Use and benefits of tools for project risk management

T. Raz a and E. Michael

Presentation By:Naveen Kumar

Presentation format..• Introduction• Problem Definitions????• Approach• Methodology• Individual tool contribution• Project management performance• Contribution of PRM process• Practical implications• Conclusions• References

Introduction

• Risk management - one of the main areas of the P M Body of Knowledge (PMBOK) - Project Management Institute

• project risk management (PRM)- a process that accompanies the project from its definition through its planning, execution and con-trol phases up to its completion and closure.

Intro….

Numerous Phases option among the different stages of project.

Identify risk factorsAssess risk probabilities and effectsDevelop strategies to mitigate identified risksMonitor risk factors Invoke a contingency plan;Manage the crisisRecover from the crisis.

intro

Risks encountered @ Software Industries• Identification• Analysis• Response planning• Tracking and control

Problem Definitions????

• A question of major relevance to any individual or organization considering the adoption or improvement of a PRM process is: which tools can provide the greatest benefits?

Approach

surveying a sample of project managers in order to find out which tools are widely used

• tools - project management and effective

project risk management

Methodology

• Questionnaire - personally or via e-mail to about 400 project managers from the software and high-tech sectors in Israel during April through June 1998.

• questionnaire consisted of three main sections

• a number of brief questions to be answered on a 0±5 scale.

Methodology……cont’d• First section - Extent of the contribution of

individual PRM tools to the project success in general

Objective - identify the tools that were perceived as being the most valuable by the respondents.

• Second section - Effectiveness and efficiency of the manner in which projects are managed in the respondent's organization

Objective - investigate whether there is a relationship between the use of PRM tools and the level of performance of the project management process.

Methodology……cont’d

• Third section - Contribution of a risk management process to overall project success

• Objective - learn about the differences in PRM tool usage between those project managers who believe that risk management is a valuable process, and those who do not

Individual tool contribution

• 38 tools have been finalised• Tools were grouped according to the five stages

of the Software Engineering Institute Risk Management process

• Sixth group is also added for tools, processes and practices of a general nature

“background”• Objective - Affect the manner in which risks are managed

without being specifically related to one of the five stages in the PRM cycle

Individual tool contribution….cont’d

• Respondents - Rate indicates the contribution of each tool to the PRM process by a value between 0 (no contribution at all) to 5 (critical contribution)

• Results for the 38 tools, divided into the six groups

Individual tool contribution….cont’d

• Out of the ten tools that received the highest mean score, five @ `Background' group,tools in this group received scores above the overall average of 2.72

• Indicates risk management is related to other management practices

• Requirements management• Subcontractor management• Configuration control

Individual tool contribution….cont’d

• During the execution of the project, managers are likely to neglect the risk control phase

• Risk control tools are used sporadically or not at all, and their contribution is rated as low

Project management performance

• Six questions designed to represent the manner in which projects were managed at the respondent's organization

• Two complementary aspects of project management: efficiency and effectiveness

• Respondents @ indicate the extent to which the projects they manage exhibit the characteristics listed

PMP Questions…..

Project management performance…cont’d

• Project Management Performance (PMP) index as the average of the scores over the six items

• Plot the PMP index against total tool score. Each observation corresponds to one respondent.

• Positive relationship between the extent of tool use and the PMP score

PMP Index VS Total tool score

Project management performance…cont’d

• Co-efficient of correlation = 0.36 0.36 at a level of significance of 0.0008.

• Suggests that respondents who come from environments conducive to better project management performance are more likely to assign higher scores to project risk management tools.

Project management performance…cont’d

• Exploring the relationship between individual tool scores and the PMP score

• 84 respondents are divided into two sets, based on their PMP index value.

• LOW set (43 respondents with PMP below 3)• HIGH set (41 respondents with PMP above 3)

Project management performance…cont’d

• Using 0.05 as the threshold for rejecting the null hypothesis, highlighted with a star (*) the tools in which there is a statistically significant difference in score between the LOW and the HIGH populations

• Background groups - link between the organization-wide application of practices

Simulation (T30) Subcontractor Management (T33) Quality Management (T36) Training (T37) Customer Satisfaction Surveys (T38) Effective and efficient environment for managing projects.

Project management performance…cont’d

• Analysis group - more extensive use of risk analysis tools is associated with better project management practice.

Risk Probability Assessment (T5) Risk Impact Assessment (T6) Risk Classification (T8) Ranking of Risks (T9)

Contribution of PRM proces

RMC Index vs Average tool score

Contribution of PRM proces…cont’d

• Defined a composite index, Risk Management Contribution (RMC)

• Strong positive relationship, with the co-efficient of correlation equal to 0.67 at a level of significance of 0.0001

• Respondents - value of the risk management process as a contributor to overall project success are more likely to apply the tools in the list

Contribution of PRM proces…cont’d

• 84 respondents- 2 sets, based on their RMC index value and threshold value was 3.5

• LOW set • HIGH set both of equal size (42)

Contribution of PRM proces…cont’d

• As for the Planning group-significant differences in three of the less commonly used tools:

• Cost±Bene®t Analysis (T14), Cause and Effect Analysis (T15) and Project

Replanning for Risk Mitigation (T16).

Practical implications

Practical implications…cont’d

• Objective - to identify the tools that have the greatest potential for contribution to a project risk management process

• Adopt the tools for performing project management practices (PMP=HIGH)

(or)• Practitioners who already have a good risk

management process (RMC=HIGH)

Practical implications…cont’d

• These two types of results, the ranking in Table 1 and the selected tools in Table 6, can also serve for diagnostic purposes

• Possible to identify areas of in sufficient coverage and to devise a course of action that will enhance the project risk management capabilities in the organization

Conclusion

• Approach - extended to other aspects of the risk management process, such as assignment of roles and responsibilities, timing and frequency of risk management activities, and amount of effort applied

• Applied to other processes related to project management, and, as the benchmarking proponents advocate, to many aspects of the organization

References• Boehm BW. Software risk management:

principles and practices. IEEE Software 1991;8:32±41

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