Risk Management Techniques & Usages Presented by - Douglas Alden, PMP

Risk management is a critical tool in Project Management! Reasons for a risk management strategy Risk remains minimal concern as luck holds out as sooner or later, bad things happen to good projects With increasing success criteria, decision making becomes more complicated & involves more judgment & more risk Benefits of a risk management strategy A formal, systematic methodology for evaluating the effects of “cost” & “schedule” foreseeable problems & decisions Identify practical and effective workarounds for achieving the project goals Allows a PM to make proactive determinations based on project cost, schedule, & performance

Reasons for a risk management strategy

Risk remains minimal concern as luck holds out as sooner or later, bad things happen to good projects

With increasing success criteria, decision making becomes more complicated & involves more judgment & more risk

Benefits of a risk management strategy

A formal, systematic methodology for evaluating the effects of “cost” & “schedule” foreseeable problems & decisions

Identify practical and effective workarounds for achieving the project goals

Allows a PM to make proactive determinations based on project cost, schedule, & performance

Risk Management Techniques … … Means to accomplish the basic steps of the Risk Management Process – Risk Identification Risk Planning Risk Qualification Risk Quantification, Risk Response Development Risk Monitoring & Control … with some of the tools and examples.

… Means to accomplish the basic steps of the Risk Management Process –

Risk Identification

Risk Planning

Risk Qualification

Risk Quantification,

Risk Response Development

Risk Monitoring & Control

… with some of the tools and examples.

Risk Management Process Risk Reviews & Audits Performance Tracking Checklists Risk Monitoring & Control Program Evaluation & Review Technique (PERT) Risk Modeling Analogy Comparisons Network Analysis Risk Factors Project Templates Documentation Reviews Risk Response Matrix Decision Analysis – Expected Monetary Value Rating Schemes Planning Meetings Expert Interviews Risk Response Planning Risk Quantification Risk Qualification Risk Planning Risk Identification

Risk Identification – Expert Interviews Montgomery County Govt. Identified the “right” individuals Meetings with core team, stakeholders, admin. payroll clerks, SME - the guy who wrote the book of rules Targeted the interest area Confirm pre-identified “risks” areas of concern, clarified, substantiated Solicit judgments Identified “similar” risks across depts. (workgroups) Info became more specific with further interviews Qualify & Quantify Estimated impact on cost, schedule, number of resources, & performance Probability range and range of impact

Identified the “right” individuals

Meetings with core team, stakeholders, admin. payroll clerks, SME - the guy who wrote the book of rules

Targeted the interest area

Confirm pre-identified “risks” areas of concern, clarified, substantiated

Solicit judgments

Identified “similar” risks across depts. (workgroups)

Info became more specific with further interviews

Qualify & Quantify

Estimated impact on cost, schedule, number of resources, & performance

Probability range and range of impact

Risk Planning Meetings Montgomery County Govt. Ongoing review of project documentation – project charter, contract, PSWO, etc. for assumptions, expectations, etc. Identified the most qualified resources - technical, functional, legal (contract) HR, payroll, senior management, project sponsor (Dir. of Finance) Shared perspectives on risk threshold & organization policy to establish risk tolerance in terms of cost, schedule, & performance Developed a working, clear, risk methodology plan, roles & responsibilities, timing, thresholds, report formats & tracking – “Best Practices”

Ongoing review of project documentation – project charter, contract, PSWO, etc. for assumptions, expectations, etc.

Identified the most qualified resources - technical, functional, legal (contract) HR, payroll, senior management, project sponsor (Dir. of Finance)

Shared perspectives on risk threshold & organization policy to establish risk tolerance in terms of cost, schedule, & performance

Developed a working, clear, risk methodology plan, roles & responsibilities, timing, thresholds, report formats & tracking – “Best Practices”

Risk Qualification – Risk Factors W.R. Grace & Co. Estimated initial project costs - down to the individual work package budget Designed WBS for each plant/facility in the organization & estimated baseline cost level for each plant/facility ( 2 hrs/policy/rule) Identified risk factors and applied the factors/multipliers to increase cost estimates to the work package budgets Assessed % from core team members, lessons learned in similar projects, culture/climate to recalculate baseline project costs Reset client expectations for overall project costs as well as per plant/facility Facilitated change control process & approval

Estimated initial project costs - down to the individual work package budget

Designed WBS for each plant/facility in the organization & estimated baseline cost level for each plant/facility ( 2 hrs/policy/rule)

Identified risk factors and applied the factors/multipliers to increase cost estimates to the work package budgets

Assessed % from core team members, lessons learned in similar projects, culture/climate to recalculate baseline project costs

Reset client expectations for overall project costs as well as per plant/facility

Facilitated change control process & approval

Risk Quantification – Network Analysis W.R. Grace & Co. Developed network-based schedules to identify specific activities and their relationships to accomplish project objectives With MS Project, developed adaptable template models (Chemical Div. & Darex Div.) Most significant result of analysis was to identify the “critical path” & inherent risks Utilized templates to detail each plant/facility implementation with their input probabilities to analyze and adjust resources, time & training. Facilitated bi-directional communication to corporate and to plant management to provide an understanding of the sources & degree of risk

Developed network-based schedules to identify specific activities and their relationships to accomplish project objectives

With MS Project, developed adaptable template models (Chemical Div. & Darex Div.)

Most significant result of analysis was to identify the “critical path” & inherent risks

Utilized templates to detail each plant/facility implementation with their input probabilities to analyze and adjust resources, time & training.

Facilitated bi-directional communication to corporate and to plant management to provide an understanding of the sources & degree of risk

Risk Response Planning Risk Response Matrix A team-generated grid lists risks (cost & schedule) on one axis and strategies on another Analyze & generate strategies that deal with multiple risks & cause fewest additional issues Strategies should not take longer to implement than the project itself

A team-generated grid lists risks (cost & schedule) on one axis and strategies on another

Analyze & generate strategies that deal with multiple risks & cause fewest additional issues

Strategies should not take longer to implement than the project itself

Risk Monitoring & Control Technical Performance Tracking & Measurement Montgomery County Govt. Contractual benchmark performance requirement of 5 second system response time when all phases complete (WTK v4.3) Provided specific system configurations required and methods to measure and achieve the performance requirements at each milestone Assigned County DTS responsibility for managing the progress towards performance goal Plotted the technical performance parameter value against the schedule to communicate visual progression for achieving the goal to the core team and stakeholders

Contractual benchmark performance requirement of 5 second system response time when all phases complete (WTK v4.3)

Provided specific system configurations required and methods to measure and achieve the performance requirements at each milestone

Assigned County DTS responsibility for managing the progress towards performance goal

Plotted the technical performance parameter value against the schedule to communicate visual progression for achieving the goal to the core team and stakeholders

Summary – Benefits of a Comprehensive Risk Management Program Montgomery County Govt. Fixed-price contract with vendors All “risk” is weighted towards the service provider W.R. Grace & Co Risk was classified (technical, cost, schedule, etc.) & documented for division/plant Risk was “budgeted” into the process for corrective action or workarounds Minimized change control process & expense Service Provider Goal is to minimize & share risk Negative - $1.1 M increased cost, 8 week delay Positive - $300K per quarter increased revenue & completed ahead of schedule

Montgomery County Govt.

Fixed-price contract with vendors

All “risk” is weighted towards the service provider

W.R. Grace & Co

Risk was classified (technical, cost, schedule, etc.) & documented for division/plant

Risk was “budgeted” into the process for corrective action or workarounds

Minimized change control process & expense

Service Provider

Goal is to minimize & share risk

Negative - $1.1 M increased cost, 8 week delay

Positive - $300K per quarter increased revenue & completed ahead of schedule

Risk Management Techniques & Usages Questions & Answers