PROJECT RISK
MANAGEMENT
(KM-09)
OCCUPATIONAL CERTIFICATE: PROJECT MANAGER | NQF
LEVEL 5
MODULE OBJECTIVES
• Understand risk management principles
• Identify project and organisational risks
• Analyse risk probability and impact
• Develop response strategies
• Monitor and control risks during project lifecycle
WHAT IS RISK?
• Risk is the possibility that an event may occur and
negatively affect project objectives
• Risk contains uncertainty and potential impact
• Risks may affect cost, schedule, quality, safety, and reputation
WHY RISK MANAGEMENT
MATTERS
• Reduces uncertainty in projects
• Improves decision-making
• Protects organisational resources
• Increases probability of project success
CATEGORIES OF RISK
• Political risk
• Economic risk
• Socio-cultural risk
• Technological risk
• Environmental risk
• Operational risk
ENTERPRISE RISK MANAGEMENT
(ERM)
• ERM manages risks across the entire organisation
• Integrates strategic, operational, financial, and compliance
risks
• Ensures risks are managed holistically
RISK MANAGEMENT LIFECYCLE
• Planning risk management approach
• Identifying risks
• Analysing risks qualitatively and quantitatively
• Developing risk responses
• Monitoring and controlling risks
PLAN RISK MANAGEMENT
• Defines how risk management activities will be conducted
• Establishes methodology, roles, and responsibilities
• Defines reporting and monitoring mechanisms
INPUTS TO RISK PLANNING
• Project charter
• Project management plan
• Stakeholder register
• Enterprise environmental factors
• Organisational process assets
RISK PLANNING OUTPUTS
• Risk management plan
• Risk categories
• Probability and impact matrix
• Risk reporting formats
• Risk monitoring procedures
RISK IDENTIFICATION
• Process of determining which risks may affect the project
• Generates a comprehensive list of threats and
opportunities
• Creates the risk register
IMPORTANCE OF RISK
IDENTIFICATION
• Ensures potential issues are discovered early
• Improves proactive project management
• Supports better planning and mitigation strategies
SOURCES OF RISK
• Technology failure
• Environmental hazards
• Community or cultural factors
• Performance and operational issues
• Time or scheduling problems
RISK DESCRIPTION STRUCTURE
• A good risk statement contains three elements:
• Cause or trigger
• The risk event
• The impact on the project
RISK ANALYSIS
• Determines likelihood and impact of risks
• Supports prioritisation of risks
• Helps allocate resources effectively
QUALITATIVE RISK ANALYSIS
• Evaluates probability and impact
• Uses probability-impact matrix
• Categorises risks by severity
QUANTITATIVE RISK ANALYSIS
• Uses numerical analysis to estimate risk impact
• Calculates cost and schedule exposure
• Uses simulation models such as Monte Carlo
RISK RESPONSE STRATEGIES
• Avoid the risk
• Reduce or mitigate the risk
• Transfer the risk
• Accept the risk
RISK MONITORING AND
CONTROL
• Track identified risks
• Monitor trigger conditions
• Implement risk responses
• Update risk register regularly
RISK REGISTER
• Central document containing all identified risks
• Includes probability, impact, response plans, and risk owner
• Updated throughout the project lifecycle
BENEFITS OF EFFECTIVE RISK
MANAGEMENT
• Improved project outcomes
• Better use of resources
• Increased stakeholder confidence
• Reduced financial losses
RISK MANAGEMENT PROCESS
FLOW
Plan Risk Qualitative Quantitative Plan Risk
Identify Risks Control Risks
Management Analysis Analysis Responses
RISK PROBABILITY–IMPACT
MATRIX
Very Low Low Medium High
Very High Risk Level Risk Level Risk Level Risk Level
High Risk Level Risk Level Risk Level Risk Level
Medium Risk Level Risk Level Risk Level Risk Level
Low Risk Level Risk Level Risk Level Risk Level
EXPECTED MONETARY VALUE
(EMV)
• EMV = Probability × Impact
• Example: 30% chance of a R100,000 loss
• EMV = 0.3 × 100,000 = R30,000 risk exposure
APPLIED RISK MANAGEMENT
CONCEPT 1
• Risk identification in project environments
• Use of structured analysis methods
• Application of mitigation strategies
• Continuous monitoring and reporting