Cost & Risk Management: Keys to Project Success - Essay Sample

Introduction

Both cost management and risk management help a project to become successful in that risk management helps to address and identify risk facing a project while cost management helps to establish a correct expanse of control on the financial plan hence achieving the project's objective.

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What is the relationship between cost managing and risk managing?

The relationship between cost and risk management makes the project manager respond and plan decisively. Failure to respond correctly to risk can lead to over budgeting, mired mitigation or behind schedule. With active usage of risk and cost management delivery of project, objectives become easy even in a constrained setting

What are the most effective risk prevention procedures that cut up the expenditure?

According to Asenova, Bailey, and McCann (2015), there are two step of effective risk prevention. Step One: Risk Identification, it is essential to identify the risks. Risk can be whether or internal like the acquisition of capital and training expenditures - identification of where risk can occur, conditions influencing risk and outcome damage when risk is neglected.

Step Two: Risk Prioritization, in the process of identifying risk, the business type should determine the chances for risks occurrence. Projects that experience risks that have significant consequences with a very high possibility of existence should first safeguard themselves from such threats.

In what way does risk and cost management affect decision-making?

Frequently, risk managers are needed to make a high-stakes decision centered on practically unlimited information. Since cost and risk management push for the success of a project, it forces for adoption of risk-based decision making. Risk-based decision making establishing a decision structure, performance of risk assessment, applying the outcome to risk management decision making, monitoring effectiveness through impact assessment, and facilitating risk communication (Haimes, Y2015). These components add value to nearly any scenario, particularly when the likelihood exists for severe or catastrophic results

How can one evaluate the extent of cost-outcome that is because of risks incurred?

Two steps can be taken to achieve this. First is theorizing of the expected effectiveness of the alternative design of risk management design. Second is quantifying approach to calculate the actual risk value. This gives you a value for the risk: Risk Value = Probability of Event x Cost of Event.

References

Asenova, D., Bailey, S. J., & McCann, C. (2015). Public sector risk managers and spending cuts: mitigating risks. Journal of Risk Research, 18(5), 552-565. Retrieved from: https://doi.org/10.1080/13669877.2014.910683

Haimes, Y. Y. (2015). Risk modeling, assessment, and management. John Wiley & Sons. Retrieved from: ttps://books.google.co.ke/books?hl=en&lr=&id=JvowBgAAQBAJ&o