Project Risk Management

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Project Risk Management

  1. 1. Project Risk Management “Those who cannot remember the past are condemned to repeat it” – George Santayana
  2. 2. Project Risk • Project is a temporary endeavor undertaken to create a unique product, service or result. • Risk is “Loss” multiplied by “Likelihood” • Risk Types: Macro-risk & Micro-risk
  3. 3. Successful Project Leaders ! Aware of lessons learned from prior projects ! Plan the work thoroughly " to understand challenges ahead " to an=cipate poten=al problems ! Make team understand sources of varia=on " minimizes where ever possible
  4. 4. Project Failures ! They are impossible ! Objec=ves lies outside capabili=es ! Possible deliverable but other objec=ves are unrealis=c ! Feasible deliverable, plausible objec=ves but insufficient effort put into planning
  5. 5. Use of Risk Data ! Lower cost/less chaos ! Project priority/management support ! Project porJolio management ! Tuning plans to reduce risks ! Project communica=on & control ! Establishing management reserve
  6. 6. Data for Project Management ! Achieving delivery ! Managing budgets ! Managing schedule ! Delivering business value
  7. 7. Defining Risk Management ! Project assump=ons ! Stakeholder risk tolerance ! Planning data? ! Templates and metrics ! Risk management plan
  8. 8. Project Selec=on ! Proper mix of risk and benefits consistent with business objec=ves ! Frequent reviews ! Revisit assump=ons ! Re balance project load
  9. 9. Project Planning ! Without planning no one knows whether something is going wrong ! Regular reviews of methods and processes used ! Adopt and use a project management process
  10. 10. Project Scope ! Change & defects - Creep in scope - Gaps - Dependencies ! Minimized by - planning and WBS - Scope documenta=on using IS/IS NOT technique
  11. 11. Project Deliverables ! Documented deliverable defini=on process ! Use a straw man defini=on document ! Adopt a rigorous evolu=onary methodology ! Key project contribu=on from start?
  12. 12. Reduce Risk ! Dollar Ac=ons? - Scope with sufficient details & limits ! WBS: any sec=on resis=ng breakdown is risky ! WBS: Lack of ownership is risky ! WBS: size of more than 200 entries is risky - Sequence or collec=on of projects
  13. 13. Other Risk ! Scope risks can bring out - Market risks - Confiden=ality risks
  14. 14. Risk Documenta=on ! Define scope and iden=fy challenges ! Set limits based on value of deliverable ! Decompose work into small pieces ! Iden=fy work not well understood ! Assign ownership and look into reason for reluctance ! Note risks from expected project dura=on or complexity
  15. 15. Project Schedule ! Sources of schedule risks - Delays - Dependency - Es=ma=on
  16. 16. Project Es=ma=on ! PiJalls - Avoidance - Op=mism - Lack of informa=on - Granularity
  17. 17. Project Ac=vity Sequencing ! Cri=cal Path Methodology (CPM) ! Mul=ple Cri=cal Paths ! Interfaces ! Scheduling risky work
  18. 18. Risk Documenta=on ! Long dura=on ac=vi=es ! Significant worst case es=ma=on ! High uncertainity es=ma=on ! Overly op=mis=c es=mate ! All cri=cal & near cri=cal path ac=vi=es ! Mul=ple cri=cal paths ! Convergence points in logical network ! External dependencies and interfaces
  19. 19. Risk Documenta=on ! Deadlines further out than the planning horizon ! Cross func=onal and subcontractor work
  20. 20. Project Resource ! People - A^ri=on - late joining - Not dedicated ! Outsourcing ! Budget
  21. 21. Project Team Environment ! Team building - Forming - Storming - Norming - Performing ! 20 minutes to get back to concentra=on ! Delega=ng to dedicated staff is low risk ! Outside dependency delay > 7 weeks
  22. 22. Project Procurement ! Solicita=on: RFP - One resource for planning and procurement - Clear scope defini=on in RFP - Clear criteria to evaluate responses ! Risks - non contac=ng suppliers - bidders asking trivial ques=ons
  23. 23. Source Selec=on ! Risks during - decision making - nego=a=ons - contrac=ng process ! Turnover due to outsourcing ! Rela=onship with outsourcing partners
  24. 24. Contract ! Clear defini=on of scope of work ! Measurable deliverables ! Payments with achievements of results ! Process to be used for any change ! Should specify responsibili=es ! Should include “not to exceed” limita=on ! Terms that aligns with goals
  25. 25. Cost Es=ma=on ! Staff ! Equipment ! Outsourcing ! Travel ! Other costs (e.g. communica=on)
  26. 26. Document Resource Risk ! Ac=vi=es with unknown staffing ! Un-­‐staffed ac=vi=es ! Work that is outsourced ! Contract risks ! Ac=vi=es requiring a unique resource ! Part =me and remote team members ! Impact of work environment ! Budget exceeding project objec=ves ! Over commi^ed staff
  27. 27. Managing Project Constraints • “ Good, Fast, Cheap : Pick two” Scope Schedule Resources
  28. 28. Risk Framework ! Technology (the work) ! Marke=ng (the user) ! Manufacturing (Produc=on & delivery)
  29. 29. Risk Complexity Index ! Index = (Tech+Arch+System) * Scale ! Assessment against experience and capability - 0 = only exis=ng technology required - 1 = minor extension - 2 = significant extension - 3 = possible with innova=on - 4 = probably feasible - 5 = new, feasibility in doubt
  30. 30. Risk Complexity Index (cont..) ! Scale signifies the number of people - 0.8 for up to 12 - 2.4 for 13 to 40 - 4.3 for 41 to 100 - 6.6 for greater than 100 ! Index - < 20 low risk - < 40 medium risk - > 40 high risk
  31. 31. Es=ma=on Techniques ! Using historical data ! Experts and expert judgment ! Experience based rules and func=ons ! Delphi group es=ma=on
  32. 32. Es=ma=on Process History Base Effort Es.mate Dura.on Es.mate Calendar Es.mate Project Factors Other Factors Resource Factors
  33. 33. Es=ma=on for Uncertainty ! Program Evalua=on and Review Technique ! PERT te = (to + 4tm + tp)/6 ! Standard devia=on = (tp -­‐ to)/6
  34. 34. Resource Planning ! Resource requirements ! Holidays ! Vaca=ons ! Time-­‐offs ! Non-­‐project ac=vi=es ! Distributed resources - consumed 60% more
  35. 35. Staff Acquisi=on ! Skills requirements ! Staff availability - 2 projects is op=mal ! Outside of project responsibility is a risk
  36. 36. Qualifying & Analyzing Risk ! Separate parts that are well understood from that are not ! Making a project impossible to possible is to isolate and schedule most risky work early ! Qualita=ve and quan=ta=ve risk assessment ! Qualita=ve is less effort but quan=ta=ve assessment strives for precision
  37. 37. Qualifying & Analyzing Risk ! “loss” in =me, money etc ! “likelihood” based on sta=s=cs, probability ! Risk probability is 0 or 1 at project end ! Uncertainty in the beginning ! Qualita=ve assessment divides choices into ranges ! Quan=ta=ve assessment assigns each risk a specific frac=on
  38. 38. Qualifying & Analyzing Risk ! Probability - Experiments e.g. tossing a coin - Historical and empirical data - Guessing or gut feel ! Most of the project risks are in this category ! Illusion of precision can be a risk ! Measurement based probabili=es can help trend analysis
  39. 39. Quan=ta=ve Risk Assessment ! Difference of the mean of the distribu=on and measured 90% point ! Can be expressed as a single value or a histogram of possibili=es - High – project objec=ve at risk - Medium – objec=ves are OK, significant re-­‐planning - Low – No major plan changes, risk is a inconvenience
  40. 40. Quan=ta=ve Risk Assessment ! Unit of impact and max value are risk specific ! More ranges the be^er the precision but harder to achieve agreement ! Cost impact is easier compared to effort/ schedule ! Increase in effort may not translate directly into schedule impact
  41. 41. Quan=ta=ve Risk Assessment ! Over=me or lower morale ! Rela=onships with customers, suppliers and others connected to the project ! Increased stress, worry and extra mee=ngs ! Concerns about health and safety
  42. 42. Qualita=ve Risk Assessment ! Minimum outcome - risk list ordered by severity - simple sort, Delphi technique ! Shows only the rela=ve risk and not the project exposure each risk represent
  43. 43. Qualita=ve Risk Assesment ! Risk assessment table Risk Probability Impact Overall Risk ! Risk assessment matrices ! Alternate assump=on tes=ng ! Data precision ranking ! Decide list of risks that require further a^en=on
  44. 44. Qualita=ve Risk Assessment ! Sensi=vity Analysis? ! Risk assessment tables - Select one type of impact - Several tables for each type of impact ! Two dimensional qualita=ve analysis - X axis probability - Y axis impact
  45. 45. bnair@asquareb.com blog.asquareb.com https://github.com/bijugs @gsbiju

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