The document outlines the concepts of risk and uncertainty in project management, emphasizing that risk is defined as uncertain events affecting project objectives, which can have positive or negative effects. It highlights the importance of a structured risk management process to identify, quantify, and mitigate risks throughout the project lifecycle to ensure project success. Additionally, it categorizes risks into project-level and business-level risks and addresses the need for continuous risk assessment to maximize opportunities and minimize negative impacts.

1. 1.2 Understanding Risks and uncertainty
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2. 1.1 Definition of Risk
•Risk is an uncertain event or condition that, if occurs, has
a positive or negative effect on a project’s objectives.
Components of risk are the probability of the occurrence
of an event and the impact of the occurrence of that event.
•Risk is defined in terms of uncertain events which may
have positive or negative effect on the project objectives.
•Risks include circumstances or situations, the existence
or occurrence of which results in an adverse impact on any
aspect of the implementation of the project.
•Various definitions of risks are presented in Table 1.
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4. • A Project risk is anything that could impact a project’s success
by either delaying the project timeline, overloading the budget,
or leading to reduced project performance in some other way.
• With an effective risk management plan, it is necessary to
address any potential risks that might crop up during the
lifecycle of a project and mitigate them so your project stays on
track, on budget, and on target.
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• Risk is actually a measure of the amount of uncertainty that exists.
It’s directly tied to information. This is not exactly the way most of us
think about risk in everyday situations.
• However, in the world of project management, risk relates primarily
to the extent of your ability to predict a particular outcome with
certainty.

6. • Threat:The effects of risk can be positive or negative. Positive
effects of risk are often referred to as opportunities.
• Threats are the negative—or “downside”— effects of risk.
✓Threats are specific events that drive your project in the direction of
outcomes viewed as unfavorable (e.g., schedule delays, cost
overruns, and inferior product performance).
• Risk can be broken down into two basic components.
• Risk = Probability x Impact
• Probability: The likelihood of the event happening.
• Impact: The potential impact of the risk event
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7. •Uncertainty is defined as an absence of information,
knowledge, or understanding regarding the outcome of an
action, decision, or event.
•Project managers constantly suffer from an absence of
information, knowledge, or understanding.
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C. Uncertainty, Opportunity and Risk

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• uncertainty, opportunity and risk are closely allied. It
can be visualized that unknowns about the future may
turn out to be either favorable or unfavorable, but lack
of knowledge of future events constitutes uncertainty
• so that uncertainty is simply the set of all possible
outcomes, both favorable and unfavorable.
• In this relationship, the probability of those outcomes
which are favorable may be viewed as opportunity,
while the probability of those outcomes which are
unfavorable represent risk

9. • Similarly, most opportunities when pursued carry with them
associated risks and, generally speaking, the greater the
opportunity, the greater is the degree of uncertainty and
the consequent associated risk.
• Thus, opportunity and risk are also tied together and,
indeed, one may be seen as the corollary of the other. This
relationship is shown diagrammatically in Figure 1.2.
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10. Types And Elements Of Risks
• What Are Risk Categories?
• A risk category is a high-level classification of project management
risks. The two overarching risk categories are project-level risks and
business-level risks, which can be broken down into subcategories.
Risk categories account for both internal and external sources of risk.
• Project-Level Risks: Project-level risks have the potential to affect
results at the project level. Project risks can include factors related to
budgeting, resource management, scheduling, and more.
• Business-Level Risks: Business-level risks have the potential to affect
the overall operations of a business. These include factors such as
project prioritization, governance, customer satisfaction, and
workforce risks.
• These risk categories can each be broken down on each level into
financial risks, strategic risks, performance risks, and external risks.
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12. 1.3 Risk Management: Definitions, Purpose and scope
• Risk management is a planned and a structured process aimed at
helping the project team make the right decision at the right time to
identify, classify, quantify the risks and then to manage and control
them.
• The aim is to ensure the best value for the project in terms of cost, time
and quality by balancing the input to manage the risks with the
benefits from such act. It is just a cost benefit analysis.
• Risk management is a continuous process which is to be implemented
in any project from inception to completion. However, in order to
realize its full potential, risk management should be implemented at
the earliest stage of a project, i.e. feasibility design and construction.
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14. Definition and Goals of Project Risk Management
• In business, risk management is defined as the process of
identifying, monitoring and managing potential risks in order to
minimize the negative impact they may have on an organization.
• Examples of potential risks include:
✓security breaches, data loss, cyberattacks, system failures and
natural disasters.
• An effective risk management process will help identify which
risks pose the biggest threat to an organization and provide
guidelines for handling them.
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• The goals of risk management, therefore, are to identify project risks
and develop strategies which either significantly reduce them or take
steps to avoid them altogether.
• At the same time, measures should be taken to maximize associated
opportunities. In essence, it involves planning which minimizes the
probability and net effects of things going wrong, and carefully
matches responsibility to residual risks which are unavoidably
retained. It is a very constructive and creative process
Goals of risk Management

16. • In short, the purpose of project risk management is to:
✓Specifically identify factors that are likely to impact the project
scope, quality, time and cost, etc
✓Quantify the likely impact of each factor
✓Give a baseline for Project non-controllables
✓Mitigate impacts by exercising influence over project controllable~
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17. Scope
• The scope for project risk management lies somewhere between the two
extremes of total certainty and total uncertainty, as shown in Figure 1.1.
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18. •The constant goal of project risk management should be to
move uncertainty away from risk and towards opportunity.
•Consequently, when assessing overall impacts of
uncertainty on a project, it is the net project risk which
should be determined, i.e., the cumulative net effects of the
chances of both adverse and favorable consequences
affecting project objectives.
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