Managing Risk: Contractual Negotiations or Transitions (Research Paper Sample)

Managing Risk
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Institution
Risk is broadly defined as the possibility of an occurrence of a loss or injury. It is often as a result of a threat capable of damaging an asset and the vulnerabilities exploited by it to destroy the property. Project risk is caused by the occurrence of a specific condition or event that takes place to distort or harm at least one of the task’s objectives. Consequently, risk management centers on recognizing risk and evaluating those perils to minimize their effect on a particular project (Wiley, 2009). Risk-free projects are non-existent because there are an infinite number of threats that can have a negative effect on a scheme. Thus, risk management does not focus on eliminating risk due to its unpredictable nature. It seeks to minimize the possibility of a certain risk through its identification, evaluation and management.
The definition of a threat leads to an analysis of various risk scenarios that affect an asset. In a dynamic model of risk assessment where time is an important consideration, various types of actions are taken into account. Through this dynamic model it is possible to define and take into consideration various chain of events, causes and outcomes. Incident scenarios bear a certain degree of similarity to risk events, though they are not exactly equivalent (Larson and Gray 2011). For instance, incident scenarios are directly linked with the exploitation of vulnerability or a set of vulnerabilities. On the other hand, though risk is as a result of certain circumstantial elements, these elements are not necessarily vulnerabilities. Since risk is associated with the occurrence of events likely to affect a project, it is imperative to discuss risk management and the major differences in managing negative and positive threats.
Every task manger is aware that risks are inevitable in projects. Therefore, risk management seeks to identify as many risk events as possible. Various risks can be identified before the commencement of a project, for instance equipment malfunction. Risks bear positive consequences as well as negative effects such as the unexpected price reduction of primary materials.
Positive risks are unexpected opportunities availed by certain circumstances. Such risks provide opportunities for the project team to work better than previously expected. It is important for positive threats to be identified earlier on in the project so as to take advantage of them. The early identification of positive threats saves on cost thereby maximizing their benefit. Handling risk, identifying the potential risk, and performing qualitative and quantitative analysis are key steps that an organization needs to follow to effectively respond to either negative or positive threats. Therefore, positive risks are exploited, shared, enhanced and accepted. Enhancing the risk ensures that the probability of it taking place rises while exploiting it maximizes on the threat’s advantages. In contrast, sharing the risk involves the introduction...