Risk management and mitigation play an important role in appraising, procuring and implementing projects. The optimism bias associated with a project is closely linked to the risks (mitigated or residual) inherent within the project. The results of the Mott MacDonald study and the best practice guidelines within this paper aid in several critical stages involved in risk management processes.
An example of risk management methodology is Risk Analysis and Management for Projects (RAMP) developed jointly by actuarial and civil engineering professions. This is a proven method for managing project risks. This section contains a short description of the RAMP approach for managing project risks.
RAMP is a comprehensive framework within which risks can be managed effectively and financial values placed upon them. It aims to achieve as much certainty as possible about a long term and uncertain future. In the case of a new project, the RAMP process covers the project's entire life-cycle, from initial conception to eventual termination. The process facilitates risk mitigation and provides a system for the control of the remaining risks.
The RAMP process consists of four activities described in the following subsections.