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The project manager of any firm is responsible for a risk management plan. The plan will assist in foreseeing risks and estimating effectiveness of the processes with best practices. The plan must also encompass plans for mitigation of risks and provide a risk assessment format.

Risks are uncertain events and conditions which occur at any time. They can have both positive and/or negative consequences for any project if best practices are not implemented. This is why there is a lot of pressure on project managers to ensure that there is always a plan for anticipated and unforeseen risks. The plan must serve as a buffer to control the losses resulting from the consequences. A risk management action plan must be reviewed periodically to ensure that the project team is ready to handle all likely outcomes. This is an important best practice which project managers must implement.

The basis of any risk management plan is to include a risk strategy into the processes of any organization. Risk assessment is a necessary best practice in order to have a risk management action plan. There are four potential strategies which can be adopted for best practice in the risk management action plan.

First Potential Strategy:

• Accept the Risk: This means the organization will have to take chances with the negative consequences. It is a best practice to be ready to face consequences and a good manager will be well prepared.

Second Potential Strategy:

• Avoid the Risk: The project managers can change the action plan to prevent the foreseen problems from arising. In case of unforeseen risks as well, experienced project managers can keep a “Plan B” ready. This is a best practice only few managers’ practice and is highly recommended.

Third Potential Strategy:

• Lessen the Magnitude of Risk: There is always the likelihood and option for managers to lessen the magnitude of the risk or its consequences. Some risks must be taken for a greater good. This means one can take intermediate steps to ensure that the processes of the firm remain as less affected as possible and losses are as minor as possible.

Fourth Potential Strategy:

• Transfer the Risk: In some setups business managers can outsource the risks to a third party which can manage the negative outcomes of the risk. This best practice helps in distributing the consequences of risk.

Whichever of these strategies one follows, the basic best practices must be implemented. This includes proper documentation, analysis, communication and other processes involved. Risk management requires thorough assessments and evaluations to have a strong risk management action plan.

Further reading: Corporate Governance | Audit | Performance Improvement