Santosh Karkhanis

In projects, things often pan out differently than expected. Sometimes the unexpected works in favor of the project team but often the opposite is the case. To anticipate these events or keep them in check a proactive stance is needed. Risk management refers to the universe of activities and measures aimed at dealing with risks in order to keep a project under control.

What is Risk? 
Risk is defined as "The possibility of suffering harm or loss; danger." Even if we're not familiar with the formal definition, most of us have an innate sense of risk. We are aware of the potential dangers that permeate even simple daily activities, from getting injured when crossing the street to having a heart attack because our cholesterol level is too high. Although we prefer not to dwell on the myriad of hazards that surround us, these risks shape many of our behaviors. Experience (or a parent) has taught us to look both ways before stepping off the curb and most of us at least think twice before ordering a steak. Indeed, we manage personal risks every day.

 Significance
Risk management helps the uninterrupted flow of activities in a project by hedging against undesirable events. This in turn creates confidence in the project, in third parties affected by the project and in the project team itself. Risk management activities require information; therefore they promote communication within the project and improve effectiveness of team efforts. Finally, risk management improves decision making in the project.

Types

1.  There are two types of unexpected events in the course of a project
   Known risks: these are identified potential problems such as the possibility of a strike when labor contracts expire. The exact consequences are unknown but the potential to harm project outcomes is evident.
2. Unknown risks: these are problems arising unexpectedly but seasoned project managers do expect them.