The Risk Management Approach is a fundamental component of the PRINCE2 7 Risk practice that defines how risks will be managed throughout a project. This approach establishes the specific procedures, techniques, and standards that the project team will follow when identifying, assessing, and control…The Risk Management Approach is a fundamental component of the PRINCE2 7 Risk practice that defines how risks will be managed throughout a project. This approach establishes the specific procedures, techniques, and standards that the project team will follow when identifying, assessing, and controlling risks.
The Risk Management Approach document typically includes several key elements. First, it outlines the risk management procedure, which describes the steps the team will take from initial risk identification through to implementation of responses. This ensures consistency in how risks are handled across the project.
Second, it defines the tools and techniques that will be used for risk assessment. This might include probability and impact matrices, expected value calculations, or qualitative assessment methods. The approach specifies which techniques are appropriate for the project's context and complexity.
Third, the document establishes roles and responsibilities for risk management. It clarifies who is responsible for identifying risks, who owns specific risks, and who has authority to approve risk responses and allocate budget for risk actions.
Fourth, it sets out the risk tolerance levels and thresholds. These parameters help the team understand when risks need to be escalated to higher management levels and what level of risk is acceptable within the project.
Fifth, the approach defines reporting requirements, including how often risk information will be communicated, what format reports will take, and who receives risk-related communications.
The Risk Management Approach should be tailored to suit the specific project environment, considering factors such as organizational standards, project size, complexity, and the nature of risks likely to be encountered. It is typically created during project initiation and may be refined as the project progresses. This approach ensures that risk management activities are proportionate, consistent, and aligned with both project and organizational objectives.
Risk Management Approach - PRINCE2 Foundation V7 Complete Guide
What is the Risk Management Approach?
The Risk Management Approach is a key management product in PRINCE2 that describes how risk management will be implemented throughout the project. It defines the specific risk management techniques, standards, and responsibilities that will be used to identify, assess, and control risks.
Why is it Important?
The Risk Management Approach is crucial because it:
• Provides a consistent framework for handling risks across the project • Ensures all team members understand their risk-related responsibilities • Establishes clear procedures for escalating risks when necessary • Defines how risks will be identified, assessed, and controlled • Sets out the scales for measuring probability and impact • Determines risk tolerance levels and thresholds • Enables proactive rather than reactive risk handling
What Does it Contain?
The Risk Management Approach typically includes:
1. Risk Management Procedure: Steps for identifying, assessing, planning, implementing, and communicating risks
2. Tools and Techniques: Methods to be used such as risk workshops, checklists, and prompt lists
3. Records: How risk information will be recorded and maintained in the Risk Register
4. Reporting: How and when risk information will be reported
5. Timing of Activities: When risk management activities will occur
6. Roles and Responsibilities: Who is responsible for risk management tasks
7. Scales: Definitions for probability, impact, and proximity
8. Risk Categories: How risks will be grouped and categorized
9. Early Warning Indicators: Triggers that indicate a risk may be occurring
10. Risk Tolerance: The acceptable level of risk for the project
How Does it Work?
The Risk Management Approach is created during the Initiating a Project process and is used throughout the project lifecycle. The Project Manager develops this document with input from corporate or programme standards and tailors it to suit the specific project context.
Once established, team members follow the defined procedures when dealing with risks. The approach ensures consistency in how risks are recorded in the Risk Register, how they are assessed using the defined scales, and how responses are planned and implemented.
Key Points to Remember:
• It is created during the Initiating a Project process • It should align with corporate or programme risk management policies • The Project Board approves the Risk Management Approach as part of the PID • It can be updated during the project if necessary • Risk tolerance is often set by the Project Board or corporate management
Exam Tips: Answering Questions on Risk Management Approach
Tip 1: Remember that the Risk Management Approach defines HOW risks will be managed, while the Risk Register contains the ACTUAL risks identified.
Tip 2: Know that this document is created in Initiating a Project, not in Starting up a Project.
Tip 3: Understand the difference between risk tolerance (level of risk acceptable) and risk appetite (organization's attitude to risk).
Tip 4: If asked about scales for probability and impact, remember these are defined in the Risk Management Approach.
Tip 5: Questions may test whether you know this approach should be tailored from corporate standards rather than created from scratch.
Tip 6: Be clear that the Project Manager is responsible for creating the Risk Management Approach, but the Project Board approves it.
Tip 7: When facing scenario questions, look for clues about whether the question is asking about risk procedures (Risk Management Approach) or specific risks (Risk Register).
Tip 8: Remember that early warning indicators and risk proximity are concepts defined within this approach.