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Transcript of PM0016, Project Risk Management -PM0016, summer / spring 2012
Master of Business Administration – Semester 4
Subject Code – PM0016
Subject Name – Project Risk Management
Assignment Set- 1 (60 Marks)
Note: Each question in total carries 10 Marks. Answer all the questions.
Q 1. Describe the five phases of risk management process.
Risk management is the identification, assessment, and prioritization of risks (defined
in ISO 31000 as the effect of uncertainty on objectives, whether positive or negative)
followed by coordinated and economical application of resources to minimize, monitor,
and control the probability and/or impact of unfortunate events or to maximize the
realization of opportunities. Risks can come from uncertainty in financial markets,
project failures, legal liabilities, credit risk, accidents, natural as well as deliberate attacks
from an adversary. Several risk management standards have been developed including
the Project Management Institute, the National Institute of Science and Technology,
actuarial societies, and ISO standards. Methods, definitions and goals vary widely
according to whether the risk management method is in the context of project
management, security, engineering, industrial processes, financial portfolios, actuarial
assessments, or public health and safety.
The strategies to manage risk include transferring the risk to another party, avoiding the
risk, reducing the negative effect of the risk, and accepting some or all of the
consequences of a particular risk.
Certain aspects of many of the risk management standards have come under criticism for
having no measurable improvement on risk even though the confidence in estimates and
decisions increase.
Principles of risk management
The International Organization for Standardization (ISO) identifies the following
principles of risk management:[4]
Risk management should:
create value
be an integral part of organizational processes
be part of decision making
explicitly address uncertainty
be systematic and structured
be based on the best available information
be tailored
take into account human factors
be transparent and inclusive
be dynamic, iterative and responsive to change
be capable of continual improvement and enhancement
After establishing the context, the next step in the process of managing risk is to identify
potential risks. Risks are about events that, when triggered, cause problems. Hence, risk
identification can start with the source of problems, or with the problem itself.
Source analysis[citation needed] Risk sources may be internal or external to the system
that is the target of risk management.
Examples of risk sources are: stakeholders of a project, employees of a company or the
weather over an airport.
Problem analysis[citation needed] Risks are related to identified threats. For example:
the threat of losing money, the threat of abuse of privacy information or the threat of
accidents and casualties. The threats may exist with various entities, most important
with shareholders, customers and legislative bodies such as the government.
When either source or problem is known, the events that a source may trigger or the
events that can lead to a problem can be investigated. For example: stakeholders
withdrawing during a project may endanger funding of the project; privacy information
may be stolen by employees even within a closed network; lightning striking an aircraft
during takeoff may make all people on board immediate casualties.
The chosen method of identifying risks may depend on culture, industry practice and
compliance. The identification methods are formed by templates or the development of
templates for identifying source, problem or event. Common risk identification methods
are:
Objectives-based risk identification[citation needed] Organizations and project teams
have objectives. Any event that may endanger achieving an objective partly or
completely is identified as risk.
Scenario-based risk identification In scenario analysis different scenarios are
created. The scenarios may be the alternative ways to achieve an objective, or an
analysis of the interaction of forces in, for example, a market or battle. Any event that
triggers an undesired scenario alternative is identified as risk - see Futures Studies for
methodology used byFuturists.
Taxonomy-based risk identification The taxonomy in taxonomy-based risk
identification is a breakdown of possible risk sources. Based on the taxonomy and
knowledge of best practices, a questionnaire is compiled. The answers to the
questions reveal risks.[5]
Common-risk checking In several industries, lists with known risks are
available. Each risk in the list can be checked for application to a particular situation.[6]
Risk charting[7] This method combines the above approaches by listing resources
at risk, threats to those resources, modifying factors which may increase or decrease
the risk and consequences it is wished to avoid. Creating a matrix under these
headings enables a variety of approaches. One can begin with resources and consider
the threats they are exposed to and the consequences of each. Alternatively one can
start with the threats and examine which resources they would affect, or one can
begin with the consequences and determine which combination of threats and
resources would be involved to bring them about.
Five steps to risk assessment
Five steps to risk assessment aims to help you assess health and safety risks.
A risk assessment is an important step in protecting your workers and your business, as
well as complying with the law. It helps you focus on the risks that really matter in your
workplace – the ones with the potential to cause harm. In many instances, straightforward
measures can readily control risks, for example, ensuring spillages are cleaned up
promptly so people do not slip or cupboard drawers kept closed to ensure people do not
trip. For most, that means simple, cheap and effective measures to ensure your most
valuable asset – your workforce – is protected.
The law does not expect you to eliminate all risk, but you are required to protect people
as far as is ‘reasonably practicable’. This guide tells you how to achieve that with
minimum fuss.
This is not the only way to do a risk assessment, there are other methods that work well,
particularly for more complex risks and circumstances. However, we believe this method
is the most straightforward for most organisations.
What is risk assessment?
A risk assessment is simply a careful examination of what, in your work, could cause
harm to people, so that you can weigh up whether you have taken enough precautions or
should do more to prevent harm. Workers and others have a right to be protected from
harm caused by a failure to take reasonable control measures.
Accidents and ill health can ruin lives and affect your business if output is lost,
machinery is damaged, insurance costs increase or you have to go to court. You are
legally required to assess the risks in your workplace so you must put plans in place to
control risks.
How to assess the risks in your workplace
Follow the five steps in our leaflet: Five steps to risk assessment .
1. Identify the hazards
2. Decide who might be harmed and how
3. Evaluate the risks and decide on precaution
4. Record your findings and implement them
5. Review your assessment and update if necessary
Don’t overcomplicate the process. In many organisations, the risks are well known and
the necessary control measures are easy to apply. You probably already know whether,
for example, you have employees who move heavy loads and so could harm their backs,
or where people are most likely to slip or trip. If so, check that you have taken reasonable
precautions to avoid injury.
If you run a small organisation and you are confident you understand what’s involved,
you can do the assessment yourself. You don’t have to be a health and safety expert.
Download the Risk Assessment and Policy Template. This template brings together your
risk assessment, health and safety policy, and record of health and safety arrangements
into one document to help you get started and save time. If you already have a health and
safety policy, you may choose to simply complete the risk assessment part of the
template. We also have a number of example risk assessments to show you what a risk
assessment might look like. Choose the example closest to your own business and use it
as a guide for completing the template, adapting it to meet the needs of your own
business.
If you work in a larger organisation, you could ask a health and safety adviser to help
you. If you are not confident, get help from someone who is competent. In all cases, you
should make sure that you involve your staff or their representatives in the process. They
will have useful information about how the work is done that will make your assessment
of the risk more thorough and effective. But remember, you are responsible for seeing
that the assessment is carried out properly.
When thinking about your risk assessment, remember:
a hazard is anything that may cause harm, such as chemicals, electricity, working
from ladders, an open drawer, etc; and
the risk is the chance, high or low, that somebody could be harmed by these and
other hazards, together with an indication of how serious the harm could be.
Some frequently asked questions
What if the work I do tends to vary a lot, or I (or my employees) move from one site
to another?
Identify the hazards you can reasonably expect and assess the risks from them. This
general assessment should stand you in good stead for the majority of your work. Where
you do take on work or a new site that is different, cover any new or different hazards
with a specific assessment. You do not have to start from scratch each time.
What if I share a workplace?
Tell the other employers and self-employed people there about any risks your work could
cause them, and what precautions you are taking. Also, think about the risks to your own
workforce from those who share your workplace.
Do my employees have responsibilities?
Yes. Employees have legal responsibilities to co-operate with their employer’s efforts to
improve health and safety (eg they must wear protective equipment when it is provided),
and to look out for each other.
What if one of my employee’s circumstances change?
You’ll need to look again at the risk assessment. You are required to carry out a specific
risk assessment for new or expectant mothers, as some tasks (heavy lifting or work with
chemicals for example) may not be appropriate. If an employee develops a disability then
you are required to make reasonable adjustments. People returning to work following
major surgery may also have particular requirements. If you put your mind to it, you can
almost always find a way forward that works for you and your employees.
What if I have already assessed some of the risks?
If, for example, you use hazardous chemicals and you have already assessed the risks to
health and the precautions you need to take under the Control of Substances Hazardous to
Health Regulations (COSHH), you can consider them ‘checked’ and move on.
Q 2. Describe in brief the basic principles followed by the GMP principles
Good Manufacturing Practice or GMP manufacturing principles are the cornerstones of
quality systems utilized in the manufacture and quality testing of products for which a
high level of quality is an overriding concern. Examples of such products are
pharmaceutical products such as drugs and their ingredients, medical devices, and food.
Depending on the country where they are utilized, these principles can either be
guidelines or legally enforced regulations.
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Q 3. Write short note on the following risk categories:
a. Operational risks
An operational risk is, as the name suggests, a risk arising from execution of a
company's business functions. It is a very broad concept which focuses on the risks
arising from the people, systems and processes through which a company operates. It also
includes other categories such as fraudrisks, legal risks, physical or environmental risks.
Q 4. Describe Risk assessment cycle.
Risk assessment is a step in a risk management procedure. Risk assessment is the
determination of quantitative or qualitative value of risk related to a concrete situation
and a recognized threat (also called hazard). Quantitative risk assessment requires
calculations of two components of risk: R, the magnitude of the potential loss L, and the
probability p, that the loss will occur.
Q.5. Describe in brief the major risk handling strategies.
A risk management strategy provides a structured and coherent approach to identifying,
assessing and managing risk. It builds in a process for regularly updating and reviewing
the assessment based on new developments or actions taken.
Q 6. Define change and the various types of changes
Most of the 41 participants in our study were undergoing changes of acculturation.
As immigrants to the United States, they were confronting the formidable tasks of
gaining fluency in the English language as well as in their new culture.
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Master of Business Administration – Semester 4
Subject Code – PM0016
Subject Name – Project Risk Management
Assignment Set- 2 (60 Marks)
Note: Each question carries 10 Marks. Answer all the questions.
Q 1. Describe the seven step risk management planning process
Risk is real for any company or organization. Don't kid yourself. Things happen when
you least expect them to happen. Are YOU ready for the unimaginable, the unexpected,
the unwanted? As an executive, have you put your head in the sand around risk? Do you
pretend that all is well, and nothing will change? If so, it's time to face reality: data gets
lost, buildings burn, people resign. When any of these occur, your organization is at risk
for malfunction, inefficiency, chronic struggle, revenue loss, and even total failure. Is this
the path you want to go down?
Beginning now, you can initiate the process of developing your organization's risk
management plan. Take charge. Form a committee representing Board members and
staff, and ask them to partner with you to create this critical document. Make sure
everyone understands the importance of the work, and explain to them how they can
benefit from contributing to the finished product. Risk managements plans are not
optional; they are essential for every company, large or small. There are no valid
exceptions.
Implement the following seven steps, and give yourself and others a huge slice of peace
of mind:
1. Define what risk looks like for your organization.
What constitutes risk in your shop? Threats to normal operations? Threats or
compromises to people's safety? Loss of physical and electronic property? Loss of
revenue? Decreased public/community support? Unethical behaviors? Create a
comprehensive definition of risk that means something to YOU and YOUR organization.
2. Identify specific risks.
Ask the committee to brainstorm as many different risks as they can possibly
imagine. Record them on a white board or flip chart. Examples of various risks
include: firing of the chief executive, dwindling interest in one of your major products,
departmental silos, Board infighting, inability to fundraise, economic downturn, layoffs,
building fire, computer crashes, philosophical differences between key employees,
extended leaves for managers, interruption in receiving necessary supplies. All of these
are potential risks, and there are many others. Continue brainstorming until the group
believes they have come up with an exhaustive list.
3. Categorize each risk.
Determine category names for the identified risks. Examples may be: Chief Executive,
Board of Directors, Physical Property, Technology, Data, Employees, Products or
Services, Customers/Clients, Stakeholders,. Place each risk under one of the selected
categories. Create as many category names as you need.
4. Rank each risk according to severity or significance.
Choose headings such as "most severe", "moderately severe", "of minimal concern". You
don't have to use these same words for your headings, but be sure that your phrases
adequately differentiate between the degrees of seriousness. Perhaps you would like to
color code each risk according to its significance heading: red for "most severe"; black
for "moderately severe", and green for "of minimal concern". Set it up the way it best
works for you and your organization.
5. Develop strategies for reducing or eliminating each risk.
Begin with the risks under your "most severe" heading. It's critical that you don't delay in
thinking through possible solutions for those major issues. Ideally, determine multiple
strategies for each risk. Be sure to consider who within the organization is going to be
responsible for implementing the various strategies, and the resources needed to
implement them. Omitting this information from the plan only causes big problems
later.
6. Write your plan.
Using all of the above input, shape a readable document. Practicality is paramount
here. The plan is worthless if nobody can follow it, interpret it, or actually rely on it as a
guide during crisis. After it is compiled, seek feedback from the committee as well as
other employees and Board members. Incorporate changes where indicated. Check for
evidence of common sense throughout the document. Hold yourself accountable to a high
standard around common sense. A pie-in-the-sky risk management plan doesn't serve
anyone.
7. Test some of those strategies in your plan for viability.
Do they work? Can they work? Why or why not? Where are the pitfalls? What steps are
missing? Would you benefit from having certain outside experts review your
strategies? If so, which types of experts?
Revisions to the plan may occur annually, as situations arise and your organization lives
one or two of the strategies firsthand. Hindsight is often wiser. Don't be afraid to toss
some plan content when you know for a fact that this is what you must
do. Remember: the plan needs to be current. On a day you least expect it, someone has to
grab that document, refer to a particular section in it, and act upon it--fast.
Q 2. Write advantages & disadvantages of the following:
a. Brainstorming
Brainstorming is a relatively simple and cheap way of generating ideas. Although it can
be done individually, it usually involves a group of people who are looking to generate
ideas that will provide a solution to a problem or situation. The aim is to generate as
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Q 3.Describe benchmarking, its advantages & limitations
There are a number of definitions used to describe benchmarking , all of which may have
their place. The European Benchmarking Code of Conduct defines it as a technique
whichis about making comparisons with other organisations and then learning the lessons
that those comparisons throw up.
Q 4. List the steps in risk analysis.
Risk assessment is a step in a risk management procedure. Risk assessment is the
determination of quantitative or qualitative value of risk related to a concrete situation
and a recognized threat (also called hazard). Quantitative risk assessment requires
calculations of two components of risk: R, the magnitude of the potential loss L, and the
probability p, that the loss will occur.
Q 5. Define the major content of a risk register
ntroduction to quality in risk registers
Risk registers, while not always the best way to understand risk and controls, are
becoming increasingly widespread. In many cases writing a risk register is an imposed
requirement so, like it or not, it has to be done. Not only do more organizations have
them, but each organization has more of them and they are getting bigger.
Q 6. Explain the difference between program and project in Business
Many people are uncertain about the difference between a project and a program (also
please refer to note on spelling conventions used on ICB.com).
Management consultants are regularly involved in supporting clients through periods of
complex change and consequently clarity on the basic definitions of a project and a
program, and the difference between a project and a program are important.
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