This chapter describes how risk management is the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability or impact of unfortunate events or to maximize the realization of opportunities. The National Institute of Standards and Technology, actuarial societies, and ISO standards has developed various risk management standards. The standards (methods, definitions and goals) are created in the context of project management, security, engineering, industrial processes, financial portfolios, actuarial assessments, or public health and safety.
TopIntroduction
Risk word is derived from the Italian verb “Risicare.” In the 16th century; the science of risk management was discovered. The root of risk management is the concept of probability that was developed to help better estimate human’s chances in games. There is variety of description for the term “risk” but none is generally accepted. All definitions implicitly include two features: uncertainty (an event may or may not occur) and loss (an event has undesired effects).
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Risk Management: To maximize the awareness of opportunities by minimizing, monitoring and controlling the probability of unfortunate events is known as Risk Management. It’s the procedure to identify, assess and prioritize the risk followed by synchronized and inexpensive application of resources.
The improbability in financial markets, fear from project failures (at any phase such as during designing, development, production, or life-cycles), legal liabilities, credit risk, accidents, natural causes and disasters, purposeful attack from an opponent, or events of uncertain or unpredictable root-cause are the main sources of risk. The two types of events are considered during risk management process are: (a). Negative events (b). Positive events. These can be classified such as the events that are negative falls into the category of Risk whereas the positive events are classified as opportunities.
The National institute of Standards and Technology, actuarial societies, and ISO standards has developed various risk management standards. The standards such as methods, definitions and goals are created in the context of project management, security, engineering, industrial processes, commercial portfolios, actuarial analyses, or public health and safety.
To lessen, observe, and constrain the probability or impact of tactless events or to increase the realization of opportunities. Risk management is the recognition, estimation, and arrangement of risks followed by coordinated and commercial application of resources.
There are assorted levels of risks that are evolved during the life cycle of a product. At every stage, be at planning, designing, development or implementation there is risk involved. Thus at is always advised to access the risk at the early stages so that at can be avoided to large extent.
The majority risks that are encountered during the development of a project are:
There are various internal risks associated with each stage of the project, where as some risk are beyond the scope of project team. Such risks are external risks that could be arising from outside the organization.
There are various phases following which the risk can be identified, assessed, analyzed, evaluated and finally treated as shown in Figure 1.
Before the start of any project various risk factors should be considered so that preventive measures could be taken before it may lead to a serious problem. List of risk factors are encountered in real life cases and their preventive measures are discussed in Table 1.