An Effective Risk Management System - 2153 Words

Risks are sometimes described as â€Å"known-unknowns† (APM, 2012): events which may happen, but may not. Risk Management is focused only on those uncertainties that have the potential to impact the achievement of one or more objectives of the organization (Murray-Webster and Williams, 2010). This means that risk management should not address all risks, only those relevant to the project objectives. This essay shall outline how to achieve an effective risk management system, and how this contributes to achieving project success and hence corporate aims and objectives. This shall be illustrated by relating the theory to two real project-based businesses. Business (a): BAE systems, a large engineering company with many complex,†¦show more content†¦The amount of contingency included in a project plan may be seen as a trade-off (Chapman and Ward, 1996). The higher the risk apatite, the more variance is allowed on the project plan. The level of management contingency also needs to be decided. This allows for unknown-unknowns: risks which have not been identified (Cayford, 2014). Business (a) may decide to carry out some high-risk projects: not only is there a higher chance of failure for this project, there is a higher chance of gain, both for the project and the business as a whole. For example if one ship news is a new piece of technology and the company patents it. This may draw in new work. Although the customer may not appreciate being used as a guinea pig, contracts may be drawn up to stipulate who takes the risk (APM 2012), as well is reaping the benefits. Even if the project meets the success criteria in the business case, some projects could be improved. Shahu et al. (2012) makes the case that some projects could have given more benefits if opportunities had been utilized and not just used as a way to balance out the negative risks. This is distinct from Gold Plating which means adding superfluous product features, which using up money and time which could have been saved (APM, 2012). Here, any