Why you like Risk Management Plans Essay Example | Topics and Well Written Essays - 750 words

Why you like Risk Management Plans - Essay Example A risk management plan is a document that is created by the project manager to estimate risks, assess the impact of the risks and define solutions to the challenges. Risk management plans also contain a risk assessment matrix that determines the impact of a risk over a specific period (Power, 2008). The procedure of creating a risk management plan starts with understanding how risk management works then the project is defined, stating all the risks and their possible impact. Input from other stakeholders is crucial at this stage. All irrelevant issues are removed then probability of each risk occurring is calculated. The possible losses from the risks are then assigned with an impact number on a scale from 0.00 to 1 with less risky activities having a small value. Next, the total risk is computed then mitigation strategies are developed. After that, the project manager creates contingency plans and analyzes the efficiency of the strategies. Finally, an effective risk is calculated. A risk management plan has several objectives. The plan calculates risks and the probability of the risks resulting in loss. This is important when determining whether to pursue a business project. A risk management plan creates strategies for managing risks or managing the losses from the risk. The plan reduces the possibility of surprises and supports efficient use of organizational resources (Rejda, 2011). Risk management plans contain strategies on how to tackle risks. These strategies include risk avoidance, loss reduction, and risk control, spreading the risk, self-retention, and duplication of resources, accepting risks and transferring risks. Risk avoidance is the most efficient risk management technique. By avoiding a risk, the possibility of loss is eliminated completely. Risk avoidance is the most effective approach but not the most practical one. It is impossible to eliminate all aspects of risk in a project. Some