Trusted answers to developer questions
Trusted Answers to Developer Questions

Related Tags


What are the fundamentals of risk management?

Shahpar Khan
svg viewer

What is risk and risk management?


A risk can be classified using four words:

  • Uncertain
  • Future
  • Cause
  • Affect

A risk is an uncertain event bound to happen in the future. It can originate due to one or more causes and can significantly affect multiple project objectives.

Risk management

Imagine that your team is working on a big meter project that your team has access to. This meter basically signifies the risk associated with the main project and its sub-domains.

Risk management’s main task is to minimize the probability of risk associated with the project’s goals and objectives. For example, suppose the probability of risk is 0.6. In that case, the goal should be to reduce this probability as much as possible.

svg viewer

Types of risk

There is a misconception surrounding the word risk. Whenever you say risk, it instantly puts a negative image in most people’s minds.

However, according to PMBOKProject Management Body of Knowledge, risk can be a:

  1. Negative Risk
  2. Positive Risk

Negative Risk

Negative Risks are threats that (if they occur) negatively influence one or more project objectives, such as cost, quality, time, etc.

In the case of negative risk, the probability of risk needs to be decreased.

Positive Risk

Individual project risks are uncertain events or circumstances that positively influence one or more project objective.

In the case of a positive risk, the probability of risk will need to be increased.

svg viewer

Note: If the probability of a risk is 1, then it isn’t a risk; it’s a certainty.


Suppose you are working in a car manufacturing factory, and you and your team are assigned to the factory’s battery production line.

A team member comes up to you and tells you that the thickness of some of copper cables does not meeting the required diameter, resulting in a faulty engine. In this case, going forward with the current state of the battery wires would result in a negative risk, which is a threat to the project. So, it would be best to minimize the probability of the risk and eliminate faulty wireswires with less diameter.

Another team member comes up to you and tells you that, instead of powering the battery with n number of wires, they have discovered that we can effectively power the battery with n-1 number of wires. In this case, if you plan on reducing the number of wires, you will increase the positive risk of your project because it would be an opportunity to increase profit. So, it would help if you worked on maximizing the probability of the risk by reducing the number of wires.




Shahpar Khan
Copyright ©2022 Educative, Inc. All rights reserved

View all Courses

Keep Exploring