Purpose: get an understanding of basic project risk management
A project is a temporary organisation, separate from, but strongly dependent of the organisation, (the ordinary organisation). A project has a fixed, well defined and controllable objective. A project has its own resources (time, money, personal etc).
All projects have three interrelated objectives: to 1 meet the budget, 2 finish on time, 3 meet specifications that satisfy the client.
Project A PROJECT is an organisational form with a defined objective limited in resources and time. Objectives Time Resources
The chance that something happens that will have an impact on objectives. It is measured in consequence and likelihood. The consequences may be positive or negative
There is no human activity which does not have risks .
Risk Management: refers to the way in which risks faced by the business are dealt with. Risks may arise from the nature of the business operations and/or the way in which the business is financed.
The purpose of (Project) Risk Management is to minimize the risk of not achieving the objectives of the project.
Project Risk Management
Risk Management assists project managers in setting priorities, allocating resources and implementing actions and processes that reduce the risk of the project not achieving its objectives.
Risk Management facilitates better decision making and better project outcomes.
The Project Risk Management Approach
We must ensure that:
All significant risks are identified
Identified risks are understood (likelihood and consequences)
Assessment is undertaken of individual risks relative to other risks
Strategies for treating risks are established
The process itself and the risk treatment strategies are implemented cost-effectively
The Risk Management Process
Establish the context
The context is a framework in which all activities of a project takes place.
Relationship between the organisation(s) and their environment.
What is the organisation all about?
Risk Management Context
This level focus on the project which the Risk Management Process is being applied. Do we understand the project (goals, time frame etc.)?
Summary: Do we clearly understand what should be the role of risk management in the project?
The process of determining:
What could happen?
How could it happen?
Why can it happen?
A risk which is not identified can not be treated
Examination of previous similar projects
Standard Questioners and Surveys (sources: insurance companies)
Work Breakdown Structure analysis
Risk assessment is the overall process of risk analysis and risk evaluation. Its purpose is to develop agreed priorities from identified risks.
The systematic use of available information to determine how often specific events may occur and the magnitude of their likely consequences.
Determine likelihood and consequence
Two types of methods:
Qualitative: expresses in word form or in descriptive scales the likelihood and consequences of an event
Quantitative: using numerical values to determine likelihood and consequences
How likely is the loss to occur?
What is the probability of this loss?
If the loss occurred, how would it affect the project?
The ability of the project to meet its objectives?
Risk Evaluation Likelihood Consequence High Low Low High Medium risk High risk Low risk Medium risk
Identify the options for reducing the likelihood or consequence for each risk
Determine potential benefits and costs of the options
Select the best options for the project
Develop and implement a detailed Risk Treatment Plan
Make appropriate provisions in project budgets
Loss control options
Reduce the expected consequence
Transfer the risk to another entity
Monitoring and review
Continuous monitoring and review of risks ensures new risks are detected and managed, and that treatment plans are implemented and progressed effectively.
Implement a review process as part of the regular management meeting cycle.
Undertake major reviews at significant project phases and milestones.
Communication and reporting
Senior managers need to understand the risks they face, and risk reports provide a complement to other project reports in developing this understanding.
Submit reports on a regular basis or as required, as part of standard project reporting.