Risk management involves determining the possible events that might in a project whereas the cost management is making the budget of the entire project. Evaluating the paper we see that cost and risk have a mutual effect in that the during cost budgeting there should be cost allocated aside for risks as well these risks determine the cost that will be used in a project
The most critical section of a project is the management of costs and risks that that may be incurred; however triumph even with improbability (Lock, 2017). The substantial relationship linking costs and risks compels the manager in decisively making decisions. As well, plan and respond appropriately. Cost control and risk management are very closely related to each other. Risk managing ought to be done throughout the project from the first phase to the last phase. When this is done, then one can spot the risks and other possible scenarios that may be encountered during the project. This allows the navigation of the project to the right direction and avoiding losses that may be incurred if the project fails thus saving on the cost.
Evaluate the cost and risk of substitute strategies is the most fundamental key for the decision makers for a project. With this, they can know which is the best and suitable one to approve and execute (Berry‐Stölzle & Xu, 2018). For instance, if there is a lack of finances for the project one is bound to borrow financial resources. Getting a loan from external foundation bares an exchange rate risk while acquiring at a market-related foundation is a bit more costly however less risky as compared to the other one. Therefore, the project planner goes with the decision that is more suitable for the project.
Evaluation of the possible risks should be done to identify the cost that will have to be incurred to cover them appropriately. Cost should not only focus on the budget just but as well as the unforeseen events and risks. This will cut down on the expenses if at any point risk is incurred. With efficient risk and project management then the project objectives will be delivered successfully.
Lock, D. (2017). The essentials of project management. Routledge.
Berry‐Stölzle, T. R., & Xu, J. (2018). Enterprise risk management and the cost of capital. Journal of Risk and Insurance, 85(1), 159-201.
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