CSE 4316 Risk Managment.ppt

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CSE 4316 Risk Managment.ppt

  1. 1. Risk Management Instructor: Mike O’Dell This presentations was derived from the textbook used for this class: McConnell, Steve, Rapid Development , Chapter 5.
  2. 2. Systems Design Project Are Risky <ul><li>The odds of a large project being cancelled due to risks encountered: 50% </li></ul><ul><li>The odds of a large project finishing on time are close to zero! </li></ul><ul><li>Pete Marwick (1988): 35% of companies studied had at least one “ runaway project ” </li></ul><ul><ul><li>Allstate office automation </li></ul></ul><ul><ul><ul><li>5 year/$8M … 6+ years/$100M </li></ul></ul></ul><ul><ul><li>Westpac Banking Corporation info systems </li></ul></ul><ul><ul><ul><li>5 year/$85M… 3years/$150M later: cancelled </li></ul></ul></ul>
  3. 3. Why Do Projects Fail? <ul><li>Generally, from poor risk management </li></ul><ul><ul><li>Failure to identify risks </li></ul></ul><ul><ul><li>Failure to actively/aggressively plan for, attack and eliminate “project killing” risks </li></ul></ul><ul><li>Risk comes in different shapes and sizes </li></ul><ul><ul><li>Schedule risks (short to long) </li></ul></ul><ul><ul><li>Cost risks (small to large) </li></ul></ul><ul><ul><li>Technology risks (probable to impossible) </li></ul></ul>
  4. 4. Case Study 5-1: What can go wrong? <ul><li>What type of project is this? </li></ul><ul><li>How difficult does it appear to be, on the surface? </li></ul><ul><li>What classic mistakes do you see along the way? </li></ul><ul><li>Where/when/how could the risks have been better managed? </li></ul>
  5. 5. Elements of Risk Management <ul><li>Managing risk consists of: identifying , addressing and eliminating risks </li></ul><ul><li>When does this occur? </li></ul><ul><ul><ul><li>(WORST) Crisis management/Fire fighting : addressing risk after they present a big problem </li></ul></ul></ul><ul><ul><ul><li>(BAD) Fix on failure : finding and addressing as the occur. </li></ul></ul></ul><ul><ul><ul><li>(OKAY) Risk Mitigation : plan ahead and allocate resources to address risk that occur, but don’t try to eliminate them before they occur </li></ul></ul></ul><ul><ul><ul><li>(GOOD) Prevention : part of the plan to identify and prevent risks before they become problems </li></ul></ul></ul><ul><ul><ul><li>(BEST) Eliminate Root Causes : part of the plan to identify and eliminate the factors that make specific risks possible </li></ul></ul></ul>
  6. 6. Elements of Risk Management <ul><li>Effective Risk Management is made up of: </li></ul><ul><ul><li>Risk Assessment: identify, analyze, prioritize </li></ul></ul><ul><ul><li>Risk Control: planning, resolution, monitoring </li></ul></ul>RISK MANAGEMENT RISK CONTROL RISK ASSESSMENT IDENTIFICATION ANALYSIS PLANNING PRIORITIZATION RESOLUION MONITORING
  7. 7. Risk Assessment Tasks <ul><li>Identification : produces a list of risks that have potential to disrupt your project’s schedule </li></ul><ul><li>Analysis : assesses the likelihood and impact of each identified risk, and the risk levels of possible alternatives </li></ul><ul><li>Prioritization : prioritizes the list by impact </li></ul><ul><ul><li>serves as the basis for risk control tasks </li></ul></ul>
  8. 8. Risk Control Tasks <ul><li>Planning : produces your plan for dealing with each risk </li></ul><ul><ul><li>Must ensure consistency of the risk management plan with your overall project plan </li></ul></ul><ul><li>Resolution : executing your plan to deal with the risks </li></ul><ul><li>Monitoring : staying on top of your plan and re-evaluate for new risks </li></ul>
  9. 9. <ul><li>Most common schedule risks </li></ul><ul><ul><li>Feature creep </li></ul></ul><ul><ul><li>Gold-plating (requirements/developer) </li></ul></ul><ul><ul><li>Shortchanged QA </li></ul></ul><ul><ul><li>Overly optimistic schedules </li></ul></ul><ul><ul><li>Inadequate design </li></ul></ul><ul><ul><li>Silver-bullet syndrome </li></ul></ul><ul><ul><li>Research-oriented development </li></ul></ul><ul><ul><li>Weak, poorly-trained personnel </li></ul></ul><ul><ul><li>Contractor failure </li></ul></ul><ul><ul><li>Friction between developers & customers </li></ul></ul>Risk Identification CLASSIC MISTAKES
  10. 10. Risk Identification <ul><li>Use Table 5-3: Potential Schedule Risks </li></ul><ul><ul><li>Schedule Creation </li></ul></ul><ul><ul><li>Organization and Management </li></ul></ul><ul><ul><li>Development Environment </li></ul></ul><ul><ul><li>End-users </li></ul></ul><ul><ul><li>Customer </li></ul></ul><ul><ul><li>Contractors </li></ul></ul><ul><ul><li>Requirements </li></ul></ul><ul><ul><li>Product </li></ul></ul><ul><ul><li>External Environment </li></ul></ul><ul><ul><li>Personnel </li></ul></ul><ul><ul><li>Design and Implementation </li></ul></ul><ul><ul><li>Process </li></ul></ul>
  11. 11. Risk Analysis: Exposure Table <ul><ul><li>Analyze the (schedule) impact of each risk </li></ul></ul><ul><ul><li>Create a risk exposure/impact table for each risk. </li></ul></ul><ul><ul><ul><li>Risk Exposure = Probability of Loss X Size of Loss </li></ul></ul></ul>Risk Probability of Loss Size of Loss Risk Exposure Overly optimistic schedule. 50% 5 wks 2.5 wks Addition of new feature that adds capability to … 10% 20 wks 2.0 wks Inadequate design that requires redesign of major … 15% 15 wks 2.25 wks Board contractor delays delivery of board. 10% 4 wks 0.4 wks Unstable code base from earlier release of product. 20% 10 wks 2.0 wks Product requirements take longer than expected to finalize than planned. 30% 3 wks 0.9 wks Etc. TOTAL PROJECT OVERRUN X wks Y wks
  12. 12. Risk Analysis <ul><li>Estimating Size of Loss </li></ul><ul><ul><li>Impact to schedule IF risk is encountered in its expected form </li></ul></ul><ul><ul><li>Can be precise based on known date for re-review(s), etc. </li></ul></ul><ul><ul><li>May need to break down tasks to lowest known level </li></ul></ul><ul><li>Estimating Probability of Loss </li></ul><ul><ul><li>Subjective assessment of probability that a given risk will cause the stated impact </li></ul></ul><ul><ul><li>Many different practices can be used: </li></ul></ul><ul><ul><ul><li>Experience </li></ul></ul></ul><ul><ul><ul><li>Delphi or group consensus </li></ul></ul></ul><ul><ul><ul><li>Betting analogies (How much would you bet that…?) </li></ul></ul></ul><ul><ul><ul><li>Adjective calibration (“Good probability” = x%, “Fair” = y%, …) </li></ul></ul></ul>
  13. 13. Risk Prioritization <ul><li>Establishes a focus on your risks based on the expected impact (risk exposure) of each risk </li></ul><ul><ul><li>Greatest potential impact must also be addressed </li></ul></ul><ul><li>80/20 Rule </li></ul>Risk Probability of Loss Size of Loss Risk Exposure Overly optimistic schedule. 50% 5 wks 2.5 wks Inadequate design that requires redesign of major … 15% 15 wks 2.25 wks Addition of new feature that adds capability to … 10% 20 wks 2.0 wks Unstable code base from earlier release of product. 20% 10 wks 2.0 wks Product requirements take longer than expected to finalize than planned. 30% 3 wks 0.9 wks Board contractor delays delivery of board. 10% 4 wks 0.4 wks Etc. TOTAL PROJECT OVERRUN X wks Y wks 1.3+ 5.65 wks
  14. 14. Risk-Management Planning <ul><li>Develop a specific, detailed plan for resolution of each high-priority risk identified </li></ul><ul><ul><li>What must be done </li></ul></ul><ul><ul><li>When it must be done </li></ul></ul><ul><ul><li>How it will be done </li></ul></ul><ul><ul><li>Who will do it </li></ul></ul><ul><ul><li>When/how it will be monitored/reassessed </li></ul></ul>
  15. 15. Risk Resolution <ul><li>Risks can be resolved by: </li></ul><ul><ul><li>Avoidance : don’t do the risky activity </li></ul></ul><ul><ul><li>Transference : move it to another place (team, organization, contractor, etc.) where it’s not as likely </li></ul></ul><ul><ul><li>Buying information : early prototyping, consulting, … </li></ul></ul><ul><ul><li>Root cause elimination : get at what causes the risk, and make it go away </li></ul></ul><ul><ul><li>Acceptance/assumption : don’t worry about it, but plan to accept the consequences </li></ul></ul><ul><ul><li>Publicizing : let stakeholders know (so they implicitly accept the risk), avoid surprises </li></ul></ul><ul><ul><li>Controlling : develop contingency plans, allocate additional resources if that will help, … </li></ul></ul><ul><ul><li>Recording/remembering : write down what you know so you can use it in the future (e.g., next project, later in this one) </li></ul></ul>
  16. 16. Risk Resolution <ul><li>Use Table 5-6: Means of Controlling the Most Common Schedule Risks </li></ul><ul><ul><li>Find ways to apply these common approaches to the specific risks that you have identified. </li></ul></ul><ul><ul><li>Make them specific and relevant to your project. </li></ul></ul>
  17. 17. Risk Monitoring <ul><li>Risks and potential impact will change throughout the course of a project </li></ul><ul><li>Keep an evolving “TOP 10 RISKS” list </li></ul><ul><ul><li>See Table 5-7 for an example </li></ul></ul><ul><ul><li>Review the list frequently </li></ul></ul><ul><ul><li>Refine… Refine… Refine… </li></ul></ul><ul><li>Put someone in charge of monitoring risks </li></ul><ul><li>Make it a part of your process & project plan </li></ul>
  18. 18. Case Study 5-2: Risk Management Done Right <ul><li>Why/how did this project start off on the right foot? </li></ul><ul><li>Describe the risk management plan: </li></ul><ul><ul><li>How were the top risks identified? </li></ul></ul><ul><ul><ul><li>What were they? </li></ul></ul></ul><ul><ul><li>How were these risks addressed? </li></ul></ul><ul><ul><li>How were risks monitored? </li></ul></ul><ul><li>What was the end result? </li></ul>

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