Let's talk about risk. Because shift happens, things go wrong on projects. And a risk is defined as uncertainty that can affect the outcome. And whilst the definition itself suggests that risks are neither good nor bad, we know that as project managers, most of our focus needs to go on threats, risks with an adverse outcome as opposed to opportunities that have a beneficial effect on our outcomes. And risks are a vital part of project management. So we need a systematic approach to handling them rather than living in fear of them, and neglecting them hoping they won't materialize.
The systematic approach has four simple steps. And the first step is to identify what the risks are. And rather like with our stakeholder identification in the stakeholder engagement process, identifying risks starts by getting a group of different people together with different backgrounds and experiences and tapping into all of their concerns. brainstorming risks is a very powerful way to get started. But also recognize that there are some people who have that kind of mindset that they just spot risks. They are the sort of person who when you tell them you're doing a project, their first response is to say, Oh, I wouldn't do that.
If I were you. sit them down, and ask them to tell me 20 reasons why you wouldn't do it, what could go wrong and they will go reel them off one after another. Now, the trouble with that list is, you know, and I know that some of the things that identify, you know, very likely. So step two is to analyze the risks, not just what could go wrong, but how serious would it be how serious we need to take any analyzing risks. The two principal things that we focus on, are given to us by our definition of water risk is a risk is uncertainty that can affect outcome. Consequently, we're interested when analyzing risks in the level of uncertainty, the likelihood of the risk happening, and secondly, of the effects on the outcome, its impact.
So likelihood and impact are two principal areas of concern in analyzing our risks. Once we've done that, we can prioritize our risks and put together a plan What are we going to do about the risks? And I will show you in a subsequent video, that there are six generic strategies for handling risk. And these strategies account for everything that you can do. So once you understand those six strategies, you can develop armfuls plans. But a plan Ain't nothing unless you do something about it.
So the final step in the process is to take action. And of course, having taken action review, analyze the effect of the action on your risk profile. Did the action reduce the level of threat to a level that you accept, or do have to continue around the loop? Put together a new plan take more action. As with everything in life, persistence is the root of success. Analyze, plan, act, analyze plan, until you've reduced the threat of a risk to an acceptable level.
In the next video, we'll look at analysis a little bit more detail. Then we'll look at how those six strategies play out with a particular example to illustrate them. And we'll also look at the risk managers