Risk management is an approach in which an organization explores identifies, analyzes and mitigates the risks that can affect a project, according to project-management.com. The purpose of risk management is to protect the project from financial, social, cultural, environmental and other related risks.
The techniques used in project risk management vary according to the nature of the risk. An action plan is used to outline the mitigation process as a series of steps and to identify the effect each risk will have on the project outcomes. Risk managers assess various risks in order to avoid any significant disasters and enhance revenues by saving expenses. Risk management also serves as a means of exploring new opportunities that encourage competitive advantage.
Quality and assessment tools are used to determine and prioritize risks for assessment. During the risk assessment process, risks are identified, prioritized and tracked according to their relative importance. When the project manager and organization team identifies a risk, a contingency plan is created to mitigate the risks. After this stage, a risk log is created to inform both the team members, as well as stakeholders, about what is going on. In order to ensure the appropriate implementation of project risk management, risks need to be tracked on a daily basis by the project manager.