Project Risk Management Sections of this presentation were adapted from A Guide to the Project...
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Project Risk Project Risk Management Management Sections of this presentation were Sections of this presentation were adapted from adapted from A Guide to the A Guide to the Project Management Body of Project Management Body of Knowledge Knowledge 4 4 th th Edition, Project Edition, Project Management Institute Inc., © 2008 Management Institute Inc., © 2008
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Transcript of Project Risk Management Sections of this presentation were adapted from A Guide to the Project...
Project Risk Project Risk ManagementManagement
Sections of this presentation were adapted Sections of this presentation were adapted from from A Guide to the Project Management A Guide to the Project Management
Body of KnowledgeBody of Knowledge 4 4thth Edition, Project Edition, Project Management Institute Inc., © 2008Management Institute Inc., © 2008
Risk ManagementRisk Management
““The process involved with identifying, The process involved with identifying, analyzing, and responding to risk. It analyzing, and responding to risk. It includes maximizing the results of positive includes maximizing the results of positive risks and minimizing the consequences of risks and minimizing the consequences of negative events”negative events”
Why Do We Manage Risk?Why Do We Manage Risk?
Project problems can be reduced as much Project problems can be reduced as much as 90% by using risk analysisas 90% by using risk analysisPositives:Positives: More info available during planningMore info available during planning Improved probability of success/optimum Improved probability of success/optimum
projectproject
Negatives:Negatives: Belief that all risks are accounted forBelief that all risks are accounted for Project cut due to risk levelProject cut due to risk level
Key TermsKey TermsRisk Tolerance – The amount of acceptable Risk Tolerance – The amount of acceptable riskriskRisk Adverse – Someone that does not want Risk Adverse – Someone that does not want to take risksto take risksRisk FactorsRisk Factors Probability Probability of occurrenceof occurrence RangeRange of possible outcomes (impact or amount at of possible outcomes (impact or amount at
stakestake Expected TimingExpected Timing of event of event Anticipated frequency of risk events from that Anticipated frequency of risk events from that
sourcesource
How Do We Manage Risk?How Do We Manage Risk?Use the six risk management processesUse the six risk management processes Plan Risk ManagementPlan Risk Management Identify RisksIdentify Risks Perform Qualitative Risk AnalysisPerform Qualitative Risk Analysis Perform Quantitative Risk AnalysisPerform Quantitative Risk Analysis Plan Risk ResponsesPlan Risk Responses Monitor and Control RisksMonitor and Control Risks
Plan Risk Management
Identify Risks
Perform Qualitative Risk Analysis
Perform Quantitative Risk Analysis
Plan Risk Responses
Monitor and Control Risk s
Plan Risk ManagementPlan Risk Management
Project Scope Statement
Cost Management Plan
Schedule Management Plan
Enterprise Environmental Factors
Organizational Process Assets
Risk Management Plan
Planning Meetings and Analysis
Inputs
Outputs
Tools & Techniques
Plan Risk Management
Identify Risks
Perform Qualitative Risk Analysis
Perform Quantitative Risk Analysis
Plan Risk Responses
Monitor and Control Risk s
What is a Risk Management Plan?What is a Risk Management Plan?Methodology – Approach, tools, & dataMethodology – Approach, tools, & data
Roles & ResponsibilitiesRoles & Responsibilities
Budgeting – Resources to be put into risk Budgeting – Resources to be put into risk managementmanagement
Timing – When and how oftenTiming – When and how often
Risk Categories – Risk Breakdown Risk Categories – Risk Breakdown Structure (RBS)Structure (RBS)
Definitions – Risk probabilities and impactDefinitions – Risk probabilities and impact
What is a Risk Mgmt Plan (Cont’d)?What is a Risk Mgmt Plan (Cont’d)?Probability and Impact MatrixProbability and Impact Matrix
Stakeholder tolerancesStakeholder tolerances
Reporting formatsReporting formats
TrackingTracking
Risk Breakdown StructureRisk Breakdown StructureLists categories and subcategories where Lists categories and subcategories where risks may ariserisks may arise
Project
Technical Organizational Project Management
Limited Design Time
Specifications Adherence
Funding
Prioritization
Resource Availability
Estimates
Scheduling
Communication
Identify RisksIdentify RisksRisk Management Plan
Activity Cost Estimates
Activity Duration Estimates
Scope Baseline
Stakeholder Register
Cost Management Plan
Schedule Management Plan
Quality Management Plan
Project Documents
Enterprise Environmental Factors
Organizational Process Assets
Risk Register
Documentation Reviews
Information Gathering Techniques
Checklist Analysis
Assumption Analysis
Diagramming Techniques
SWOT Analysis
Expert Judgment
Inputs
Outputs
Tools & Techniques
Plan Risk Management
Identify Risks
Perform Qualitative Risk Analysis
Perform Quantitative Risk Analysis
Plan Risk Responses
Monitor and Control Risk s
Information Gathering TechniquesInformation Gathering Techniques
BrainstormingBrainstorming
Delphi techniqueDelphi technique Successive anonymous questionnaires on Successive anonymous questionnaires on
project risks with responses summarized for project risks with responses summarized for further analysisfurther analysis
InterviewingInterviewing
Root cause identificationRoot cause identification
Strengths, weaknesses, opportunities, and Strengths, weaknesses, opportunities, and threats (SWOT) analysisthreats (SWOT) analysis
Diagramming TechniquesDiagramming TechniquesCause and Effect DiagramsCause and Effect Diagrams Also known as Ishikawa or fishboneAlso known as Ishikawa or fishbone
Product Delivered
Late
Bad SpecsInsufficient Resources
Inadequate Time
Project Prioritization
Testing
Materials
Potential Causes Effect
Personnel
Risk RegisterRisk Register
List ofList of Identified risksIdentified risks Potential responsesPotential responses Root causesRoot causes
Updated risk categories (if required)Updated risk categories (if required)
Perform Qualitative Risk Perform Qualitative Risk AnalysisAnalysis
Risk Register
Risk Management Plan
Project Scope Statement
Organizational Process Assets
Risk Register Updates
Risk probability and impact statement
Probability and impact matrix
Risk data quality assessment
Risk categorization
Risk urgency assessment
Expert Judgement
Inputs
Outputs
Tools & Techniques
Plan Risk Management
Identify Risks
Perform Qualitative Risk Analysis
Perform Quantitative Risk Analysis
Plan Risk Responses
Monitor and Control Risk s
MethodologiesMethodologies
Probability and Impact MatrixProbability and Impact Matrix Based on Failure Modes and Effects Based on Failure Modes and Effects
Analysis (FMEA)Analysis (FMEA) From 1950’s analysis of military systemsFrom 1950’s analysis of military systems
Probability and Impact MatrixProbability and Impact Matrix
Define Probability Scale & Impact ScaleDefine Probability Scale & Impact Scale
Likelihood ClassLikelihood of Occurrence
(events/year)
Not Likely (NL)<0.01% chance of
occurrence
Low (L)0.01 - 0.1% chance of
occurrence
Moderate (M)0.1 - 1% chance of
occurrence
High (H)1 - 10% chance of
occurrence
Expected (E) >10% chance of occurrence
Probability Scale
Consequence Health and Safety
ExtremeFatality or multiple fatalities
expected
HighSevere injury or disability likely; or
some potential for fatality
Moderate
Lost time or injury likely; or some potential for serious injuries; or
small risk of fatality
LowFirst aid required; or small risk of
serious injury
Negligible No concern
Impact Scale
Probability and Impact PlotsProbability and Impact Plots
Rate each Rate each risk on risk on scales scales then plot then plot on matrixon matrix
Develop Develop mitigation mitigation technique technique for risks for risks above above tolerancetolerance
Risk Register UpdateRisk Register Update
Add Add Probability and Impact Matrix resultsProbability and Impact Matrix results Perform quality check on resultsPerform quality check on results Categorize the risks to make them easier to Categorize the risks to make them easier to
handlehandle Perform urgency assessment to determine Perform urgency assessment to determine
which risk need immediate attentionwhich risk need immediate attention
Risk RegisterRisk Register
Perform Quantitative Risk Perform Quantitative Risk AnalysisAnalysis
Risk Register
Risk Management Plan
Cost Management Plan
Schedule Management Plan
Organizational Process Assets
Risk Register Updates
Data gathering and representation techniques
Quantitative risk analysis and modeling
Expert Judgment
Inputs
Outputs
Tools & Techniques
Plan Risk Management
Identify Risks
Perform Qualitative Risk Analysis
Perform Quantitative Risk Analysis
Plan Risk Responses
Monitor and Control Risk s
Quantitative Risk AnalysisQuantitative Risk Analysis
Analyze numerically the probability and Analyze numerically the probability and consequence of each riskconsequence of each risk
Monte Carlo analysis popularMonte Carlo analysis popular
Decision Tree analysis on testDecision Tree analysis on test Diagram that describes a decision and Diagram that describes a decision and
probabilities associated with the choicesprobabilities associated with the choices
Expected Monetary Value Analysis (EMV)Expected Monetary Value Analysis (EMV)
Expected Monetary Value (EMV)Expected Monetary Value (EMV)
Building Cost Probability
Optimistic OutcomeOptimistic Outcome $150K$150K 0.20.2 $30K$30K
Likely OutcomeLikely Outcome $225K$225K 0.50.5 $113K$113K
Pessimistic Pessimistic OutcomeOutcome
$300K$300K 0.30.3 $100K$100K
Expected Value $243K$243K
Decision Tree AnalysisDecision Tree Analysis
Build or Upgrade
Plant
New Plant
-$120
Upgrade Plant
-$50
Strong Demand
Weak Demand
Strong Demand
Weak Demand
65%
$200
35%
$90
65%
$120
35%
$60
$80
-$30
$70
$10
Decision Definition
Decision Node
Chance Node
Net Path Value
EMV of New Bldg Node = $41.5!
EMV of Upgrade Node = $49!
Plan Risk ResponsesPlan Risk Responses
Risk Management Plan
Risk RegisterRisk Register Updates
Strategies for negative risks or threats
Strategies for positive risks or opportunities
Contingent response strategy
Expert Judgment
Inputs
Outputs
Tools & Techniques
Project Management Plan Updates
Risk-related Contract Decisions
Plan Risk Management
Identify Risks
Perform Qualitative Risk Analysis
Perform Quantitative Risk Analysis
Plan Risk Responses
Monitor and Control Risk s
StrategiesStrategies
Negative Risks (or Threats)Negative Risks (or Threats) AvoidAvoid TransferTransfer MitigateMitigate AcceptanceAcceptance
Positive Risks (or Opportunities)Positive Risks (or Opportunities) ExploitExploit ShareShare EnhanceEnhance AcceptanceAcceptance
Monitor and Control RisksMonitor and Control Risks
Risk Register
Project Management Plan
Work Performance Information
Performance Reports
Risk Register Updates
Risk reassessment
Risk audits
Variance and trend analysis
Technical performance measurement
Reserve analysis
Status meetings
Inputs
OutputsTools & Techniques
Organizational Process Assets
Change Requests
Project Management Plan Updates
Project Document Updates
Plan Risk Management
Identify Risks
Perform Qualitative Risk Analysis
Perform Quantitative Risk Analysis
Plan Risk Responses
Monitor and Control Risk s
