A comprehensive overview of project risk management. Assumes a familiarity with fundamental concepts of project management.

1. Risk Management Andrew P. Valenti, Principal Consultant Valenti Partners

7. Determining a Risk Candidate Candidate Uncertain? Loss Possible? Time Component? Risk Yes Yes Yes Yes No No No Issue No Impact Irresolvable The three components of a risk, which determine our ability to manage it.

15. Using Project Risk Models

20. The Standard Risk Model Probability of risk event (P e ) Probability of impact (P i ) Risk event driver(s) Impact drivers Risk Event Impact Total loss (L t )

21. Simple Risk Model Simple Risk Model. Combines the risk event and impact into a single entity along with the risk’s probability of occurrence. Probability of risk event & impact (P e and P i ) Driver(s) Risk event and impact Total loss

22. The Risk Management Process

24. Critical information The Five-step Risk Management Process Risk events and impact Drivers, probabilities and total loss Subset of risks to be managed Types of action plans: avoidance, transfer, redundancy and mitigation (prevention, contingency, reserves) Assess status and closure of targeted risks; identify new risks Step 1: Identify risks Step 2: Analyze risks Step 3: Prioritize and map risks Step 4: Resolve risks Step 5: Monitor risks Regular check for new project risks Steps

28. Formula for calculating expected loss from its components Probability of risk event (P e ) Probability of risk impact (P i ) Total loss (L t ) Expected loss (L e )    Risk likelihood Total amount of loss if risk occurs Answers question, “How risky is it?”

30. Risk likelihood (P e X P i ) - percent Total loss - workdays Threshold line Risk 2 Risk 1 Risk 5 Risk 16 Risk 13 Risk 4 Risk 9 Risk 18 Risk 7 Risk 10 Risk Map showing risks 1, 2, 5, 13, & 16 under active management and five more monitored candidates 5 10 15 20 25 10 30 50 70 90

33. Factors entering into calculating expected loss, which is the prime criterion for prioritizing risks. Calculate Expected Loss Probability of risk event (P e ) Probability of risk impact (P i ) Total loss (L t ) Expected loss (L e )    Risk likelihood Total amount of loss if risk occurs Answers question, “How risky is it?”

36. Calibration values for total loss when using qualitative scales 180 >500,000 >1.20 >15 High 190 150,000-500,000 0.50-1.20 6-15 Medium 205 <150,000 <0.50 1-5 Low 220 0 0 0 None Product performance (throughput, units/minute) Project budget overrun Target product cost overrun Schedule slip (workdays) Total Loss