Developing a Project Risk Management Strategy[3]
Overview
In any large or significant project, the ability to manage risk well should be a core competency. It must be supported by a strong risk conduct and an effective risk management approach. Project risk is defined as the potential for loss or undesirable outcome with respect to the project's intended product, its timely delivery, its ultimate cost, and its capability to deliver the intended benefits.
The risk profile of the project in question and the "Risk Appetite" of the responsible organization are also important factors. Major risk categories include: changing market conditions, liquidity and funding, insurance, regulatory environment and compliance, operational reputation, the competition, and credit availability.
The following sections provide suggestions for an effectiv corporate risk management approach.
Example Mission Statement:
Build corporate value through leadership in the strategic management of project risk.
Suggested objectives of General Project Risk Management
- Provide independent and objective oversight of the management of significant risks arising from the Program Management and/or single project product development activities;
- Maintain an effective project management-wide risk management process through working in partnership with all areas of the program;
- Ensure the continuous improvement in risk management processes, tools and techniques; and
- Promote a strong attitude to risk acceptance and its conduct.
Suggested project risk management priorities
- Risk appetite — Articulate what risks project management is prepared to take;
- Risk conduct — Define how the program organization should operate;
- Risk governance and controls — Focus on the maintenance of effective program-wide risk management processes;
- Support program-wide product development strategies by maintaining strong partnerships, balancing risk and reward, and striving to achieve a shared responsibility for risk compliance within the total program environment;
- Risk infrastructure (people, operating plan and systems) — Deliver efficient and scalable risk and compliance infrastructure comprised of highly competent professionals supported by appropriate training/development, tools and techniques; and
- Managing regulatory environment and relationships — Comply with regulatory requirements and expectations, and maintaining strong regulatory standards.
3. Note: In the suggestions that follow, the framework for this presentation has been adopted from a careful study of valuable insights provided in the 2014 Annual Report published by the Royal Bank of Canada in March 2015. The report describes the RBC Risk Management approach as applied to financial investments.
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