Project managers manage risk every day. They are charged with utilizing organizational resources efficiently to navigate the many risks which arise. Some risks are known, others are completely unknown. There are some basic fundamentals of project risk we should all consider:
· Everyone is risk averse.
· The level of profit a firm will include in its bid will reflect its assessment of the project risk and be a function of its risk tolerance (or aversion).
· Risk can be diversified and managed.
· Risk is a factor on all projects and can be mitigated but not eliminated.
· Risk can be shared, insured against, managed, deferred or accepted.
· While we cannot eliminate risk, we CAN price it into the project budget either as a contingency item or an increased amount on scope items.
· The risk/reward balance is a tricky one and requires experience and sound judgement to achieve.
· It is not prudent to take on a large risk for a small reward.