Risk Management in Project Management


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Risk Management in Project Management

  1. 1. Risk ManagementFor Project Management
  2. 2. What is Risk?• Risk (noun): possibility of loss or injury • (Merriam-Webster Dictionary)
  3. 3. Risk in Project Management •A risk is something that may happenand if it does, will have an impact on the project objectives.May → possibilityImpact → lossObjectives → time, cost, performance, quality, scope, client satisfaction.
  4. 4. Words in Risk Management• Possibility → probability, likelihood• Loss → impact• Weakness → vulnerability• Threat• Control → countermeasure• Residual Risk → the amount of risk that is left over when appropriate controls are properly applied to lessen or remove weakness
  5. 5. Risk Management Plan• Risk Identification• Risk Quantification• Risk Response• Risk Monitoring and Control
  6. 6. Risk Identification Or Risk Assessment• Threats to the project• Weaknesses of the project environment• The possibility that threat will make use of weakness• The impact of the exposure (threat to weakness)• Available controls
  7. 7. Risk Identification and SWOT Factors affecting an organization (in this case, project) can usually be classified as:• Internal factors – Strengths (S) – Weaknesses (W)• External factors – Opportunities (O) – Threats (T)
  8. 8. Risk Identification Tools and Techniques• Document Reviews• Information Gathering – Brainstorming – Lessons Learned Database – Other methods, some common techniques include: questionnaires and surveys, interviewing, checklists, and examination of the Work Breakdown Structure for the project with appropriate specialty groups, asking “what-if’ questions
  9. 9. Risk Identification Output• Identification # for each risk identified• Date and phase of project development when risk was identified• Name of risk (does the risk pose a threat or present an opportunity?)• Detailed description of risk event• Risk trigger• Risk type• Potential responses to identified risk• Comments about risk identification
  10. 10. Risk Identification Sheet Example
  11. 11. Risk Quantification• Set Impact Level of the Project – Impact Level to Cost – Impact Level to Schedule• Set Probability Level of the Project (could be organization standard)• Set Risk Matrix (should be organizational standard)
  12. 12. Impact Level Example• Project Value 10M• Project Schedule 3 Months Level Value Time Very High > 5M > 1Mo High 2M-5M 2W-1Mo Medium 0.5M-2M 3d-2W Low 0.1M-0.5M 1d-3d Very Low <0.1M < 1d
  13. 13. Probability Level Example Level Probability Very High >90% High 70%-90% Medium 30%-70% Low 5%-10% Very Low <5%
  14. 14. Probability Risk Matrix Example •VH •H •M •L •VL •VL •L •M •H •VH Impact
  15. 15. Risk Response Avoid: Do Something to Remove Transfer: Make Someone Else Responsible Reduce: Take Action to Lessen the Impact or Possibility Accept
  16. 16. Risk Response: Rule Cost of Risk Response (Avoid, Transfer orReduce) must be less than the cost of impact. Probability Reduce Avoid Accept Transfer Severity
  17. 17. Risk Monitoring and Control• Risk Audit• Risk Reviews• Risk Status Meetings and Reports