Risk Management

• Sergii Zabigaylo, Program Manager

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What is Risk?Project FailureRisk Management, theory and practiceThe Cone of UncertaintyNotes about Risks

Content

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The optimism bias

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Risk Management Strategies

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What is Risk?

Uncertain Event or Condition

Always in the Future

Effect on Project Objective

Has Causes, Impact and Probability

Negative or Positive Outcome

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Practice: What are the benefits of risks management?

Define common ways to manage risks, analyze, response plans

Increase project success probability

Realistic estimates

Remove obstacles on project launch phases

Increase profitability

Less stress

Professionalism and reputation

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Whenever a project doesn’t meet to the expectation of the Stakeholders.

Project Failure

A Project is considered as Failure……

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• Cost & Time Over-runs• Quality Degradation• Frustration & Stress: sometime resulting

in people quitting• Low Job Satisfaction• Low Corporate Market Value• Low Public Opinion• Negative Media Campaigns • May even force the company into Closure

Impact of Project Failure

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Primary Causes of Project Failure

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Problems: The changes that were not initially planned for, are added

to project. The Project takes longer and costs more than planned

and there is no record of WHY??

Causes: Not having a method to handle or recognize changes.

1. Lack of Change Management

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Problems: Team Members do not have the information they need

when they need it. Issues or changes do not get escalated. Project reporting is sluggish

Causes: The project’s communication plan

was not completed. The project’s communication plan

doesn’t have enough details.

2. Poor Communication

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You do not have enough people, the right skill-sets, or the team is not committed to the projects.

Problems: Tasks take longer than expected

to complete. Deadlines and milestones get

missed. Project completion date comes

into jeopardy. You end up working double shifts to

complete all the works.

Causes: There was no pre-commitment of resources to the projects. The Project was not supported. There was no analysis and documentation of all skill-set required

3. Inadequate Resources

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“I would like a set of stairs that leads up to a bridge.”

Problems: Customer will be unhappy. Customer will complain and you will end up doing the

what they want- at your expense.

Causes: What the customer wants, was not clearly documented. What you believe the customer wants is different that

what the customer believes they have asked for?

4. Poorly Defined Requirement

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How do you figure out how long the project will take?

Problems: An unrealistic timeline or budget will be agreed to. You will not be able to do all the work in the time allocated.

Causes: No formal estimating method Estimate confidence is law. Volume of work not understood

5. Inaccurate Estimates

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Sorry about the project, I left it in my car & there was a bit of an incidents.Problems:

Unexpected events cause delays. Domino effect of thing going wrong.

Causes: No Formal Risk Management. Just try to predict the big things that can go wrong. It’s the sum of the all little things that make a project late. Nothing is more stressful than trying to keep on schedule

when unexpected things keep happening.

6. Poor Risk Management

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“Emergency Phone installed, Deliverable completed”Problems:

Difficult to get the agreement that the product is finished. Customer Keep wanting more, saying you didn’t do it to

their Specification.

Causes: The Milestones or deliverables were not measurable. The customer never told us How many they wanted So

we just assumed 1,

7. Poorly Defined Deliverables

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Of course we Can do that for you.

Problems: There was little or no planning before deciding you can

get the job done. The task you agree to turns out to be more work than

expected. It takes you longer and jeopardizes other deliverables.

Causes: Not enough time spent planning. You may have been pressured into giving an answer right

then and there. Didn’t have a full understanding of the work involved

before committing.

8. Over Optimism

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Hurry .... We have a tight deadline. No time to plan. Just start digging.

Problems: The plan is flawed from the start. The project gets out of control and can’t be recovered.

Causes: You have to do the work and weren’t also given time for

project management. Perhaps you only have 10% or 20%

allotment for the project management duties.

9. No time for Project Management

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You Don't Know What You Don't Know.

Problems: Your project don’t finish on time. Your project are always squeezed at the end. Your project are stressful. You have to deal with unrealistic expectation or customers. You feel your projects are out of control.

Causes: People often don’t know what they don’t know. Their project are out of control but they

don’t know WHY?? They feel they are doing okay but could

benefit from formal PM education.

10. Improved PM Skill-set needed

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Risk Management Process

Plan Risk Management Identify Risks Perform Risk

AnalysisPlan Risk

ResponsesMonitoring &

Control

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Define how will we work with Risks: resources, responsibilities, frequency, risk tolerance…

Plan Risk Management

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Risk Management Plan:• Categorize risk sources• Probability Matrix• Roles, Responsibilities, Activity Plan• Monitoring, Reporting,

Communication• Tolerance, Management/Contingency

reserves, reaction (before, after)

Plan Risk Management

Risk Breakdown StructureRisk Breakdown Structure

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Influence Source Time Budget Quality Scope …

Technologies

External Environment

Internal conditions, Project, Process + + +

People, Communication + +

…

Categorization of Sources and Influence

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Scale: (1-3, 1-10, 1-100)

Matrix of Probability and Impact

Matrix of Probability and Impact

Scale: Planning Poker

Matrix of Probability and Impact

Matrix of Influence Definition

Should correlate with Matrix of Probability and Impact and with Categorization of Sources and

Influence

Matrix of Influence Definition

Should correlate with Matrix of Probability and Impact and with Categorization of Sources and Influence

Identify RisksIdentify Risks

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Risk Register

ID Risk Impact Probability Impact Risk Value Notes

1Application response will be worse than expected

according to the acceptance criteria

Architecture redesign – 3 weeks

2 Specifications aren’t confirmed by client

Corresponding time delay, budget increase

3 … …

ID Risk Impact Probability Impact Risk Value Notes

1Application response will be worse than expected

according to the acceptance criteria

Architecture redesign – 3 weeks 3 5 15

2 Specifications aren’t confirmed by client

Corresponding time delay, budget increase 2 1 2

3 … …

Perform Qualitative Risk AnalysisCurrent Risks

Watchlist

Perform Qualitative Risk Analysis

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Negative Risks: Avoid, Transfer, Mitigate

Positive Risks: Exploit, Share, Enhance

Acceptance of Positive and Negative Risks

Plan Risk Responses

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Risk Management StrategiesIf your project

requires that you stand on the edge

of a cliff, then there’s a risk that

you could fall.

If it’s very windy out or the ground is

slippery and uneven, then falling

is more likely.

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Risk Management Strategies - Avoid

The easiest way to avoid this risk is to walk away from the cliff… but that may not be an option on this project

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Risk Management Strategies - Mitigate

If you can’t avoid the risk, you can mitigate it. This means taking some sort of action that will cause it do as little damage to your project as possible.

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Risk Management Strategies - Transfer

One effective way of deal with risk is to pay someone else to accept it for you. The most common way to do this is to buy insurance.

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Risk Management Strategies - Accept

If you can’t avoid the risk and there’s nothing you can do to reduce its impact then accepting it is you only choice

Looks like falling is the best option

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Monitor and Control RisksInformation Management Systems

▪ Expert Judgment

▪ Meetings

Monitor and Control Risks

Iteratively!

Monitor and Control Risks

Monitor and Control Risks

Project Start Planning IdentificationAnalysis

Responses

Project EndProject Plan Changes, Change Requests, Change in Risk

Register and Project Documents

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Emergency Budget (direct, indirect)

strategy “Before”: Most critical Risks in the project plan from very beginning

strategy “After”: Contingency Reserve should be in the project plan

management Reserve: 5%-7% for unpredictable cases (in addition to known

risks)

Risks and Client

Project Scope

Proactive Reac-tion

Contingency Reserve

Management Reserve

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The Cone of Uncertainty

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Don't make promises if you can't keep them

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Estimates as a range.

10 Golden Rules of Risk Management

1. Make Risk Management Part of Your Project 2. Identify Risks Early in Your Project3. Communicate About Risks4. Consider Both Threats and Opportunities5. Clarify Ownership Issues6. Prioritize Risks7. Analyze Risks8. Plan and Implement Risk Responses9. Register Project Risks10.Track Risks and Associated Tasks

10 Golden Rules of Risk Management

• Make Risk Management Part of Your Project • Identify Risks Early in Your Project• Communicate About Risks• Consider Both Threats and Opportunities• Clarify Ownership Issues• Prioritize Risks• Analyze Risks• Plan and Implement Risk Responses• Register Project Risks• Track Risks and Associated Tasks

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The optimism bias

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There is a web application – business analytics. Known technologies, DB, 23 main modules, DB architecture is very complex, DB performance is very critical with the strict acceptance criteria. Requirement are 50% defined, very low chances for requirements to be changed, but they should be very clear before the realization. Now is August, release is on April 1. Client wants to have full transparency on progress. There couldn’t be delay with the delivery of the whole scope, it is more important than budget. Test environment is on client’s side, very big load on the network connection (more than the channel is now). Client is very qualified in business area, will be doing UAT. Main expert on the client’s side is Jar Jar Binks. Project team should be 15 people, 5 are missing, they will be not used after project completion. DB architect works on another project 60-70%. Client’s expert Jar Jar Binks hardly uses email and has strong non-English accent.

Practice