In today’s unpredictable economy, businesses big and small are experiencing great uncertainty. For this reason, conducting business and managing projects always contains some kinds of risk that can have a great influence on the business’s bottom line. A risk may have one or more causes and, if it occurs, it may have one or more impacts. As a project manager, risk taking is part of our life. If we want to succeed, we must be able to accept and take calculated risks.

Defining Risk

Risk is an event that may happen in the future―and events will happen during your project that you did not foresee at all. These events will have an impact on the project in one or more ways: scope, schedule, cost, and/or quality: If one of your engineers leaves for another job or is laid off, that will obviously have an effect on your schedule. If a component that you have written into your specifications is no longer available, this could effect your scope, cost and quality. Project managers need to identify and address risks effectively to be successful in their job

According to A Guide to the Project Management Book of Knowledge (PMBOK), when risk is applied to a project, six processes are used to manage it. These processes are utilized to take advantage of positive events and to minimize negative ones.

The processes are:

• Plan risk management
• Identify risks
• Perform qualitative risk analysis
• Perform quantitative risk analysis
• Plan risk responses
• Monitor and control risks

In this paper, I am concentrating on the first process and the first step in project risk management, which is plan risk management, with five other papers covering the other processes.

At this point, you may be asking, "How can you plan for events that may or may not occur?" That is why you need to plan your risk management, which will lead to a formal document, the risk management plan. When the project is first created or formulated, this is the time to start planning because this when risk has the highest potential.

Terms and Conditions of Sale

Even prior to the first start date, the project is fraught with risk. An area of greatest risk lies within your terms and conditions of sale, the T&C. By identifying the potential risks within the T&C, project managers can start their risk management plan. Most companies have their standard document of terms and conditions, which would be presented to the customer along with the main part of the contract. The content of the T&C varies from company to company and industry to industry, but it generally describes the warranty, liability, payment terms, taxes, returns, cancellations, and delivery.

Carefully draw up your T&C, but if your customer offers their own, read and re-read what they have proposed. Look for any item that may change the scope, schedule, cost, and quality because a change in any of these elements could signify an increase in risk.