Project Risk Management 020410

Bill Muirhead, PMP 2/04/2010

Agenda
Introductions
Break in to Groups & Project Selection
PMI’s Risk Management Sequence
Risk Planning
Risk Identification
Risk Qualification
Risk Quantification
Plan Risk Responses
Monitor & Control Risk
Wrap Up , Takeaway’s, and Q & A

About Me
Chrysler Corporation
Product Engineer – 1.5 Years
Starters & Alternators
Clarion Corporation
Applications Engineer – 3.5 Years
CD Changers & Mechanisms
Mitsubishi Electronics
Sales Engineer – 1.5 Years
Starters & Alternators
Alpine Electronics
Program Manager – 9 Years
Sound Systems, Navigation, CD Mechanisms

Types of Risk Management
There are MANY flavors and types of risk management.
Financial Service Advisors can be FRM or PRM certified.
ISO 27001 was created for IT (Data) Risk Management
Airlines and Casino’s have their own variety of Risk
There is also Crisis Management
There are too many varieties to list here!
Today we are going to cover the basics of;
Project Risk Management
Based of PMI’s Risk Management concepts. Edited to be a stand alone session.

Project Risk Management

Definitions
Project
A temporary endeavor undertaken to create a product, service, or result
What is the difference between a Risk and an Issue?
An Issue has already occurred, a risk is an uncertain event.
PMI suggests a probability of 80% be considered an issue.
Are all Risk’s Negative?
Risks can be both positive (opportunity) & negative (risk).
Ok, lets break in to groups!

Project Selection Criteria
Try to select….
A new project, or one with many milestones left.
A fictional/future project that has not yet started
Hypothetical insourcing vs. outsourcing decision
Providing a unique product, service, or result.
Try to avoid…
A project near completion.
Analysis (post mortem) of a past project.
Anything related to ongoing operations or manufacturing (must have an ending).

Risk Planning
Risk Identification
Risk Qualification
Risk Quantification
Plan Risk Responses

Risk Planning
The process of deciding how to conduct risk management activities.
A Risk Management Plan may consist of ;
Methodology – Approaches, Tools, Data Sources
Roles & Responsibilities – Team Member Clarification
Budget – Resources & Protocol for using Contingency Reserve
Timing – How often do you evaluate risks?
Risk Categories – Consistent Structure and Organization
Definitions of Probability & Impact – Low, Medium, High
Tracking – How will this activity be recorded for future evaluation.

Risk Identification
Process of determining which risks may affect the project and
document their characteristics.
Identify Risks is an iterative process because uncertainties evolve or change over time.
Stakeholders outside the project team may provide additional information.
Let’s Identify Some Risks!

Tools for Risk Identification
Documentation Review
Reading the specifications and/or quotes.
Information Gathering Techniques
Brainstorming, Delphi Technique, Interviewing, or RCA
Checklist Analysis
Assumptions Analysis
Diagramming Techniques
SWOT Analysis
Expert Judgment
WBS

Identify your Project Risks
Using Brainstorming, identify at least 10 significant
risks, with probability of occurring, potential impacts, to calculate risk score.
Risk Identification Chart
“ X” could happen, which would cause “Y”.
Our response could be “Z”
Risk Impact Response X Y Z

Path Convergence – Tricks of the Trade

Risk Qualification
The process of prioritizing risks for further analysis or action by combining their probability and impact.
This is usually a rapid and cost effective way to establish priorities.
This process should be revisited through the project’s life cycle, as probabilities evolve over time.
Let’s Qualify Some Risks!

Tools for Risk Qualification
Probability & Impact Assessment
Reading the specifications and/or quotes.
Probability & Impact Matrix
Risk Data Quality Assessment
Risk Categories
Risk Urgency Assessment
Expert Judgment

Qualifying your Project Risks
Using Brainstorming or expert judgment, rank your risk’s priority, add a category, and do any require further analysis or is it urgent.
Sample Format;
Risk Impact Resp. Rank or Priority Category Urgency or Additional Analysis? X Y Z H / M / L 1, 2, 3, etc. Int/Ext H/W or S/W Yes or No (Quantification)

Warning
Per Rita Mulcahy, in Risk Management
She strongly suggests that companies make a big mistake using a scale of high, medium and low
Why? When you have only 3 choices, how do you settle ties when you have 10 risks that are all high probability and high impact?

Probability of Risk
If a risk has a high probability of occurring (80% or greater), then the WBS should be updated to include a strategy to address the risk.

Include Risk Score on Gantt Chart – Tricks of the Trade

PMI’s Risk Management Sequence In some cases, Quantification can be skipped. Time, Resources, Budget, and Project size will dictate if it’s required.

Risk Quantification
The process of numerically analyzing the affect of identified risks on project objectives.

Tools for Risk Quantification
Data Gathering & Representation Techniques
Interviewing
Quantification Analysis & Modeling Techniques
Sensitivity Analysis
Expected Monetary Value
Modeling & Simulation
Expert Judgment

Quantitative Analysis 25% $9,000 No $2,250 Y $11,250 Total expected value Risk Probability Cost Impact Expected Value Risk Response Planning X 75% $12,000 $9,000 Yes

Plan Risk Responses
The process of developing options & actions to enhance opportunities, and to reduce threats to project objectives.
It includes the identification and assignment of one person as the risk owner .
This may require inserting resources & activities in to the budget or schedule as needed.

Tools for Plan Risk Responses
Strategies for Negative Risks
Avoid
Reducing scope, obtaining deviation
Transfer
Giving another party responsibility
(Insurance, guarantee, warrantee)
Mitigate
Reduce the probability and/or Impact of the event.
More testing, More Stable Supplier, Prototypes, Launch Support
Accept

Tools for Plan Risk Responses
Strategies for Positive Risks
Exploit
Reducing the uncertainty (increase probability)
Finishing earlier, lowering price
Share
Allocating some of the ownership to a 3 rd party
Joint Ventures, Partnerships
Enhance
Make the size of the opportunity larger (impact)
Adding a feature, lowering the price, or finishing early.
Accept

Risk Response Updates
Using the tools for positive & negative threats, add Risk Owner, and add alternate response if needed.
Sample Format;
Risk Owner Alternate Responses Name or Position If there is more information

Process of implementing response plans, tracking risks, monitoring residual risks, and risk response effectiveness through out the project.
Also includes updating organizational assets.
Lessons learned & Risk Management Templates

Tools for Monitor & Control Risk
Risk Re-Assessment
Identify new risks, closing of outdated risks (status mtgs.)
Risk Audits
Examine the documents for effectiveness
Internal or External to the project
Variance & Trend Analysis / Performance Measurements.
Comparing the planned result to the actual
Reserve Analysis
Compares the amount of contingency reserves to the remaining risk left in the project

Wrap Up
Is there any questions on the Risk Register you have created?

A Couple Takeaway’s
Complete your risk register & make it available for future projects. It is a lessons learned document that can become a corporate asset if used properly.
Be aware of the stigma associated with being labeled as a naysayer or prophet of doom and gloom.
Risk Managers may have the perception of being a pessimist
Those with no proactive posture on risk might be called “team players”
This is why a Risk Management Plan is important.

Other Resources (books)

The End
Thank You!
Q & A

Project Risk Management 020410

by TQM Network on Feb 04, 2010

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