4/3/2011

Project Management
Knowledge Areas
Section – 3
Chapter – 11

Project Risk Management


Session Objectives…
1. T...
4/3/2011

Project Risk Management


Exam Objectives
1. Planning for Risk Management
2. Identifying Risks
3. Creating a Ri...
4/3/2011

Project Risk Management


What is Risk?
 Risk is unplanned event or condition that
can have a positive or nega...
4/3/2011

Plan Risk Management
• 1. Project Scope
Statement
• 2. Cost Management Plan
• 3. Schedule Management
Plan
• 4. E...
4/3/2011

Plan Risk Management
Tools and Techniques
1. Planning Meeting and Analysis
 Outputs
1. Risk Management Plan


...
4/3/2011

Risk Categorization
Risk Breakdown Structure
 The Categories are
 Technical
 External
 Organizational
 Proj...
4/3/2011

Plan Risk Management
Probability : Is the chance that something is likely to
happen
 Ranked as “Very Unlikely”...
4/3/2011

Probability and Impact Matrix


Legend - Watch list - Moderate - High
Alert
Defined Conditions for Impact Scale...
4/3/2011

Identify Risk


Risks may be found
1. Budgets/funding
2. Schedules
3. Scope or requirement changes
4. Project p...
4/3/2011

Identify Risk
•
•
•
•
•
•
•
•
•
•

1. Risk Management Plan
2.Activity Cost Estimates
3.Activity Duration Estimat...
4/3/2011

Identify Risk


Inputs
7. Schedule Management Plan
8. Quality Management Plan
9. Project Documents
10. Enterpri...
4/3/2011

Identify Risk


Tools and Techniques
3. Checklist Analysis
4. Assumptions Analysis
5. Diagramming Techniques
 ...
4/3/2011

Perform Qualitative Risk Analysis
Qualitative Analysis is a subjective approach
to prioritizing risks.
 Accordi...
4/3/2011

Perform Qualitative Risk Analysis


Inputs
1. Risk Register
2. Risk Management Plan
3. Project Scope Statement
...
4/3/2011

Perform Qualitative Risk Analysis


Outputs
 Updated Risk Register
 Relative ranking or priority list of risk...
4/3/2011

Perform Quantitative Risk Analysis

• 1. Risk Register
• 2. Risk Management Plan
• 3. Project Cost
Management Pl...
4/3/2011

Perform Quantitative Risk Analysis


Tools and Techniques
1. Data Gathering and Representation
 Techniques
 I...
4/3/2011

Perform Quantitative Risk Analysis


Outputs
1. Updated Risk Register
 Probabilistic Analysis of the Project
...
4/3/2011

Plan Risk Responses
Risk response planning is all about options and
actions
 It involves activities
 How to de...
4/3/2011

Plan Risk Responses


Inputs
1. Risk Management Plan
2. Risk Register

Plan Risk Responses


Tools and Techniq...
4/3/2011

Plan Risk Responses
 Tools
2.

3.
4.

and Techniques
Strategies for Positive Risks or
Opportunities
 Exploit
...
4/3/2011

Plan Risk Responses


Risk Transfer
 Insurance
 Performance Bonds
 Warranty
 Guaranty
 Fixed-Price contrac...
4/3/2011

Plan Risk Responses


Risk Acceptance
 Is the process of simply accepting the
risk because
 No other option
...
4/3/2011

Monitor & Control Risks
The process is for:
 Monitoring identified risks triggers at the
thresholds
 Controlli...
4/3/2011

Monitor & Control Risks

•1. Risk Management Plan
•2. Risk Register
•3. Approved Change requests
•4. Work perfor...
4/3/2011

Monitor & Control Risks


Tools and Techniques
1. Risk Reassessment
2. Risk Audits
3. Variance and Trend Analys...
4/3/2011

Project Risk Management
To Sum Up….
1. We identified the project Risk management
knowledge area’s processes
2. W...
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Project managment 10

  1. 1. 4/3/2011 Project Management Knowledge Areas Section – 3 Chapter – 11 Project Risk Management  Session Objectives… 1. To identify the project Risk management knowledge area’s processes 2. How to plan Risk Management for the project 3. How to identify Risk 4. How to perform Qualitative Risk Analysis 5. How to perform Quantitative Risk Analysis 6. How to plan risk Responses 7. How to perform Risk Monitoring and Control 1
  2. 2. 4/3/2011 Project Risk Management  Exam Objectives 1. Planning for Risk Management 2. Identifying Risks 3. Creating a Risk Register 4. Performing Qualitative Risk Analysis 5. Performing Quantitative Risk Analysis 6. Planning for Risk Responses 7. Monitoring and controlling Risks Project Risk Management  The Project Risk Management Knowledge area, discusses the processes of  Plan Risk management  Identify Risks  Perform Qualitative Risk analysis  Perform Quantitative Risk analysis  Plan Risk responses  Monitor and Control Risks 2
  3. 3. 4/3/2011 Project Risk Management  What is Risk?  Risk is unplanned event or condition that can have a positive or negative effect on its success  Not all Risks are bad, and are seen as a Threat  Risk is uncertainty Plan Risk Management The process is to decide  How to approach  How to conduct  Risk management activities  Exam point to remember The objective of Risk Management Planning is to ensure that the level, type and visibility of Risk Management are commensurate with both the risk and importance to the project to the organization, to provide sufficient resources and time for risk management activities and to establish an agreed-upon basis for evaluating risks.  3
  4. 4. 4/3/2011 Plan Risk Management • 1. Project Scope Statement • 2. Cost Management Plan • 3. Schedule Management Plan • 4. Enterprise Environmental Factors • 5. Organizational Process Assets Tools & Techniques • 1. Risk Management Plan • 1. Planning Meetings and Analysis Input Output Plan Risk Management  Inputs 1. Project Scope Statement 2. Cost Management Plan 3. Schedule Management Plan 4. Enterprise Environmental Factors 5. Organizational Process Assets 4
  5. 5. 4/3/2011 Plan Risk Management Tools and Techniques 1. Planning Meeting and Analysis  Outputs 1. Risk Management Plan  Risk Management Plan  Contains…  Methodology  Roles and Responsibility  Budgeting  Timing  Risk Categories  Definitions of Risk Probability and Impact  Probability and Impact Matrix  Revised stakeholders’ tolerances  Reporting formats  Tracking 5
  6. 6. 4/3/2011 Risk Categorization Risk Breakdown Structure  The Categories are  Technical  External  Organizational  Project Management  Risk Categorization Risk Breakdown Structure 6
  7. 7. 4/3/2011 Plan Risk Management Probability : Is the chance that something is likely to happen  Ranked as “Very Unlikely” to “Almost Certainty”  Impact: The resultant of the probable event, is measured as impact  Negative for threats or  Positive opportunities  Ranked as “Very Low”, “Low”, “Moderate”, “High”, “Very High”  Probability and Impact Matrix Defined Conditions for Impact Scales of a Risk on Major Project Objectives Project Very Low Objectives / .05 Low / .10 Moderate / .20 High / .40 Very High / .80 Cost Time Scope Quality 7
  8. 8. 4/3/2011 Probability and Impact Matrix  Legend - Watch list - Moderate - High Alert Defined Conditions for Impact Scales of a Risk on Major Project Objectives Probability/i / .05 mpact / .10 / .20 / .40 / .80 Very Low Low Moderate High Very High Identify Risk The process of  Identifying the Risks  Documenting their characteristics  The process is repetitive  8
  9. 9. 4/3/2011 Identify Risk  Risks may be found 1. Budgets/funding 2. Schedules 3. Scope or requirement changes 4. Project plan 5. Project management processes 6. Technical issues 7. Personnel issues Identify Risk  Risks may be found 8. Hardware 9. Contracts 10. Political 11. Business risk 12. Legal 13. Environmental 9
  10. 10. 4/3/2011 Identify Risk • • • • • • • • • • 1. Risk Management Plan 2.Activity Cost Estimates 3.Activity Duration Estimates 4. Scope Baseline 5. Stakeholder Register 6. Cost Management plan 7. Schedule Management Plan 8. Quality Management Plan 9. Project Documents 10. Enterprise Environmental Factors • 11. Organizational Process Assets Tools & Techniques • 1. Documentation Reviews • 2. Information Gathering Techniques • 3. Checklist Analysis • 4. Assumptions Analysis • 5. Diagramming techniques • 6. SWOT Analysis • 7. Expert Judgment • 1. Risk Register Output Input Identify Risk  Inputs 1. Risk Management Plan 2. Activity Cost Estimates 3. Activity Duration Estimates 4. Scope Baseline 5. Stakeholder Register 6. Cost Management Plan 10
  11. 11. 4/3/2011 Identify Risk  Inputs 7. Schedule Management Plan 8. Quality Management Plan 9. Project Documents 10. Enterprise Environmental Factors 11. Organizational Process Assets Identify Risk  Tools and Techniques 1. Documentation Reviews 2. Information Gathering techniques  Brainstorming  Delphi technique  Interviewing  Root Cause Identification 11
  12. 12. 4/3/2011 Identify Risk  Tools and Techniques 3. Checklist Analysis 4. Assumptions Analysis 5. Diagramming Techniques  Cause-and-Effect diagrams  System or Process Flow charts 6. SWOT Analysis 7. Expert Judgment Identify Risk  Outputs 1. Risk Register  List of identified Risks  List of Potential Responses  Root causes of Risks  Updated Risk Categories 12
  13. 13. 4/3/2011 Perform Qualitative Risk Analysis Qualitative Analysis is a subjective approach to prioritizing risks.  According to probability and potential impact, identified risks are rated  The ranking categorizes into  That require additional analysis  That may proceed directly to risk response planning  That are not critical  And prioritizes risks  Perform Qualitative Risk Analysis • • • • 1. Risk Register 2. Risk Management Plan 3. Project Scope Statement 4. Organizational Process Assets Input Tools & Techniques • 1. Risk probability And Impact Assessment • 2. Probability and Impact Matrix • 3. Risk Data Quality Assessment • 4. Risk Categorization • 5. Risk Urgency Assessment • 6. Expert Judgment • 1. Risk Register • Updates Output 13
  14. 14. 4/3/2011 Perform Qualitative Risk Analysis  Inputs 1. Risk Register 2. Risk Management Plan 3. Project Scope Statement 4. Organizational Process Assets Perform Qualitative Risk Analysis  Tools and Techniques 1. Risk Probability and Impact Assessment 2. Probability and Impact Matrix 3. Risk Data Quality Assessment 4. Risk Categorization 5. Risk Urgency Assessment 6. Expert Judgment 14
  15. 15. 4/3/2011 Perform Qualitative Risk Analysis  Outputs  Updated Risk Register  Relative ranking or priority list of risks  Risks grouped by categories  List of risks requiring responses in the near term  List of risks for additional analysis and response  Watch-lists of low priority risks  Trends in qualitative risk analysis results Perform Quantitative Risk Analysis Quantitative Risk Analysis tries to numerically assess the probability and impact of the identified risks  The objectives of quantitative risk analysis are  Ascertain the likelihood of project success  Determine the risk exposure  Determine the likely amount of contingency reserve needed  Determine the risks with largest impact on the project  15
  16. 16. 4/3/2011 Perform Quantitative Risk Analysis • 1. Risk Register • 2. Risk Management Plan • 3. Project Cost Management Plan • 4. Schedule Management Plan • 5. Organizational Process Assets Input Tools & Techniques • 1. Data Gathering And Representation Techniques • 2. Quantitative Risk Analysis And Modeling techniques • 3. Expert Judgment • 1. Risk Register • Updates Output Perform Quantitative Risk Analysis  Inputs 1. Risk Register 2. Risk Management Plan 3. Project Cost Management Plan 4. Project Schedule Management Plan 5. Organizational Process Assets 16
  17. 17. 4/3/2011 Perform Quantitative Risk Analysis  Tools and Techniques 1. Data Gathering and Representation  Techniques  Interviewing  Probability Distributions  Expert Judgment Perform Quantitative Risk Analysis  Tools and Techniques  2. Quantitative Risk Analysis and Modeling  Techniques  Sensitivity Analysis  Expected Monetary Value Analysis  Decision Tree Analysis  Modeling and Simulation  3. Expert Judgment 17
  18. 18. 4/3/2011 Perform Quantitative Risk Analysis  Outputs 1. Updated Risk Register  Probabilistic Analysis of the Project  Probability of Achieving Cost and Time Objectives  Prioritized list of quantified risks  Trends in Quantitative Risk Analysis Results Perform Quantitative Risk Analysis Buy or Build Decision Tree Analysis Decision Name Buy 200,000 Build 190,000 Probability of On-Time Completion Strong 85% Weak 15% Strong 75% Weak 25% 170,000 30,000 142,500 47,500 Best Decision 18
  19. 19. 4/3/2011 Plan Risk Responses Risk response planning is all about options and actions  It involves activities  How to decrease the possibility of risks  How to reduce the impact of the risk if has to happen  Effectiveness of Risk Response will control number of risks that occur Exam Point:- Planned risk responses must be appropriate to the significance of the risk, cost effective in meeting the challenge, timely, realistic with the project context, agreed upon by all parties involved, and owned by a responsible person.  Plan Risk Responses • 1. Risk Management Plan • 2. Risk Register Tools & Techniques • 1. Strategies For negative risks or Threats • 2. Strategies for positive risks or Opportunities • 3. Contingent Response Strategies • 4. Expert Judgment Input • 1. Updated Risk Register • 2. Updated Project Management Plan • 3. Risk-related Contract Decisions • 4. Project Document Updates Output 19
  20. 20. 4/3/2011 Plan Risk Responses  Inputs 1. Risk Management Plan 2. Risk Register Plan Risk Responses  Tools and Techniques  1. Strategies for Negative Risks or Threats  Avoid  Transfer  Mitigate  Accept 20
  21. 21. 4/3/2011 Plan Risk Responses  Tools 2. 3. 4. and Techniques Strategies for Positive Risks or Opportunities  Exploit  Share  Enhance  Accept Contingent Response Strategies Expert Judgment Plan Risk Responses  Outputs 1. Updated Risk Register 2. Updated Project Management Plan 3. Risk – Related Contract Decisions 4. Project Document Updates 21
  22. 22. 4/3/2011 Plan Risk Responses  Risk Transfer  Insurance  Performance Bonds  Warranty  Guaranty  Fixed-Price contracts Plan Risk Responses  Risk Mitigation  An effort to reduce the probability, impact or both of an identified risk.  Ex:  Developing prototypes, simulations.  Adding activities to reduce the risk probability or impact. 22
  23. 23. 4/3/2011 Plan Risk Responses  Risk Acceptance  Is the process of simply accepting the risk because  No other option  Risk may be small probability, impact or both  Passive acceptance requires no action  Active acceptance requires developing a contingency plan if the risk occurs Plan Risk Responses Residual Risks  The remains of the risk after avoidance, transfer, or mitigation  Secondary Risks  The risks that are resulted from risk responses  Secondary Risk Risk Solution Secondary Risk` 23
  24. 24. 4/3/2011 Monitor & Control Risks The process is for:  Monitoring identified risks triggers at the thresholds  Controlling identified risks with responses  Scouting for new risks that may creep up  The objectives are to  Confirm risk responses are implemented as planned  Determine if risk responses are effective or new responses are needed  Monitor & Control Risks  The objectives are to  Validate the project assumptions  Monitor risk triggers  Monitor for new risks  Confirm policies and procedures 24
  25. 25. 4/3/2011 Monitor & Control Risks •1. Risk Management Plan •2. Risk Register •3. Approved Change requests •4. Work performance Information •5. Performance reports Tools & Techniques •1. Risk Reassessment •2. Risk Audits •3. Variance and Trends Analysis •4. Technical Performance Measurement •5. Reserve Analysis •6. Status Meetings Input •1. Updated Risk Register •2. Requested Changes •3. Recommended Corrective Actions •4. Recommended Preventive Actions •5. Updated Organizational Process Assets •6. Updated Project Management Plan Output Monitor & Control Risks  Inputs 1. Risk Management Plan 2. Risk Register 3. Approved Change Requests 4. Work Performance Information 5. Performance Reports 25
  26. 26. 4/3/2011 Monitor & Control Risks  Tools and Techniques 1. Risk Reassessment 2. Risk Audits 3. Variance and Trend Analysis 4. Technical Performance Measurement 5. Reserve Analysis 6. Staff Meetings Monitor & Control Risks  Outputs 1. Updated Risk Register 2. Requested Changes 3. Recommended Corrective Actions 4. Recommended Preventive Actions 5. Updated Organizational Process Assets 6. Updated Project Management Plan 26
  27. 27. 4/3/2011 Project Risk Management To Sum Up…. 1. We identified the project Risk management knowledge area’s processes 2. We know how to do Risk Management for the project 3. We know how to do Risk Identification 4. We know how to perform Qualitative Risk Analysis 5. We know how to perform Quantitative Risk Analysis 6. We know how to do risk Response Planning 7. We know how to perform Risk Monitoring and Control Questions ? 27

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