Paper on risk management by Samuel Obino Mokaya


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Paper on risk management by Samuel Obino Mokaya

  1. 1. Project Management Training Series Project Risk Management By Samuel Obino Mokaya BA, PGD, Ph.D. (Student) Jomo Kenyatta University of Agriculture and Technology, Nairobi, Kenya Telephone: 0722845562, 0734615008 E-mail: o’,
  2. 2. <ul><li>Risk is a probability that some adverse circumstance will occur; a measure of the potential harm or loss associated with an activity executed in an uncertain environment. </li></ul><ul><li>Projects involve an amount of risk that has implication on its performance. </li></ul><ul><li>A proactive approach to project management demands that as part of the planning phase of project, a thorough risk assessment is done to identify potential problems that are likely to affect its success. </li></ul><ul><li>The purpose is to identify risks and formulate appropriate strategies to deal with them, and minimize their effect on the project. </li></ul>Introduction
  3. 3. <ul><li>Risk management in projects involves: </li></ul><ul><ul><li>Identifying risks. </li></ul></ul><ul><ul><li>Assessing and analyzing the likelihood and impacts of risks. </li></ul></ul><ul><ul><li>Trying to reduce the uncertainties (by gathering more information or making different decisions). </li></ul></ul><ul><ul><li>Trying to lessen the impacts of risks. </li></ul></ul><ul><ul><li>Developing contingency plans for critical risks. </li></ul></ul><ul><ul><li>Monitoring risks as the project progresses. </li></ul></ul>
  4. 4. Risk Management Process Risk identification Risk analysis Risk monitoring Risk planning Potential risks Prioritized risk list Risk avoidance & contingency Risk assessment
  5. 5. <ul><li>Risk identification </li></ul><ul><li>The focus should be on: </li></ul><ul><ul><li>Technology risks: speed, performance. </li></ul></ul><ul><ul><li>People risks: skills, availability, training. </li></ul></ul><ul><ul><li>Organizational risks: structure, resources. </li></ul></ul><ul><ul><li>Estimation risks: time, deadlines, size. </li></ul></ul><ul><li>A brainstorming session with the project team can be helpful way to ensure that all important risks are identified. </li></ul><ul><li>Risk analysis </li></ul><ul><li>Assess probability and seriousness. </li></ul><ul><li>Probability may be very low, low, moderate, high and very high. </li></ul><ul><li>Risk effects might be catastrophic, serious, tolerable or insignificant. </li></ul><ul><li>(See diagram next page) </li></ul>
  6. 6. Matrix for Risk Analysis Risk Probability Effects Required training for staff not available Moderate Tolerable Time to complete project is underestimated Staff illness Organizational financial problems force reduction in project budget Defective inputs / components Key staff ill at critical times Impossible to recruit staff with required skills
  7. 7. <ul><li>Risk planning </li></ul><ul><ul><li>Consider each risk and develop a strategy to manage it. </li></ul></ul><ul><ul><li>Avoidance strategies: the probability that the risk will arise is reduced. </li></ul></ul><ul><ul><li>Minimization strategies: the impact of the risk on the project or product will be reduced. </li></ul></ul><ul><ul><li>Contingency plans: if the risk arises, contingency plans are plans to deal with that risk – for instance, having a back-up supplier for a key material; having an alternate distribution channel to send products to China (air instead of boat). </li></ul></ul>
  8. 8. <ul><li>Risk monitoring </li></ul><ul><ul><li>Assess each identified risk regularly to decide whether or it is becoming less or more probable. </li></ul></ul><ul><ul><li>Also assess whether the effects of the risk have changed. </li></ul></ul><ul><ul><li>Each key risk should be discussed at management progress meetings. </li></ul></ul>
  9. 9. Look at this!
  10. 10. Risk Management Matrix (Example) Risk Strategy Recruitment problems Early recruitment, proper timing, training existing staff etc. Organizational financial problems Prepare report to management showing contribution of project to business goals Defective inputs/components Replace with those of known reliability Staff illness Reorganize team for more work overlaps, make people understand each other’s job
  11. 11. Risk Indicators (Example) Risk Type Potential Indicators People <ul><li>poor staff morale, </li></ul><ul><li>poor relationships amongst team members, </li></ul><ul><li>job availability </li></ul>Organization <ul><li>organizational gossip, </li></ul><ul><li>lack of action by senior management </li></ul>Tools <ul><li>reluctance by team members to use tools, </li></ul><ul><li>complaints about use of tools </li></ul>Requirements <ul><li>many change requests, </li></ul><ul><li>customer complaints </li></ul>Estimation <ul><li>failure to meet agreed schedule, </li></ul><ul><li>failure to clear reported defects </li></ul>
  12. 12. <ul><li>Every step of the way you must keep in mind that there are two types of risk that can affect your project: firstly, the risks that you already know about and secondly, the risks that you are not aware of. </li></ul><ul><li>Your task is to ensure that the risks you are aware of are much more than the ones not known. </li></ul><ul><li>Create contingency plans for the risks you know about and build enough time into your project schedule to mitigate unknown risks; to enhance chances of project success. </li></ul>
  13. 13. PRACTICE WINDOW You have been appointed the Project Manager of a major project on the construction of the Prime Minister’s official residence in Nairobi. Identify potential risks and possible actions to tackle them Risk Action
  14. 14. <ul><li>“ Good risk management will not prevent bad things from happening; but when bad things happen, good risk management will have anticipated them and will reduce their negative effects” </li></ul><ul><li>Samuel Obino Mokaya, 2009 </li></ul><ul><li>THANK YOU </li></ul><ul><li>Telephone: 0722845562, 0734615008 </li></ul><ul><li>E-mail: o’, </li></ul>