Risk Management: Why it’s Important

There is no project in this world without risk. The risk can either be a positive risk or negative. This article explains the introduction of Risk Management and SWOT Analysis.

What is Risk?

An uncertain event that, if it occurs, has a positive or negative effect on the company or project goals and objectives and/ or success.

What is Risk Management?

  • A proactive attempt to recognize and manage internal events and external threats that affect the likelihood of a project’s success
  •  Project Success = Safe – On Time – Under Budget – Quality
  • The art and science of identifying, analyzing, and responding to risk throughout the life of a company/project and in the best interest of meeting company/project goals and objectives.
  • It begins with fully understanding the organization’s strengths and weaknesses, and the opportunities and threats that it faces.
  • It helps in planning for the ‘future’ by exploiting strengths and opportunities and mitigating weaknesses and threats.

What is SWOT Analysis?

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.

  • SWOT Analysis is a planning tool used to analyze risks on a project.
  • A Framework for organizing and using historical data and information to identify internal and external risks.
  • A technique that enables a project team to move from traditional strategies to a project-specific fresh perspective.


  • Characteristics of the business or a project team that gives it a competitive advantage.
  • Positive tangible and intangible attributes, internal to an organization.
  • Beneficial aspects of the organization or the capabilities of an organization, which include human competencies, process capabilities, financial resources, products and services, customer goodwill, and brand loyalty.
  • Identify skills and capabilities that you have.
  • What can you do particularly well, relative to competitors?
  • What do analysts consider to be your strengths?
  • What resources do you have?
  • Is your brand or reputation strong?


  • Characteristics that place the firm at a disadvantage relative to competitors.
  • Detract the organization from its ability to attain the core goal and influence its growth.
  • Weaknesses are the factors that do not meet the standards we feel they should meet. However, weaknesses must be controlled, minimized, and eliminated.
  • What do competitors do better than you?
  • What do you do poorly or least effectively?
  • What generates the most customer dissatisfaction and 
  • complaints?
  • What generates the most employee dissatisfaction and 
  • complaints?
  • What processes and activities can you improve?


  • Chances to increase revenue – External factors that represent the reason for an organization to continue to exist & develop.
  • Arise when an organization can take advantage of conditions in its environment to plan and execute strategies that enable it to become more profitable.
  • The organization should be careful and recognize the opportunities and grasp them whenever they arise. Opportunities may arise from the market, competition, industry/government, and technology.
  • Where can you apply your strengths?
  • How are your customers and their needs changing?
  • How is technology changing your business?
  • Are there new markets for your strengths? (e.g., foreign)
  • Are your rivals’ customers dissatisfied?


  • External elements in the environment that could cause trouble for the business – External factors, beyond an organization’s control, which could place the organization’s mission or operations at risk.
  • Arise when conditions in the external environment jeopardize the reliability and profitability of the organization’s business.
  • Compound the vulnerability when they relate to the weaknesses. Threats are uncontrollable. When a threat comes, stability and survival can be at stake.
  • Are customers able to meet their needs with your competitors?
  • Are customers’ needs changing away from your market?
  • What new technologies are your competitors developing?
  • Are your rivals improving their market offerings or lowering prices?
  • Is new technology making your operations obsolete?
  • Is your cash-flow and debt position healthy?
  • Are your employees satisfied? Is turnover high?
  • Is new competition coming?
  • Are sales growing slower than the industry average?

Why SWOT Analysis?

  • To help decision-makers share and compare ideas.
  • To bring a clearer common purpose and understanding of factors for success.
  • To organize the important factors linked to success and failure in the business world.
  • To analyze issues that have led to failure in the past.
Author Credit: Manasa Avula|BE in Civil Engineering| MS in Construction Management | OSHA 30 CERTIFIED

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