Amount at Stake The extent of adverse consequences which could occur to the project. (Also referred to as risk impact). Business Risk The inherent chances for both profit or loss associated with a particular endeavor. Contingency Planning The development of a management plan that identifies alternative strategies to be used to ensure project success if specified risk events occur. Contingency Reserve A separately planned quantity used to allow for future situations which may be planned for only in part ("known unknowns"). Contingency reserves are intended to reduce the impact of missing cost or schedule objectives. Contingency reserves are normally included in the project's cost and schedule baselines. Deflection The act of transferring all or part of a risk to another party, usually by some form of contract. Expected Monetary Value The product of an event's probability of occurrence and the gain or loss that will result. For example, if there is a 50% probability it will rain, and rain will result in a $100 loss, the expected monetary value of the rain event is $50 (.5 * $100). Impact Analysis The mathematical examination of the nature of individual risks on the project, as well as potential arrangements of interdependent risks. It includes the quantification of their respective impact severity, probability, and sensitivity to changes in related project variables, including the project life cycle. Insurable Risk A particular type of risk which can be covered by an insurance policy. Also referred to as a pure risk.Management Reserve A separately planned quantity used to allow for future situations which are impossible to predict. ("unknown unknowns") Management reserves are intended to reduce the risk of missing cost or schedule objectives. Use of management reserves requires a change to the project's cost baseline. Mitigation Taking steps to lessen risk by lowering the probability of a risk event's occurrence or reducing its effect should it occur. Monte Carlo Analysis A schedule risk assessment technique that performs a project simulation many times in order to calculate a distribution of likely results. Opportunities As related to risk, positive outcomes of risk. Project Risk Management Includes the processes concerned with identifying, analyzing, and responding to project risk. Risk Event A discrete occurrence that may affect the project for better or worse. Risk Identification Determining which risk events are likely to affect the project. Risk Management Plan A subsidiary element of the overall project plan which documents the procedures that will be used to manage risk throughout the project. Also covers who is responsible for managing various risk areas; how contingency plans will be implemented, and how reserves will be allocated. Risk Quantification Evaluating the probability of risk event occurrence and effect. Risk Response Control Responding to changes in risk over the course of the project. Risk Response Development Defining enhancement steps for opportunities and mitigation steps for threats. Threats As related to risk, negative outcomes of risk. Total Certainty All information is known. Total Uncertainty No information is available and nothing is known. By definition, total uncertainty cannot be envisaged. Uncertainty The possibility that events may occur which will impact the project either favorably or unfavorably. Uncertainty gives rise to both opportunity and risk. Workaround A response to a negative risk event. Distinguished from contingency plan in that a workaround is not planned in advance of the occurrence of the risk event.

Risk Management Planning Used to decide how to approach and plan the risk management activities for a project. Input includes: The project charter, risk management policies, and WBS all serve as input to this process Methods used: Many planning meeting will be held in order to generate the risk management plan Output includes: The major output is the risk management plan, which does not include the response to specific risks. However, it does include methodology to be used, budgeting, timing, and other information

Risk Identification Determining which risks might affect the project and documenting their characteristics Input includes: The risk management plan is used as input to this process Methods used: Documentation reviews should be performed in this process. Diagramming techniques can also be used Output includes: Risk and risk symptoms are identified as part of this process. There are generally two types of risks. They are business risks that are risks of gain or loss. Then t here are pure risks that represent only a risk of loss. Pure risks are also known as insurable risks

Qualitative Risk Analysis A qualitative analysis of risks and conditions is done to prioritize their affects on project objectives. Input includes: There are many items used as input into this process. They include things such as the risk management plan. The risks should already be identified as well. Use of low precision data may lead to an analysis that is not useable. Risks are rated against how they impact the projects objectives for cost, schedule, scope, and quality Methods used: Several tools and techniques can be used for this process. Probability and Impact will have to be evaluated Output includes: An overall project risk ranking is produced as a result of this process. The risks are also prioritized. Trends should be observed. Risks calculated as high or moderate are prime candidates for further analysis

Quantitative Risk Analysis Used to measure the probability and consequences of risks and estimate their implications for project objectives. Input includes: The risk management plan is used as input to this process. The list of prioritized risks is also used Methods used: Interviewing is a key technique used in this process. Other forms of analysis are used too. Objectives of this process include the determination of the probability of reaching the projects objectives Output includes: A prioritized list of quantified risks is produced as a result of this process. A probability analysis of the project is produced as well

Risk Response Planning Used to develop procedures and techniques to enhance opportunities and reduce threats from risk to the project's objectives. Input includes: Opportunities to pursue or ignore risks are the input for this process Methods used: There are four different techniques used for responding to risk. We will cover each technique in this course Output includes: The output includes a risk response plan and contingency plans. A contingency plan is applied to identified risks that arise during the project. A fall-back plan is developed if the risk has high impact, or if the strategy might not be fully effective. Contingency allowance accounts for known risks. Risks that arise as a result of implementing the contingency plan are called secondary risks. Contractual agreements may also be created as a result of this process

Risk Monitoring and Control Used to monitor risks, identify new risks, execute risk reduction plans, and evaluate their effectiveness throughout the project life cycle. Input includes: Input to this process includes the risk management plan, risk identification and analysis, and scope changes Methods used: Audits should be used in this process to ensure that risks are still risks as well as discover other conditions that may arise. Reviews should also be used Output includes: Output includes work-around plans, corrective action, project change requests, as well as other items

Risk Management Concepts

Expected Monetary Value A Risk Quantification Tool EMV is the product of the risk event probability and the risk event value Risk Event Probability: An estimate of the probability that a given risk event will occur Risk Event Value: An estimate of the gain or loss that will be incurred if the risk event does occur Risk event values must reflect both tangibles and intangibles in order to compare risks. (Otherwise, the risks are not equivalent) EMV is generally used in further analysis such as decision trees

Decision Trees A diagram that depicts key interactions among decisions and associated chance events as understood by the decision maker. Can be used in conjunction with EMV since risk events can occur individually or in groups and in parallel or in sequence.

Scope of Project Risk Management: (reference I-2) in Risk Management Book from PMI Scope of project risk management lies somewhere between the two extremes of total certainty and total uncertainty Spectrum: Total Uncertainty, General Uncertainty, Specific Uncertainty, and Total Certainty Spectrum: Unknown Unknowns (no information), Known Unknowns (partial information), and Knowns (complete information) Management Reserves handle unknown unknowns while contingency reserves handle known unknowns

Categories of Risk Response Avoidance Eliminate a specific threat, usually by eliminating the cause. Examples: Don't do the project; or do the project in a different way such that the risk is no longer a risk Mitigation Reduce the expected monetary value of a risk event by reducing the probability of occurrence or reducing the risk event value (impact of the risk) Example: Using proven technology to lessen the probability that the product will not work Mitigation includes transferring the risk by buying insurance. Acceptance Accepting the consequences of the risk. Acceptance can be active: Developing a contingency plan should the risk occur Acceptance can be passive: Accepting a lower profit is some activities overrun