The paper "Theoretical Notions of Risk Management " is a good example of business coursework. Within the volatile global environment, a number of projects take place. The environment is volatile in the sense that many dangers do exist. The increasing number of dangers will affect project execution in a number of ways hence the output of the project may not be satisfactory. The evaluation, which is done, at the end of the project always indicate that the problems, which were encountered, can be easily foreseen and could be eliminated even before they occur.
Risk management is, therefore, aimed at predicting the problems and giving out measures that can be taken to avert the problems hence less impact on the projects. This paper looks at the theoretical notions of risk management and how it can be adapted to a practical phenomenon. The practical phenomenon to be looked at is the software projects. This is because a number of software projects do not take place as planned. Low quality or substandard, time, and cost overruns and totally failed projects are always witnessed. The principle in the wake of risk management in the context of Information Technology project management is that the mistakes or problems can be foreseen at an early stage.
Nonetheless, it is reasonable to locate any potential problem and seeking solutions to minimize or avert the consequences that are because of these problems. Project management concepts can be implemented in practice. In extension, the paper will incorporate both theory and practice. Initially, the theoretical concepts will be looked at. Then a connection with practice will be made by use of a concrete procedure for risk management.
Finally, a discussion and conclusion of the outcome will be presented. Definition of risk and risk management Risk, risk exposure and risk impact Risk is defined as the prospective for recognition of unwanted, unconstructive consequences of an occurrence. The basic features or characteristics of the definition are; one, the extent of uncertainty in relation to the happening of the problem and two, unconstructive affect the risk has on the project if the problem occurs. Risk impact refers to the size of the loss. The impact can be established in a number of ways that include additional expenditure, extended lead-times, lower quality, an absence of functionality and in the extreme case total project failure.
The degree of uncertainty is equated to the extent of probability. Probability is normally expressed as a number, with one implying certainty and zero implying impossibility. Measures such as small, medium, or large. The aspect of uncertainty is deep-seated in the concept of risk. For instance, in instances where the problem is unlikely, to occur then it is discarded, but in circumstances where its occurrence is visible then, normal management practices are put in place to deal with the problem (Frenkel, 2005). When looking at the possible effects and countermeasures of risks two notions are of importance.
The first notion is focusing on the loss of expectation. This is also known as risk exposure and ascertained as the product of probability multiplied by the risk impact. These mean that impact and probability have to be considered while discussing the risk. For instance, a risk that leads to a higher impact will call for more attention given that the probability for it to occur is high relative to fewer impact risks.
The other notion is risk reduction leverage. It is founded on the previous and focuses on establishing the effectiveness of an offset measure. The effectiveness of a measure is ascertained through the comparison of its associated costs and its benefit.
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