The risk allocation described above is part of an ongoing risk management process that enables parties to reduce the probability of a risk occurring as well as mitigating the consequences of a risk should it occur. The objective of risk management is to reduce potential negative outcomes by identifying risks and analyzing them on an ongoing basis. During the business case phase of the project, the risk management element can be broken down into the following steps:
1. Identifying and clearly describing the major potential risk events for a project;
2. Analyzing the range of possible consequences of the risks identified;
3. Evaluating the likelihood and potential impact of those consequences;
4. Quantifying, where possible, the dollar value of these outcomes to the project;
5. Developing mitigation and treatment strategies for identified risks; and
6. Recording the results of this process in a risk matrix.
Beginning at the business case stage, this risk management approach is intended to provide the information needed to support the efficient risk transfer described above, as well as the effective ongoing management of these identified risks on the part of the parties ultimately responsible for them.