Full Answer Section

1. High Impact & Low Probability: While less likely, these risks can be devastating if they occur. Examples include a natural disaster or a key employee leaving the company. Develop a plan to mitigate these risks even if the probability is low.

2. Low Impact & High Probability: These frequent, minor issues can still disrupt operations. Examples include delays due to equipment malfunctions or communication breakdowns. Implement controls to minimize their occurrence.

3. Low Impact & Low Probability: These are minor and unlikely to cause significant problems. However, they shouldn’t be completely ignored. Monitor them and have a basic plan in place in case they arise.

Risks vs. Issues

Risks are potential future events that could have a negative impact on your project or organization. They haven’t happened yet, but there’s a chance they might.

Issues are current problems that need to be addressed. They are the actualization of a risk, or an event that has already occurred and is causing a negative impact.

Here’s an analogy: A storm cloud is a risk. It might rain (negative impact), but it might not. If it starts raining heavily (negative impact has occurred), that’s an issue.

Root Causes and Consequences of Risk

Root Cause: This is the underlying reason a risk exists. It’s essential to identify the root cause to prevent future occurrences of the risk.

• Example: Risk: Project delay due to software bugs. Root Cause: Inadequate software testing.

Consequences: These are the potential negative outcomes of a risk if it materializes.

• Example: Consequences of project delay: Missed deadlines, customer dissatisfaction, increased costs.

By understanding the types of risks, their differences from issues, and the root causes and consequences, you can effectively prioritize and manage them, ensuring a smoother project or organizational journey.