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Pm deep dive risk management


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  • 1. PM DeepDiveProject Risk Management - Niraj Agarwal May 2011 Slide 1
  • 2. Project Risk ManagementDefinition of Risk• Risk is an uncertain event or condition that, if it occurs, has a positive or negative effect on a project objective.• Risk has a cause and, if it occurs has a consequence.• Project environment may contribute to project risk such as poor project management practices, or external dependencies which can not be controlled.• Project risk includes both threats to the project’s objectives and opportunities to improve on those objectives. May 2011 Slide 2
  • 3. Project Risk ManagementRisk Factors• Risk Event - “A discrete occurrence that may effect the project”—for A project for better or worse• Risk Probability - The likelihood of occurrence. The ratio of the number of chances by which an event may happen (or not happen) to the sum of the chances of both happening and not happening.• Amount at Stake - “The extent of adverse consequences which could q occur to the project”. It equals amount wasted plus amount required to rebuild• Risk Timing - When Is the risk event expected to occur in the Project Lifecycle May 2011 Slide 3
  • 4. Project Risk ManagementProcesses• Risk Management planning• Risk Identification• Qualitative Risk Analysis• Quantitative Risk Analysis• Risk Response Planning• Risk Monitoring and Control May 2011 Slide 4
  • 5. Risk Management planningDefinition & ITTODeciding how to approach and plan risk management activities. May 2011 Slide 5
  • 6. Risk Management planningITTO May 2011 Slide 6
  • 7. Risk Management planningImpact Analysis May 2011 Slide 7
  • 8. Risk IdentificationDefinition• The process of systematically identifying all possible risk eventswhich may impact on a project.• They may be conveniently classified according to their cause orsource and ranked roughly according to ability to manage effectiveresponses.• Not all risk events will impact all projects, but the cumulative effectof several risk events occurring i conjunction may well b more severe f l i k t i in j ti ll bethan examination of individual risk events might suggest. May 2011 Slide 8
  • 9. Risk IdentificationITTO May 2011 Slide 9
  • 10. Risk Identification May 2011 Slide 10
  • 11. Risk IdentificationRisk Register• List of risks that includes an identification number risk name risk number, name,description, and risk owner i.e. the person responsible for monitoringthe project to determine whether the potential for this risk event is highand then implementing the risk response p p g p plan should it occur. May 2011 Slide 11
  • 12. Qualitative Risk AnalysisDefinition & ITTO• Qualitative Risk Analysis uses a subjective approach to determine thelikelihood that a risk will actually occur and the impact to the project ifit does occur. This process also involves prioritizing the risks accordingto their effect on the project. p j May 2011 Slide 12
  • 13. Qualitative Risk AnalysisITTO May 2011 Slide 13
  • 14. Qualitative Risk AnalysisProbability/Impact• Risk Probability is the likelihood that a risk event will occur For occur.example, if you a flip a coin, there ’ s a .50 probability the coin will comeup heads. Probability is expressed as a number from 0.0 to 1.0, with 1.0being an absolute certainty the risk event will occur. g y• Risk possibility and consequences may be described in qualitativeterms such as very high, high, moderate, low and very low.• I Impact is the amount of damage ( opportunity) th risk poses t t i th t fd (or t it ) the i k tothe project if it occurs. Simple rating like the following to rate riskimpact: High, Medium, Low May 2011 Slide 14
  • 15. Qualitative Risk AnalysisProbability/Impact Matrix• A matrix can be constructed on probability and impact impact.• A risk with high probability and high impact needs further analysis.• Also called Risk Rating Matrix May 2011 Slide 15
  • 16. Quantitative Risk AnalysisDefinition & ITTOAims to analyze numerically, the probability of each risk and itsconsequence on project objective, as well as the extent of overall projectrisk. May 2011 Slide 16
  • 17. Quantitative Risk AnalysisITTO May 2011 Slide 17
  • 18. Risk Response PlanningDefinition & ITTORisk Response Planning is the process of reviewing the risk analysis anddetermining what, if any, action should be taken to reduce negativeimpacts and take advantage of opportunities as a result of a risk eventoccurring. May 2011 Slide 18
  • 19. Risk Response PlanningITTO May 2011 Slide 19
  • 20. Risk Response PlanningStrategies for Risk• Avoid : Avoiding the risk altogether or eliminating the cause of therisk event• Transfer : Moving the liability for the risk to a third party byppurchasing insurance, p g , performance bonds, and so on ,• Mitigate : Reducing the impact or the probability of the risk• Accept : Choosing to accept the consequences of the risk May 2011 Slide 20
  • 21. Risk Response PlanningStrategies for opportunities• Exploit : Looking for opportunities to take advantage of positiveimpacts• Share : Assigning the risk to a third party who is best able to bringabout the opportunity pp y• Enhance : Monitoring the probability or impact of the risk event toassure benefits are realized May 2011 Slide 21
  • 22. Risk Monitoring and ControlDefinition & ITTOIs the process of keeping track of the identified risks, monitoringresidual risks and identifying new risks, ensuring the execution of riskplans, and evaluating their effectiveness in reducing risks. May 2011 Slide 22
  • 23. Risk Monitoring and ControlITTO May 2011 Slide 23
  • 24. Pop QuizQuestion 1Risk Identification is the process of which of the following?A. Quantifying the impact to the project of a potential risk eventB. Determining and documenting potential risk events on the projectC. Assigning a probability that a particular risk event will occurD. Defining the action to take in response to a risk event May 2011 Slide 24
  • 25. Pop QuizQuestion 2This risk analysis technique uses a complex mathematicalapproach to numerically analyze the probability and impactof risks.A. Quantitative Risk Analysis Q yB. Risk impact analysisC. Risk probability analysisD. Qualitative Risk AnalysisD Q lit ti Ri k A l i May 2011 Slide 25
  • 26. Pop QuizQuestion 3All of the following are strategies for dealing with negative risks, exceptfor which one?A. AcceptB.B TransferC. ShareD. Mitigate May 2011 Slide 26
  • 27. Pop QuizQuestion 4Once risks have been identified and analyzed, this tool helps youdetermine an overall risk score.A. Probability impact matrixB.B Risk listC. Risk registerD. Risk template May 2011 Slide 27
  • 28. Thank You!