Risk Management in Project Management
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Transcript of Risk Management in Project Management
Risk Management
For Project Management
What is Risk?
• Risk (noun): possibility of loss or injury• (Merriam-Webster Dictionary)
Risk in Project Management
•A risk is something that may happen and if it does, will have an impact on the
project objectives.
May → possibilityImpact → lossObjectives → time, cost, performance,
quality, scope, client satisfaction.
Words in Risk Management
• Possibility → probability, likelihood
• Loss → impact
• Weakness → vulnerability
• Threat
• Control → countermeasure
• Residual Risk → the amount of risk that is left over when appropriate controls are properly applied to lessen or remove weakness
Risk Management Plan
• Risk Identification• Risk Quantification• Risk Response• Risk Monitoring and
Control
Risk Identification
Or Risk Assessment
• Threats to the project
• Weaknesses of the project environment
• The possibility that threat will make use of weakness
• The impact of the exposure (threat to weakness)
• Available controls
Risk Identification and SWOT
Factors affecting an organization (in this case, project) can usually be classified as:
• Internal factors
– Strengths (S)
– Weaknesses (W)
• External factors
– Opportunities (O)
– Threats (T)
Risk Identification Tools and Techniques
• Document Reviews
• Information Gathering
– Brainstorming
– Lessons Learned Database
– Other methods, some common techniques include: questionnaires and surveys, interviewing, checklists, and examination of the Work Breakdown Structure for the project with appropriate specialty groups, asking “what-if’ questions
Risk Identification Output
• Identification # for each risk identified
• Date and phase of project development when risk was identified
• Name of risk (does the risk pose a threat or present an opportunity?)
• Detailed description of risk event
• Risk trigger
• Risk type
• Potential responses to identified risk
• Comments about risk identification
Risk Identification Sheet Example
Risk Quantification
• Set Impact Level of the Project
– Impact Level to Cost
– Impact Level to Schedule
• Set Probability Level of the Project (could be organization standard)
• Set Risk Matrix (should be organizational standard)
Impact Level Example
• Project Value 10M
• Project Schedule 3 Months
Level Value Time
Very High > 5M > 1Mo
High 2M-5M 2W-1Mo
Medium 0.5M-2M 3d-2W
Low 0.1M-0.5M 1d-3d
Very Low <0.1M < 1d
Probability Level Example
Level Probability
Very High >90%
High 70%-90%
Medium 30%-70%
Low 5%-10%
Very Low <5%
Risk Matrix Example
•VH
•H
•M
•L
•VL
•VL •L •M •H •VH
Pro
babi
lity
Impact
Risk Response
Avoid: Do Something to Remove Transfer: Make Someone Else Responsible Reduce: Take Action to Lessen the Impact or
Possibility Accept
Risk Response: Rule
Cost of Risk Response (Avoid, Transfer or Reduce) must be less than the cost of impact.
Reduce Avoid
Accept Transfer
Severity
Pro
bab
ility
Risk Monitoring and Control
• Risk Audit
• Risk Reviews
• Risk Status Meetings and Reports