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Managing IT ProjectsChapter 5Project Risk Management
Project Risk ManagementWhat is Risk?A risk is an likelihood of an event which can haveeither a negative or positive impact...
Project Risk Management A disciplined, though simple, approach to riskmanagement can reduce crisis managementand the clean...
Project Risk Management   1. MeasureThe project manager needs to measure, assess, understand:· the risk that the project w...
Project Risk Management Risk Identification  filing it away and believing they have "done riskmanagement". Not terribly us...
Project Risk Management Risk Check lists   Priorities the risks, listing first those which wouldcause major problems and a...
Project Risk Management Risk Classification  For example: define that users role in writing, get a writtencommitment from ...
Project Risk Management Risk Classification   Some companies record how projects deal successfully withrisks and make this...
Project Risk Management Risk Classification   (Image you dont mention the risks and when its all goingwrong you tell the s...
Project Risk Management Risk Control   If you were sponsor and youre told "this risk is almostcertain to happen and when i...
Project Risk ManagementRisk Control  Create a Risk Register which lists risks in priorityorder. For each risk, the registe...
Project Risk ManagementRisk ControlAt weekly team meetings risk owners report,briefly, on the status of their risks. What ...
Project Risk ManagementRisk ControlEach month the project manager should report tothe sponsor on the status of key risks. ...
Project Risk ManagementRisk Controland what you would do next time with thebenefit of hindsight. These ways ofaddressing r...
Project Risk ManagementRisk ControlWhen a future project manager is starting aproject and has identified a risk he has noi...
Project Risk ManagementRisk ControlIdeally they would also seek out successfulstrategies for addressing risks andproactive...
Four Broad Strategies ForHandling RiskBased on the foregoing the Four Broad StrategiesFor Handling Risk of any kind are:•R...
Four Broad Strategies ForHandling Risk•Risk Transfer: The organizers can either bindsubcontractors & mange to share part o...
Role of Buffers & Contingencyplans in risk ManagementTwo common ways of dealing with project relatedrisks are•Working out ...
Role of Buffers & Contingencyplans in risk ManagementA clear contingency plan must be defined forconstruction & software i...
Role of Buffers & Contingencyplans in risk ManagementType of Buffers Buffers can be three types: Resource buffers:I.e prov...
Role of Buffers & Contingencyplans in risk Management   Where to place Buffers ?It is good practice to place buffers at fo...
Role of Buffers & Contingencyplans in risk Management  Where to place Buffers ?• Task level buffers : We use pure estimate...
Project Tracking meeting  Project tracking meeting is best place to identifyrisk which is likely to hit the project in the...
Project Tracking meeting Usually risk management involves thefollowing steps Risk Identification Risk Quantification Risk ...
Project Tracking meeting A properly defined processwhich takes the project from riskdetection to closure will help inglidi...
Project Risk ManagementEnd of Chapter 5
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Project Risk Management

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In this presentation, we will discuss about risk, project risk and four broad strategies to handle risk. We will also talk about the role of buffers and contingency plan in risk management, project tracking meetings.
To know more about Welingkar School’s Distance Learning Program and courses offered, visit:
http://www.welingkaronline.org/distance-learning/online-mba.html

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  1. 1. Managing IT ProjectsChapter 5Project Risk Management
  2. 2. Project Risk ManagementWhat is Risk?A risk is an likelihood of an event which can haveeither a negative or positive impact on a project(delivery or outcome).Examples of Project Risks: Absenteeism Attention Changes in scope Breakdown of equipment Relation related risk (Between client & Service Providers)
  3. 3. Project Risk Management A disciplined, though simple, approach to riskmanagement can reduce crisis managementand the clean ups that result. It will alsoincrease the chance of project success andprobably reduce the project managers stresslevel into the bargain. We will summaries theprocess under these five headings: Measure,Minimize, Mention, Monitor and Modify, whichyou will notice make the easily rememberedacronym mmmmm.
  4. 4. Project Risk Management 1. MeasureThe project manager needs to measure, assess, understand:· the risk that the project will exceed the budget he isthinking of committing to· the risk that the project will miss any dates he has in mind· the risk that the project will fail to meet any othercommitments he is about to make.Many organizations have checklists - things that have gonewrong in previous similar projects - which are thereforethings that might cause problems in future projects. Someorganizations have several checklists reflecting the varioustypes of project they undertake. However, checklists (andIve met PMs who have done this) can lead to the PM "fillingin the checklist", Cont…….
  5. 5. Project Risk Management Risk Identification filing it away and believing they have "done riskmanagement". Not terribly useful.A better approach might be to invite the team and otherstakeholders to a Risk Identification Workshop. Brainstorm:"team, what do we think could cause us problems, or evencause us to fail?" When that has been exhausted, zip throughany checklists youve managed to lay your hands on to see ifthey prompt anything you hadnt thought of.Stakeholder managers who may have no direct projectrole will need to be involved. Only a manager from therelevant business department can tell you whether auser provisionally assigned to your project has therequired skills, will genuinely be available, and will beempowered to represent their part of the business.
  6. 6. Project Risk Management Risk Check lists Priorities the risks, listing first those which wouldcause major problems and are most likely to happen.These high impact, high probability risks will clearlyneed most attention. You may well decide to ignore lowprobability low impact risks to avoid cluttering up yourrisk management process.Tools which employ risk weighting and which calculate anoverall risk score in an apparently scientific way may addvalue, but can obscure the fact that one single risk, which maynot even be considered in the tool, can make the whole projecta complete non-starter. Whatever techniques you use to assess,measure and understand the risks - brainstorming, checklists,tools.
  7. 7. Project Risk Management Risk Classification For example: define that users role in writing, get a writtencommitment from his boss that he will be available andempowered to make decisions on behalf of his department.Line up backfills for people you think might leave the teamduring the project. Increase the budget to include contingencytasks for risks that you cant eliminate at the start, i.e. tasksthat describe what youll do if the risk bites you during theproject. Now, if you are an experienced PM youll know howto deal with most risks. If youre a novice you may have noidea how to reduce the risk that, for example, too muchchange to the Requirements during the project might causeyou to miss the proposed end date.
  8. 8. Project Risk Management Risk Classification Some companies record how projects deal successfully withrisks and make this information available to future projectmanagers. Getting a list of the dozen or so ways PMs havereduced that change risk in the past could give you some veryuseful pointers as to how you might reduce the risk in yourproject.MentionWho owns the project risk, who ultimately is taking the risk?The Project Sponsor. But many sponsors have no idea whatthe risks might be, particularly if they are sponsoringtechnical, e.g. IT, projects - and why should they? Projectmanagers have a duty to explain the risks to the sponsorbefore the sponsor gives the go ahead. Cont….
  9. 9. Project Risk Management Risk Classification (Image you dont mention the risks and when its all goingwrong you tell the sponsor that you knew all along it was highrisk - youre going to get shot and quite rightly too.) But there are good ways and bad ways of presenting risks tosponsors. Do not go in with 50 overheads listing hundreds ofrisks. No. The way to do it is briefly to explain the processyou have used to identify and analyze the risks and then todescribe the major risks you initially foresaw. Then explainwhat you have already done to eliminate or reduce some ormost of these major risks. This builds real credibility for thenext bit where you tell the sponsor about the high risks thatremain, the likelihood of their coming to fruition and theconsequence if they do.
  10. 10. Project Risk Management Risk Control If you were sponsor and youre told "this risk is almostcertain to happen and when it does your £5M project will be atotal write off", would you give the project the go ahead?Probably not, unless the benefits are measured in billions andits worth the gamble. But the sponsor may accept the positionthat if a particular risk should happen it would delay the enddate by a month - although he will of course exhort you tomeet the end date in spite of the risk.MonitorBut that isnt the end of it. Far from it. Clearly we mustmake sure we monitor and manage risks during theproject to make it less likely that they will happen and tominimize the impact if they do.
  11. 11. Project Risk ManagementRisk Control Create a Risk Register which lists risks in priorityorder. For each risk, the register might include:• Risk number· Description· Consequence if risk happens· Probability (high, medium or low)· Planned actions to mitigate the risk· Contingency plan (what youll do if the risk happens)· Risk owner (a member of the project team)· Status (e.g. closed: no longer a risk)
  12. 12. Project Risk ManagementRisk ControlAt weekly team meetings risk owners report,briefly, on the status of their risks. What planned(or unplanned) actions are being taken to reducethe risk. Is the risk receding or growing? Thisshould ensure that the team is involved in riskreduction activities and in refining the riskmanagement plan. Keep the register updated -relegate receding risks, promote growing ones.New risks can always crawl out of the woodworkas you go along - if they are significant add themto the register.
  13. 13. Project Risk ManagementRisk ControlEach month the project manager should report tothe sponsor on the status of key risks. With anyluck youll be reporting your success in dealingwith the risks, but if risks are growing you shouldobviously alert the sponsor to thatModifyAt the end of each stage of your project holda post mortem. Look at the risks youidentified at the outset. Record what you didsuccessfully to deal with each risk, what youtried that did not work,
  14. 14. Project Risk ManagementRisk Controland what you would do next time with thebenefit of hindsight. These ways ofaddressing risks will be useful not only to youand your next project, but also to otherproject managers.Some organizations have a Project Supportor Project Assurance or similarly namedproject management center of competence.If such exists in your organization, send yourlist of addressing factors to them.
  15. 15. Project Risk ManagementRisk ControlWhen a future project manager is starting aproject and has identified a risk he has noidea how to mitigate, he can call up ProjectSupport and ask "what has worked well inthe past?"Ideally Project Support will be proactive inmodifying the organisations risk checklists.They will add new risks that are actuallybeing experienced and delete risks that areno longer applicable within the organization.
  16. 16. Project Risk ManagementRisk ControlIdeally they would also seek out successfulstrategies for addressing risks andproactively feed these forward to futureprojects.No risk checklist will list all the risks that yourproject faces: projects are all different, whichis why project management is such fun.Project risk assessment is a "brain in gear"activity: it is not about filling in a checklistand forgetting it.
  17. 17. Four Broad Strategies ForHandling RiskBased on the foregoing the Four Broad StrategiesFor Handling Risk of any kind are:•Risk Avoidance: do not tend that path at all.forexample do not allow employers to enter externalCD’s & floppies or remove all those drives.•Risk Migration: Either reduce the possibility of therisk or reduce its impact,again going back to sameexample,we may allow to use CD”s etc butinstalling anti virus software
  18. 18. Four Broad Strategies ForHandling Risk•Risk Transfer: The organizers can either bindsubcontractors & mange to share part of the riskwith them.For example some part of subcontractor paymentlinked with successful completion of the project.The other way of transferring risk to take insuranceKey man insurance takes care of loss of key person•Risk acceptance:Here considering the low impact of the risk theorganization decide not to any thing but take therisk and absorb financially
  19. 19. Role of Buffers & Contingencyplans in risk ManagementTwo common ways of dealing with project relatedrisks are•Working out suitable Contingency plans•Putting Buffers A Contingency plan is a standby plan which canbe activated once the normal course is affected. If Power failure is a known risk in a region themanager will Provide Standby generator. A standbyGenerator set is a example of Contingency plans Conducting Mock drills is a good practice to reduce panic & galvanize the team into action
  20. 20. Role of Buffers & Contingencyplans in risk ManagementA clear contingency plan must be defined forconstruction & software industryA Project manager builds suitable buffer to Reduceimpact of risk to project. The combination of which two concepts can beused for working out approximate buffers Pure Duration estimate & specific mapping oftask. Thus we can decide on the buffer by Identifying which tasks are affected Access the extent of impact due to that risk byquantifying & providing appropriate amount ofbuffer
  21. 21. Role of Buffers & Contingencyplans in risk ManagementType of Buffers Buffers can be three types: Resource buffers:I.e providing more resources as people,equipment etc. Time buffers:Task expected to finish in four days & one more day as buffer Natural buffers:Usually plan is prepared on normal working day i.e 8 hours a day/5 days a week it can stretched to 10 to 14hoursday & six days/week
  22. 22. Role of Buffers & Contingencyplans in risk Management Where to place Buffers ?It is good practice to place buffers at followingplaces.• Project end buffer :This is a buffer whichprevents the project does not cross the final date.Project end buffer is a type of time buffer•Milestone and phase end buffers: To prevents adelay in one phase or a milestone eating time ofnext phase or milestones,it is important to place abuffer in terms of time/resources.
  23. 23. Role of Buffers & Contingencyplans in risk Management Where to place Buffers ?• Task level buffers : We use pure estimates andadd buffers to those tasks which are likely to beimpacted by risk.•Buffering the tasks on critical path :Mostimportant tasks which are on the critical path mustbe buffered by resources buffers to ensure tere is nodelay on the critical path•Buffering the tasks on Non-critical path:There isslack in terms of time in this path ,hence noncritical path is subject to variation
  24. 24. Project Tracking meeting Project tracking meeting is best place to identifyrisk which is likely to hit the project in the nearfuture.each project team member is aware of therisks likely emerge in his work area or tasks.Hence good project managers should use projecttracking meetings not to review stsus but as toidentify sources of risk.Having identified the risk there has to be a formalprocess for managing risks.
  25. 25. Project Tracking meeting Usually risk management involves thefollowing steps Risk Identification Risk Quantification Risk Classification Risk response development Risk response execution Risk response Monitoring Risk Closure
  26. 26. Project Tracking meeting A properly defined processwhich takes the project from riskdetection to closure will help ingliding over eventually,duringthe closure of the project
  27. 27. Project Risk ManagementEnd of Chapter 5
  28. 28. “Like” us on Facebook:  p // /http://www.facebook.com/welearnindia “Follow” us on Twitter:http://twitter.com/WeLearnIndiahttp://twitter com/WeLearnIndiaWatch informative videos on Youtube: http://www.youtube.com/WelingkarDLP
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