Project Management Training Series Project Risk Management By Samuel Obino Mokaya BA, PGD, Ph.D. (Student) Jomo Kenyatta University of Agriculture and Technology, Nairobi, Kenya Telephone: 0722845562, 0734615008 E-mail: o’email@example.com, firstname.lastname@example.org
Risk is a probability that some adverse circumstance will occur; a measure of the potential harm or loss associated with an activity executed in an uncertain environment.
Projects involve an amount of risk that has implication on its performance.
A proactive approach to project management demands that as part of the planning phase of project, a thorough risk assessment is done to identify potential problems that are likely to affect its success.
The purpose is to identify risks and formulate appropriate strategies to deal with them, and minimize their effect on the project.
A brainstorming session with the project team can be helpful way to ensure that all important risks are identified.
Assess probability and seriousness.
Probability may be very low, low, moderate, high and very high.
Risk effects might be catastrophic, serious, tolerable or insignificant.
(See diagram next page)
Matrix for Risk Analysis Risk Probability Effects Required training for staff not available Moderate Tolerable Time to complete project is underestimated Staff illness Organizational financial problems force reduction in project budget Defective inputs / components Key staff ill at critical times Impossible to recruit staff with required skills
Consider each risk and develop a strategy to manage it.
Avoidance strategies: the probability that the risk will arise is reduced.
Minimization strategies: the impact of the risk on the project or product will be reduced.
Contingency plans: if the risk arises, contingency plans are plans to deal with that risk – for instance, having a back-up supplier for a key material; having an alternate distribution channel to send products to China (air instead of boat).
Risk Management Matrix (Example) Risk Strategy Recruitment problems Early recruitment, proper timing, training existing staff etc. Organizational financial problems Prepare report to management showing contribution of project to business goals Defective inputs/components Replace with those of known reliability Staff illness Reorganize team for more work overlaps, make people understand each other’s job
Risk Indicators (Example) Risk Type Potential Indicators People
Every step of the way you must keep in mind that there are two types of risk that can affect your project: firstly, the risks that you already know about and secondly, the risks that you are not aware of.
Your task is to ensure that the risks you are aware of are much more than the ones not known.
Create contingency plans for the risks you know about and build enough time into your project schedule to mitigate unknown risks; to enhance chances of project success.
PRACTICE WINDOW You have been appointed the Project Manager of a major project on the construction of the Prime Minister’s official residence in Nairobi. Identify potential risks and possible actions to tackle them Risk Action