Project risk management

1. Project Risk Management
- The processesof conductingriskmanagementplanning,identification,analysis,response
planningandmonitoringandcontrol ona project
- Objectivesare toincrease the probabilityandimpactof positiveeventsanddecrease the
probability andimpactof negative eventsinthe project
11.1 PlanRisk Management
- The processof defininghowtoconductrisk anagementactivitiesforaproject
- Importantto provide sufficientresourcesandtime forriskmanagementactivities,andto
establishanagreeduponbasisforevaluatingrisk.
Plan Risk Management:Inputs
- ProjectManagementPlan
- ProjectCharter
- StakeholderRegister
- Enterprise Environmental Factors
- Organizational ProcessAssets,includebutnot limitedto:
o RiskCategories
o Commondefinitionsof conceptsandterms
o Riskstatementformats
o Standardtemplates
o Rolesandresponsibilities
o Authoritylevelsfordecisionmaking
o Lessonslearned
Plan Risk Management:Technical & Tools
1. Analytical Techniques
2. ExpertJudgment
3. Meetings
Plan Risk Management:Outputs
1. RiskManagementPlan
 Methodology
 RolesandResponsibilities
 Budgeting
 Timing
 RiskCategories
 Definitionof probabilityandimpact

2.  ProbabilityandImpactMatrix
 Revisedstakeholders’tolerance
 Reportingformat
 Tracking
Risk Categories
DefinitionofRisk Probabilityand Impact

3. Quiz
• “ An uncommon stateof nature,characterized by theabsenceof any information related to a
desired outcome”,isa common definition for:
A. An act of God
B. An amountatstake
C. Uncertainty
D. Risk aversion
11.2 IdentifyRisks
IdentifyRisksisthe processof determining whichrisksmayaffectthe projectand documentingtheir
characteristics
IdentifyRisks: Inputs
1. RiskManagementPlan
2. Cost managementPlan
3. Schedule ManagementPlan
4. QualityManagement Plan
5. Human Resource ManagementPlan
6. Scope Baseline
7. ActivityCostEstimates
8. ActivityDurationEstimates
9. StakeholderRegister
10. ProjectDocuments
11. ProcurementDocuments
12. Enterprise Environmental Factors
13. Organizational ProcessAssets
IdentifyRisks:T& T
1. DocumentationReviews
2. InformationGatheringTechniques

4. o Brainstorming
o Delphi Technique
o Interviewing
o Root Cause Analysis
3. ChecklistAnalysis
4. AssumptionsAnalysis
5. DiagrammingTechniques
o Cause-and-effectdiagrams
o Systemor processflowcharts
o Influence diagrams
6. SWOT Analysis(Strength,Weakness,Opportunities,Threats)
7. ExpertJudgment
Influence Diagram
SWOT Analysis

5. IdentifyRisks: Outputs

6. Quiz
• Risk tolerancesare determined in order to help:
A. The teamrank theproject risks
B. The projectmanagerestimatetheproject
C. The teamschedule theproject
D. Managementknow how othermanagerswillact to the project
11.3 PerformQualitative Risk Analysis
The processof prioritizingrisksforfurther analysisoractionbyassessingand combiningtheir
probabilityof occurrence andimpact
PerformQualitative Risk Analysis:Inputs
1. RiskManagementPlan
2. Scope Baseline
3. RiskRegister
4. Enterprise Environmental Factors
5. Organizational ProcessAssets
PerformQualitative Risk Analysis:Tools & Techniques
1. ProbabilityandImpactMatrix

7. 2. RiskProbabilityandImpactAssessment
3. RiskData QualityAssessment
4. RiskCategorization
5. RiskUrgency Assessment
6. ExpertJudgment
PerformQualitative Risk Analysis:Outputs
1. RiskRegisterUpdates
 Relative rankingorprioritylistof projectrisks
 Risksgroupedbycategories
 Causesof riskor projectareasrequiring particularattention
 List of risksrequiringresponseinthe near-term
 List of risksfor additional analysisandresponse
 Watch listsof low-priorityrisks
 Trendsinqualitative riskanalysisresults
11.4 PerformQuantitative Risk Analysis
- The processof numericallyanalyzingthe effectof identifiedrisksonoverallprojectobjectives.
- Quantitative analysisisperformedonrisks thathave been prioritizedbythe qualitativerisk
analysisprocessaspotentiallyandsubstantiallyimpactingthe project'scompetingdemands.
PerformQuantitative Risk Analysis:Inputs
 RiskManagementPlan
 Cost ManagementPlan
 Schedule ManagementPlan
 RiskRegister
 Enterprise Environmental Factors
 Organizational ProcessAssets
PerformQuantitative Risk Analysis:Tools & Techniques
 Data Gatheringand Representation
 Techniques
 Interviewing
 ProbabilityDistribution

8. 
ProbabilityDistribution
PerformQuantitative Risk
Analysis:Tools & Techniques(2)
2. Quantitative RiskAnalysisandModeling Techniques
 Sensitivityanalysis
 Expectedmonetaryvalue analysis
 ModelingandSimulation
3. ExpertJudgment

9. SampleSensitivityAnalysis
Expectedmonetary value analysis (Decisiontree)
ModelingAndSimulation

10. ModelingAndSimulation
PerformQuantitative Risk Analysis:Outputs
1. ProjectDocumentUpdates
 Probabilisticanalysisof the project
 Probabilityof achieving costandtime objectives
 Prioritizedlistof quantifiedrisks
 Trendsinquantitative riskanalysisresults
Quiz
• If a projecthasa 60% chanceof a US $ 100,000 profitand a 40% chanceof a US$ 100,000 loss,
the expected monetary valuefortheprojectis :
• A. $ 100,000 profitB. $ 60,000 loss
• C. $ 20,000 profit
• D.$ 40,000 loss
11.5 PlanRisk Responses

11. The processof developingoptionsandactionstoenhance opportunitiesandtoreduce threatsto
projectobjectives.
The keybenefitistoaddressthe risksby theirpriority,have strategiestohandle the risksandassigned
resources& budgettohandle those risks
Plan Risk Responses:Inputs
1. RiskManagementPlan
2. RiskRegister
Plan Risk Responses:Tools& Techniques
Strategiesfor negative risks or threats
Avoid
Transfer
Mitigate
Accept
Response Strategiesfor Threats
 Avoidance:
 Riskprevention
 Changingthe planto eliminateariskbyavoidingthe cause/source of risk
 Protectprojectfromimpact of risk
 Examples:
o Change the implementationstrategy
o Do it ourselves (donotsubcontract)
o Reduce scope toavoidhighrisk deliverables
o Adopta familiartechnologyorproduct
 Mitigation
 Seekstoreduce the impactor probabilityof the riskeventtoan acceptable threshold
 Be proactive:Take earlyactionstoreduce impact/probabilityanddon’twait until the
riskhitsyour project
 Examples:
o Staging- More testing- Prototype
o Redundancyplanning

12. o Use more qualifiedresources
 Transfer
 Shiftresponsibilityof riskconsequencetoanotherparty
 DoesNOT eliminaterisk
 Most effective indealingwithfinancial exposure
 Examples:
 Buy/subcontract:move liabilities
 Selectingtype of Procurementcontracts:FixedPrice
 Insurance:liabilities+bonds+ Warranties
 Acceptance
Usedwhenprojectplancannot be changed& otherriskresponse strategycannotbe
used
 Active Acceptance
- Developacontingencyplantoexecute if the riskoccur
- Contingencyplan=be ready withPlanB
 Passive Acceptance
- Deal withthe risksas theyoccur = NoPlanB prepared
 Contingencyallowance/reserve
Establishedamountof reserve (e.g.:timeand/ormoney) to accountforthe identified
knownrisks.
Amountisdecidedbasedonprobabilityandimpact
Strategiesfor Positive Risks or Opportunities
 Exploit:Ensure opportunityisrealized
1. Ex: Assigningorganization mosttalentedresourcestothe projecttoreduce cost
lowerthanoriginallyplanned.
 Share:Allocatingsome orall of the ownershiptothirdpart bestable tocapture the
opportunity
1. Ex: Jointventures,special-purposecompanies
 Enhance:Increase the probabilityand/orthe positiveimpactof the opportunity
1. Ex: Addingmore resourcestofinishearly

13.  Accept:Wellingtotake advantage of opportunityif itcomes,butnotactivelypursuing
it.
3. ContingentResponse Strategies
4. ExpertJudgment
Plan Risk Responses:Outputs
1. Project managementPlan Updates
 Schedule ManagementPlan
 Cost ManagementPlan
 QualityManagementPlan
 ProcurementManagementPlan
 Human Resource ManagementPlan
 Scope Baseline
 Schedule Baseline
 Cost Baseline
2. Project DocumentsUpdates
 Assumptions logupdates
 Technical DocumentationUpdates
 Change Requests
Quiz
Purchasing insuranceisBEST considered an exampleof risk:
A. Mitigation
B. Transfer
C. Acceptance
D. Avoidance
11.6 Control Risks
• The processof implementingriskresponseplans,

14. • trackingidentifiedrisks,monitoringresidual risks,identifyingnew risks,andevaluatingrisk
processeffectivenessthroughoutthe project.
Monitor and Control Risks: Inputs
1. RiskRegister
2. ProjectManagementPlan
3. Work Performance Data
4. Work Performance Reports
Monitor and Control Risks: Tools& Techniques
1. RiskReassessment
2. RiskAudits
3. Variance andTrendAnalysis
4. Technical Performance Measurement
5. Reserve Analysis
6. Meetings
Monitor and Control Risks: Outputs
1. Work Performance Information
2. Change Requests
 Recommended corrective actions
 Recommendedpreventive actions
3. ProjectmanagementPlanUpdates
 Outcome of riskreassessment,riskaudits,and periodicriskreviews
 Actual outcome of the project’srisksandthe risk’sresponse
4. ProjectDocumentUpdates
5. Organizational ProcessAssetsUpdates
Quiz
Whatshould be donewitha non-criticalRisk?
A. Documentthemforhistorical use on otherprojects
B. Documentthemand revisit during projectexecution

15. C. Documentthem& set them asidebecausethey are already covered in yourcontingency plans
D. Documentthemand give themto the customer