Risk

PRINCE2 Risk Practice Guide: Understanding, Application, and Exam Strategy

Understanding PRINCE2 Risk Practice

The PRINCE2 Risk Practice is a systematic approach to identifying, assessing, and managing uncertainties throughout a project. It's a fundamental practice within the PRINCE2 methodology that helps project teams anticipate potential problems and opportunities, enabling proactive management rather than reactive crisis handling.

Why Risk Management is Important in PRINCE2

Risk management is crucial because projects inherently contain uncertainties that can impact objectives. Effective risk management:

• Increases likelihood of project success
• Reduces negative surprises and crisis management
• Improves decision-making based on risk-informed choices
• Creates stakeholder confidence through demonstrated control
• Allows for appropriate resource allocation
• Supports the continued business justification principle

How PRINCE2 Risk Practice Works

PRINCE2 Risk Practice follows a structured process:

1. Risk Management Strategy - Defines how risks will be managed throughout the project, established during the initiation stage.

2. Risk Register - The primary record-keeping tool tracking identified risks, their status, and actions.

3. Risk Management Procedure - The five-step process:
• Identify - Recognize and document risks (threats and opportunities)
• Assess - Evaluate probability and impact, calculate exposure
• Plan - Determine appropriate responses to identified risks
• Implement - Execute planned responses
• Communicate - Keep stakeholders informed throughout

4. Risk Response Types:
For threats:
• Avoid - Change plans to eliminate the risk
• Reduce - Take action to reduce probability or impact
• Transfer - Pass risk ownership to a third party
• Accept - Make a conscious decision to retain the risk
• Share - Share risk with another party

For opportunities:
• Exploit - Make the opportunity definitely happen
• Enhance - Increase probability or impact
• Reject - Turn down the opportunity
• Share - Share with a third party who can best realize the opportunity

5. Risk Budget - Financial provision for managing risks that materialize

Key PRINCE2 Risk Management Roles

• Executive: Ultimately accountable for effective risk management
• Project Manager: Day-to-day responsibility for risk management
• Senior User: Identifies and monitors risks related to benefits realization
• Senior Supplier: Identifies and monitors risks related to solution development
• Team Manager: Identifies and manages risks at the delivery level

Exam Tips: Answering Questions on Risk

1. Understand Risk Terminology:
• Distinguish between a risk (uncertain event) and an issue (problem that has occurred)
• Know the difference between threats (negative risks) and opportunities (positive risks)
• Recognize the components of risk: cause, event, and effect

2. Focus on the Process:
• Remember the five steps: Identify, Assess, Plan, Implement, Communicate
• Know when each step should be performed in the project lifecycle
• Understand which management products are updated with risk information

3. Apply Risk Response Types Correctly:
• Match appropriate response types to different scenarios
• Recognize that different responses are used for threats vs. opportunities
• Consider cost-effectiveness when choosing responses

4. Connect Risk to Other PRINCE2 Elements:
• Link risk management to continued business justification
• Show how risk connects to the management by exception principle
• Relate risk management to other practices, especially the Change practice

5. Common Exam Question Patterns:
• Scenario-based questions asking you to identify the best risk response
• Questions about when risk activities should occur in the process
• Questions about who is responsible for specific risk management tasks
• Identifying correctly or incorrectly applied risk management principles

6. Risk Prioritization:
• Understand how to calculate risk exposure (probability × impact)
• Know how to use risk proximity as a factor in prioritization
• Be able to distinguish high priority from low priority risks

Remember that PRINCE2 expects risks to be managed actively throughout the project, not just identified at the beginning. The Risk practice emphasizes proactive management and regular review, aligning with PRINCE2's principles of continued business justification and management by exception.