Kim, Lee, & Choi, 2017). Consumers increasing demand on a project can result in a risk of losing market share and to mitigate the problem a project manager can change the project to include the needs of the consumers, and hence the product becoming more marketable thus improving profit margin.
Risk management is an opportunity to grow (Aven, 2013). Businesses put a lot of additional strengths to mitigate risks and can understand all the worst- case scenarios, and if a project succeeds in risk management, it is less likely to be caught by surprise in dealing with such matters hence resulting in their growth.
6.Learning lessons from past project are vital to improve on a future project and get a better outcome. Understanding what worked and what did not work is very crucial to the success of a project as it helps to mitigate possible risks. This is necessary from the initial stage to the closing stages as the project manager should not only collect, validate and prioritize but also reuse such lessons to identify risks before they happen to lead to continuous improvement
A project manager can use different methods in tracking lessons learned. First, he/she can use an integrated approach which helps to incorporate lessons learned earlier through project reporting within the initial management plan. (Kerzner, 2013). This approach has different steps from meeting staff to disseminating lessons either by using websites, newspaper or holding workshops on lessons learned and this helps to identify potential risks.
Use of post-facto method which is a more detailed method and is usually done when managers think things should have been done more differently (Johnston, Pojana, Zuin, Jacobsen, Møller, Loft, & Wallin, 2013). This approach makes project manager and all the interested parties look at the success and the shortcomings of a project, and it involves a table with steps such as identifying lessons learned, choosing data collection and dissemination strategies. The lessons learned in this approach helps in future risk identification.
The last method for tracking lessons learned is combining the integration method and use of post-facto methods. This approach and allow wider analyses as it helps in collaboration of all the partners responsible for project implementation and almost all the possible risks are identified at this stage.
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Bashir, T., Shaheen, S., Batool, Z., Butt, M. H., & Javed, A. (2014). The Impact of Demographic Characteristics and Risk Tolerance on Investors’ Risk Perception and Portfolio Management.
Aven, T. (2013). On the meaning and use of the risk appetite concept. Risk Analysis, 33(3), 462-468.
Reville, R. T., Dalal, S. R., Caston, L. A., Loughran, D. S., & Shetty, K. (2014). U.S. Patent No. 8,671,102. Washington, DC: U.S. Patent and Trademark Office.
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Pritchard, C. L., & PMP, P. R. (2014). Risk management: concepts and guidance. CRC Press.
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Johnston, H., Pojana, G., Zuin, S., Jacobsen, N. R., Møller, P., Loft, S., ... & Wallin, H. (2013). Engineered nanomaterial risk. Lessons learned from completed nanotoxicology studies: potential solutions to current and future challenges. Critical reviews in toxicology, 43(1), 1-20.
Kerzner, H. (2013). Project management: a systems approach to planning, scheduling, and controlling. John Wiley & Sons.
Kim, J., Lee, J., Lee, J., & Choi, I. (2017). An Integrated Process?Related Risk Management Approach to Proactive Threat and Opportunity Handling: A Framework and Rule Language. Knowledge and Process Management, 24(1), 23-37.
Smith, D. J. (2017). Reliability, maintainability, and risk: practical methods for engineers. Butterworth-Heinemann.
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