Risk Management

Risk is a product of the uncertainty offuture events and is a part of all activity. It is a fact of life. We tend to stay away from situations that involve high risk to things we hold dear. When we can-not avoid risk, we look for ways to reduce it or its impact upon our lives. Yet even with careful planning and preparation, risks cannot be completely eliminated because they cannot all be identified beforehand. Even so, risk is essential to progress. The opportunity to succeed also car-ries the opportunity to fail. It is necessary to learn to balance the possible negative consequences of risk with the potential benefits of its associated opportunity [1]. Risk may be defined as the possibility to suffer damage or loss. The possibility is characterized by three factors [1]: 1. The probability or likelihood that loss or damage will occur. 2. The expected time of occurrence. 3. The magnitude of the negative impact that can result from its occur-rence. The seriousness of a risk can be determined by multiplying the probabili-ty of the event actually occurring by the potential negative impact to the cost, schedule, or performance of the project