A formal risk management process provides multiple benefits to both the project team and the development organization as a whole. First, it gives us a structured mechanism to provide visibility into threats to project success. By considering the potential impact of each risk item, we can focus on controlling the most severe risks first. We can marry risk assessment with project estimation to quantify possible schedule slippage if certain risks materialize into problems. This approach helps the project manager generate sensible contingency buffers. Sharing what does and does not work to control risks across multiple projects helps the team avoid repeating the mistakes of the past. Without a formal approach, we cannot ensure that our risk management actions will be initiated in a timely fashion, completed as planned, and effective.

Controlling risks has a cost. We must balance this cost against the potential loss we could incur if we don’t address the risk and it does indeed bite us. Suppose we’re concerned about the ability of a subcontractor to deliver an essential component on time. We could engage multiple subcontractors to increase the chance that at least one will come through on schedule. That’s an expensive remedy for a problem that might not even exist. Is it worth it? It depends on the downside we incur if indeed the subcontractor dependency causes the project to miss its planned ship date. Only you can decide for each individual situation.