A brief guide
Practical Project Risk Management
SERIES ARTICLE
By Martin Hopkinson
United Kingdom
Purpose
Identify the different reasons for performing project risk analysis, with the aim of improving process choices and the selection of risk analysis tools and techniques.
The general purpose of project risk analysis
Project risk management should be understood as a process that adds value in ways not achievable by improving deterministic processes such as planning. If the process fails to improve decisions or result in beneficial actions, it cannot add value. Thus the purpose of risk analysis is to develop useful insights that can be acted upon and that would not normally be developed through other core project processes. Risk analysis should therefore be linked with the key questions and decisions that arise as a consequence of the implications of uncertainty.
Key risk-related questions and decisions
These questions and decisions are listed in a typical order of their fundamental importance.
- How should the project’s exposure to strategic risk influence its objectives and design?
- Is the business case risk-robust? (Analysis of the risk to both the project’s delivery phases and the project’s intended benefits).
- Should the project be approved to continue e.g. to its next phase?
- How should the project’s exposure to risk influence significant planning choices?
- How can contracts be drawn up in a way that incentivises the parties to manage risk in a mutually constructive manner?
- What provisions should be made for cost and schedule contingency?
- How should responsibilities for risk be divided between by the sponsor and project team?
- Which risks should be prioritised for action at the present time?
- Are the planned risk responses proving to be effective?
More…
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Editor’s note: This series of articles is by Martin Hopkinson, author of the books “The Project Risk Maturity Model” and “Net Present Value and Risk Modelling for Projects” and contributing author for Association for Project Management (APM) guides such as Directing Change and Sponsoring Change. These articles are based on a set of short risk management guides previously available on his company website, now retired. For an Introduction and context for this series, click here. Learn more about Martin Hopkinson in his author profile below.
How to cite this paper: Hopkinson, M. (2025). Purposes of Risk Analysis: A brief guide, Practical Project Risk Management series, PM World Journal, Vol. XIV, Issue III, March. Available online at http://pmworldlibrary.net/wp-content/uploads/2025/03/pmwj150-Mar2025-Hopkinson-Purposes-of-Risk-Analysis-brief-guide.pdf
About the Author
Martin Hopkinson
United Kingdom
Martin Hopkinson, recently retired as the Director of Risk Management Capability Limited in the UK, and has 30 years’ experience as a project manager and project risk management consultant. His experience has been gained across a wide variety of industries and engineering disciplines and includes multibillion-pound projects and programmes. He was the lead author on Tools and Techniques for the Association for Project Management’s (APM) guide to risk management (The PRAM Guide) and led the group that produced the APM guide Prioritising Project Risks.
Martin’s first book, The Project Risk Maturity Model, concerns the risk management process. His contributions to Association for Project Management (APM) guides such as Directing Change and Sponsoring Change reflect his belief in the importance of project governance and business case development.
In his second book Net Present Value and Risk Modelling for Projects he brought these subjects together by showing how NPV and risk modelling techniques can be used to optimise projects and support project approval decisions. (To learn more about the book, click here.)
To view other works by Martin Hopkinson, visit his author showcase in the PM World Library at https://pmworldlibrary.net/authors/martin-hopkinson/
