Post on 27-Dec-2015
BSBPMG407A Apply Risk Management Techniques1
Apply RiskManagement Techniques
Project Risk Processes Part 2
Certificate IV in Project Management 17871Qualification Code BSB41507
Unit Code BSBPMG407A
BSBPMG407A Apply Risk Management Techniques2
Project Risk Management Processes
PMBOK Project Risk Management Processes -
11.1 Plan Risk Management
11.2 Identify Risks
11.3 Perform Qualitative Risk Analysis
11.4 Perform Quantitative Risk Analysis
11.5 Plan Risk Responses
11.6 Monitor and Control Risks
Related processes from Project Integration Management –
4.1 Develop Project Charter
4.2 Develop Project Management Plan
4.6 Close ProjectPMBOK 4th Edition
BSBPMG407A Apply Risk Management Techniques3
11.4 Perform Quantitative Risk Analysis
Adapted from PMBOK 4th Edition
Initiation Planning Execution Close
Monitor
Control
• The process of numerically analysing the effect of identified risks on overall project objectives
• Typically only applied to risks with high priority due to potential to substantially impact the project’s objectives
• Enables a more rigorous approach to risk decision making in the presence of uncertainly
• Often omitted depending on the organisation’s risk appetite and maturity of the project and risk management processes
• Occurs during Planning
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11.4 Perform Quantitative Risk Analysis
• Inputs to Perform Quantitative Risk Analysis -Draft Risk Register
Risk Management Plan
Cost Management Plan
Schedule Management Plan
Organisational Process Assets -– Risk management standards
– Risk management policies and procedures
– Risk categories and definitions
– Standard templates
– Lessons learned from previous projects
– Risk databases and checklists
Adapted from PMBOK 4th EditionAdapted from PMBOK 4th Edition
Initiation Planning Execution Close
Monitor
Control
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11.4 Perform Quantitative Risk Analysis
• Tools and techniques for Quantitative Risk Analysis include -
Interviews
SensitivityAnalysis
ProbabilityDistributions
Modelling &SimulationExpert
Judgement
Expected MonetaryValue Analysis
Decision TreeDiagrams
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11.4 Perform Quantitative Risk Analysis
Interviews• Draw on experience of experts and historical data to quantify the probability
and impacts of risks on project objectives. Often Three-point data is gathered on pessimistic, likely and optimistic outcomes.
Probability Distributions – Advanced technique
• Discrete distributions represent uncertain events such as risks. Requires high degree of statistical skill and statistical software.
Sensitivity Analysis – Advanced technique
• Helps to determine which risks have the most potential impact on project objectives. Prioritisation undertaken in Qualitative Analysis is often sufficient.
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11.4 Perform Quantitative Risk Analysis
Modelling and Simulation – Advanced techniques
• Uses a model to simulate the outcomes of the project, including the impact of uncertain events such as risks. Requires extensive data on past and similar projects, a high degree of statistical expertise and statistical software.
Expected Monetary Value Analysis – Advanced technique
• Extremely advanced technique. Rarely used except for Defence and Scientific projects such as space exploration. Specifically examines the impacts on cost of uncertain events.
Decision Tree Diagrams• Can be use in conjunction with Modelling and Simulation and Expected
Monetary Value Analysis, or can be prepared in a more informal manner. Enables analysis of different choices and paths.
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11.4 Perform Quantitative Risk Analysis
• Outputs of this process include –
Risk Register Updates– Probabilistic analysis of the project
– Probability of achieving cost and time objectives
– Prioritised list of quantified risks
– Trends in risk analysis results
Adapted from PMBOK 4th Edition
Initiation Planning Execution Close
Monitor
Control
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11.5 Plan Risk Responses
Adapted from PMBOK 4th Edition
Initiation Planning Execution Close
Monitor
Control
• The process of developing options and actions to reduce the threat and impacts of risks
• It includes the identification and assignment of one person to be the Risk Owner, as well as the selection of the best management or mitigation actions
• Planned risk responses must be appropriate to the significance of the risk and cost effective
• Can also be applied to the maximisation of the benefits from any identified possible opportunities (less common)
• Occurs during Planning
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11.5 Plan Risk Responses
• Inputs to Plan Risk ResponsesRisk Register
Risk Management Plan
• Tools and techniques to Plan Risk Responses include -
Adapted from PMBOK 4th EditionAdapted from PMBOK 4th Edition
1. Avoid
2. Transfer
3. Mitigate
4. Accept
Negative Risks or Threats
1. Exploit
2. Share
3. Enhance
4. Accept
Positive Risks or Opportunities
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11.5 Plan Risk Responses
Avoid• Changing the Project Management Plan to eliminate the risk entirely
Transfer • Shifting some or all of the ownership of a threat to third party and thus also
transferring the negative impact.
Mitigate• Undertaking risk responses that in some way reduce either the likelihood or
impact of the risk.
Accept• Passive acceptance requires no specific risk response action apart from
standard risk monitoring and reporting procedures.
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11.5 Plan Risk Responses
Activity:
A. I know we have 3 different designs we can select from in order to satisfy the customer’s requirements. However I am very reluctant to consider the second option because, if we are wrong there exists the chance of imminent damage to the project.
B. I know the design we selected has the option of getting us in trouble, but I’m not going to worry about or even develop a contingency plan until I am convinced that the risk is about to occur.
C. I know we can manufacture the project ourselves but there are risks. I would rather award a fixed-price contract to Alpha company and have them do the manufacturing instead.
D. I have set up a management reserve just in case there are escalations in the cost of the raw materials we must purchase.
Kerzner and Saldaris, 2006.
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11.5 Plan Risk Responses
Activity:
A. I know we have 3 different designs we can select from in order to satisfy the customer’s requirements. However I am very reluctant to consider the second option because, if we are wrong there exists the chance of imminent damage to the project. AVOID
B. I know the design we selected has the option of getting us in trouble, but I’m not going to worry about or even develop a contingency plan until I am convinced that the risk is about to occur. ACCEPT
C. I know we can manufacture the project ourselves but there are risks. I would rather award a fixed-price contract to Alpha company and have them do the manufacturing instead. TRANSFER
D. I have set up a management reserve just in case there are escalations in the cost of the raw materials we must purchase. MITIGATE
Kerzner and Saldaris, 2006.
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11.5 Plan Risk Responses
• Outputs of this process include – Risk Register Updates
– Risk Owners Assigned
– Mitigation/Management Strategies defined and documented
– Residual Risk Ratings
Risk Action Plans - for specific high priority risks
Risk Related Contract Decisions Project Management Plan Updates
– Schedule management plan
– Cost management plan
– Quality management plan
– Procurement management plan
– Human resource management plan
– Work Breakdown Structure
– Schedule Baseline
– Cost Baseline
Assumptions Log UpdatesAdapted from PMBOK 4th Edition
Initiation Planning Execution Close
Monitor
Control
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11.6 Monitor and Control Risks
Adapted from PMBOK 4th Edition
Initiation Planning Execution Close
Monitor
Control
• The process of implementing risk response plans, tracking residual risks, identifying new risks, and evaluating risk management effectiveness
• Risk Action Plans are included in the project lifecycle and managed by this process
• Can include activities such as choosing alternative strategies, executing a contingency or fallback plan, and modifying the project management plan accordingly
• The Risk Owner reports periodically to the Project Manager on the effectiveness of the Risk Action Plans and responses
• Occurs throughout the project
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11.6 Monitor and Control Risks
• Inputs to Monitor and Control RiskRisk Register
Risk Action Plans
Project Management Plan
Work Performance Information– Deliverable status
– Schedule progress
– Costs incurred
Performance Reports
Adapted from PMBOK 4th EditionAdapted from PMBOK 4th Edition
Initiation Planning Execution Close
Monitor
Control
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11.6 Monitor and Control Risks
• Tools and techniques to Monitor and Control Risks include -
Risk Audits
Technical PerformanceMeasurementRisk
Re-assessmentVariance &
Trend Analysis
StatusMeetings
ReserveAnalysis
StatusReports
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11.6 Monitor and Control Risks
Risk Re-assessment• Risk monitoring and control activities often result in the identification of new
risks, re-assessment of current risks and the closing of risks that no longer apply. Re-assessment sessions need to be scheduled regularly and risk registers, status reports and risk action plans updated as a result.
Risk Audits • Examine and document the effectiveness of risk responses. Often combined
with Risk Re-assessment activities.
Variance and Trend Analysis• Compares the planned results of risk responses and action plans to the
actual outcomes. Often combined with Risk Re-assessment activities.
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11.6 Monitor and Control Risks
Technical Performance Measurement – Advanced technique
• Measures the performance of technical accomplishments or deliverables. Can only be performed if quantifiable measures of technical performance are defined in the Project Management and Risk Management Plans.
Reserve Analysis• Compares the amount of risk reserves or contingency that remain at any
point in time to determine if it is adequate or can be adjusted up or down based on the performance of risk management activities.
Status Meetings • Project Risk Management and a review of the Risk Register should be on
the agenda for all Project Status Meetings.
Status Reports• Risk ratings and trends should be included in Project Status Reports for the
high priority risks.
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11.6 Monitor and Control Risks
• Outputs of this process include –Risk Register Updates
– Risk Re-assessments
– Risk Audits
– Risk reviews
– Risk Action Plans
Risk Management Plan Updates– Revised templates– Risk Breakdown Structure– Lessons learned from risk management activities
Change Requests– Corrective and Preventative Actions
Project Management Plan UpdatesProject Document Updates
Adapted from PMBOK 4th Edition
Initiation Planning Execution Close
Monitor
Control
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Team Assignment Criteria
Team AssignmentComponents
Marks Basic Competency Higher Competency
Risk Rating Matrix 5 Basic scales for likelihood and consequences (3 possible ratings)
Combined impacts of likelihood and consequences
Detailed scales for likelihood and consequences (5 possible ratings)
Quantification of impacts for each rating
Risk Register 5 Risk register covering major categories of project risk
Risk ratings and priorities Summarised mitigation strategies
Concept of residual risk rating applied
More comprehensive coverage of risk categories
Risk Action Plans 5 Detailed risk action plans provided for 3 highest priority risks, including assignment of responsibility for plan execution
More comprehensive risk action planes including scope, cost and time impacts of the plan
Risk identificationRisk management tools &
techniques
5 Basic understanding of tools and techniques
At least two methods used
Advanced understanding of tools and techniques
More than two methods used and experts consulted
Total 20 13 to 16 17 to 20