7-* Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Risk Management Chapter 7 7-* Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Risk Risk management - the art and science of identifying, analyzing, and responding to risk factors throughout the life of a project and in the best interest of its objectives. Project risk – any possible event that can negatively affect the viability of a project * Why Do Projects Fail?Generally, from poor risk managementFailure to identify risksFailure to actively/aggressively plan for, attack and eliminate “project killing” risksRisk comes in different shapes and sizesSchedule risks (short to long)Cost risks (small to large)Technology risks (probable to impossible) * * Elements of Risk ManagementManaging risk consists of: identifying, addressing and eliminating risksWhen does this occur?(WORST) Crisis management/Fire fighting : addressing risk after they present a big problem(BAD) Fix on failure : finding and addressing as the occur.(OKAY) Risk Mitigation : plan ahead and allocate resources to address risk that occur, but don’t try to eliminate them before they occur(GOOD) Prevention : part of the plan to identify and prevent risks before they become problems(BEST) Eliminate Root Causes : part of the plan to identify and eliminate the factors that make specific risks possible * * Elements of Risk ManagementEffective Risk Management is made up of:Risk Assessment: identify, analyze, prioritizeRisk Control: planning, resolution, monitoring RISK MANAGEMENT RISK CONTROL RISK ASSESSMENT IDENTIFICATION ANALYSIS PLANNING PRIORITIZATION RESOLUION MONITORING * * Risk Assessment TasksIdentification: produces a list of risks that have potential to disrupt your project’s scheduleAnalysis: assesses the likelihood and impact of each identified risk, and the risk levels of possible alternativesPrioritization: prioritizes the list by impactserves as the basis for risk control tasks * * Risk Control TasksPlanning: produces your plan for dealing with each risk Must ensure consistency of the risk management plan with your overall project planResolution: executing your plan to deal with the risksMonitoring: staying on top of your plan and re-evaluate for new risks * 7-* Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Risk Vs Amount at Stake Phase 1 Conceive (C) Phase 2 Develop (D) Phase 3 Execute (E) Phase 4 Finish (F) Time $ Value Increasing Risk Total Project Life Cycle Amount at stake Plan Produce Opportunity and risk Period of highest risk impact Combined risk impact 7-* Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Process of Risk Management What is likely to happen? What can be done? What are the warning signs? What are the likely outcomes? Project Risk = (Probability of Event)(Consequences of Event) 7-* Copyright © 2010 Pearson Education, Inc. .