The Risk Management Procedure in PRINCE2 is a systematic approach to handling risks throughout a project's lifecycle. It consists of five key steps that form a continuous cycle: identify, assess, plan, implement, and communicate. In the identification phase, project teams proactively recognize pote…The Risk Management Procedure in PRINCE2 is a systematic approach to handling risks throughout a project's lifecycle. It consists of five key steps that form a continuous cycle: identify, assess, plan, implement, and communicate. In the identification phase, project teams proactively recognize potential threats and opportunities using various techniques such as risk workshops, checklists, and brainstorming sessions. The assessment step involves evaluating identified risks by determining their probability of occurrence and potential impact on project objectives, often using tools like probability-impact matrices to prioritize risks. Planning responses to risks follows, with four primary strategies for threats (avoid, reduce, transfer, accept) and opportunities (exploit, enhance, share, accept). During the implementation phase, the planned responses are executed, and their effectiveness is monitored. The communication step ensures that information about risks is appropriately shared with stakeholders. PRINCE2 recommends documenting all risks in a Risk Register, which serves as a central repository for risk information, including risk descriptions, owners, and response actions. The procedure emphasizes that risk management should be integrated into the project management approach rather than treated as a separate activity. It also underscores the importance of clear risk ownership, where individuals are assigned responsibility for monitoring specific risks and implementing response actions. Effective application of the Risk Management Procedure helps project teams anticipate potential problems, minimize their negative impacts, and capitalize on positive opportunities, contributing significantly to project success.
PRINCE2 Risk Management Procedure: A Comprehensive Guide
Introduction to Risk Management Procedure
The Risk Management Procedure is a central component of the Risk theme in PRINCE2. It provides a structured approach to identifying, assessing, and controlling uncertainty in projects. Understanding this procedure is crucial for project success and for passing your PRINCE2 Foundation exam.
Why Risk Management Procedure is Important
Risk management is not optional in projects—it's essential. The Risk Management Procedure:
• Enables proactive rather than reactive management • Increases the likelihood of project success • Improves stakeholder confidence • Helps balance threats and opportunities • Provides a consistent approach to handling uncertainty • Forms the foundation for informed decision-making
What is the Risk Management Procedure?
The PRINCE2 Risk Management Procedure consists of five steps that create a cycle of risk management activities throughout the project lifecycle:
1. Identify (context and risks) 2. Assess (estimate and evaluate) 3. Plan (responses and actions) 4. Implement (the planned responses) 5. Communicate (throughout the process)
Communication is central to the procedure and flows between all steps, ensuring stakeholders remain informed about risks and response activities.
How the Risk Management Procedure Works
Step 1: Identify • Understand the project context (objectives, scope, stakeholders) • Identify threats and opportunities through various techniques (brainstorming, checklists, lessons from previous projects) • Document risks in the Risk Register
Step 2: Assess • Estimate: Determine probability and impact of each risk • Evaluate: Calculate risk exposure and proximity • Prioritize risks based on their assessment
Step 3: Plan • Select appropriate responses: - For threats: Avoid, Reduce, Transfer, Accept, Share - For opportunities: Exploit, Enhance, Reject, Share • Develop actions to implement chosen responses • Identify risk owners and action owners
Step 4: Implement • Execute the planned risk responses • Take corrective action if responses are not effective • Update the Risk Register with implementation results
Step 5: Communicate • Report on risk status regularly • Escalate risks as needed • Keep stakeholders informed about risk management activities
Exam Tips: Answering Questions on Risk Management Procedure
1. Know the five steps thoroughly - Questions often ask you to identify the correct order or define what happens in each step
2. Understand the difference between risk responses - Be clear on which responses apply to threats versus opportunities
3. Recognize key roles - Know that the Project Manager is responsible for day-to-day risk management, while the Executive has ultimate accountability
4. Remember communication is central - It's not just a fifth step but flows throughout the entire process
5. Focus on the difference between: • Risk owner (responsible for managing a risk) • Risk actionee (responsible for implementing risk actions) • Probability (likelihood of a risk occurring) • Impact (effect on objectives if the risk occurs)
6. Be familiar with risk assessment techniques: • Probability-impact matrix • Expected value assessment • Risk proximity assessment
7. Practice with scenarios - Exam questions may present scenarios and ask which step of the procedure is being applied
8. Remember common mistakes to avoid: • The procedure applies to both threats AND opportunities • Risk management continues throughout the project, not just at the start • All risks should be recorded in the Risk Register, even if they are accepted
By thoroughly understanding the Risk Management Procedure and practicing with sample questions, you'll be well-prepared to answer exam questions on this critical aspect of PRINCE2.