How to implement risk management process in the project. Autor: Dipl.-Ing. Hari Maslic

1. Dipl.-Ing. Hari Maslic
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RISK MANAGEMENT
How to implement risk management process in the project

2. Bankverbindung
Hari Maslic – MerisCon
Bank: Deutsche Bank AG
IBAN: DE71 5007 0024 0719
0564 02 BIC: DEUTDEDBFRA
MerisCon ARTfeature
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Table of contents
Risk management___________________________________________________________ 2
Organization ____________________________________________________________________2
Project manager and team_________________________________________________________3
Qualitative risk management_______________________________________________________3
Quantitative risk management _____________________________________________________4
Risk monitoring and controlling_____________________________________________________6
The final process of risk management________________________________________________6

3. Bankverbindung
Hari Maslic – MerisCon
Bank: Deutsche Bank AG
IBAN: DE71 5007 0024 0719
0564 02 BIC: DEUTDEDBFRA
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Risk management
Does a project need risk management? Which methodology should be chosen in order
for risk management activities to meet the basic project criteria during the
implementation of the project itself?
Managers and teams assigned to implementing projects will always give a positive answer to
the first question. On the other hand, those who practice project management, especially in
projects of smaller budget and scope, and based on practical experience, will answer that
risk management (as a process) was not an important part of the project. Which is because
of budget (cost) and time savings or because the organization and management themselves
did not support or recognize the importance of that process. These reasons motivate many
managers to seemingly gain optimization of budget, time and content, and thus quality,
especially at the beginning of project planning, by neglecting risk management activities and
solving the whole process on the” fly” in a given project situation.
The second question requires more analytical thinking, analysis and planning to come up
with the best answer or solution. The correct answer and choice of methodology and
activities for risk management can be obtained only if the role of risk in the project is
properly understood.
First, it is important to understand risk management as factors, activity and process in a
project that aims to optimize the cost, duration and quality of the entire project.
Organization
In order to achieve this goal, the organization in which the project is implemented or
responsible for its implementation must offer organizational procedures, processes and
templates for planning, identification and qualification of risks. As well as templates and / or
historical databases on past implemented projects and their risk management. Organizations
in which projects are implemented or which implement projects often have internal
institutions that monitor and control the risk management in the project, which are part of
the organization itself and its methodology.

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Hari Maslic – MerisCon
Bank: Deutsche Bank AG
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These organizational parts are not an active part of the project team but are an important
stakeholder from the project and organizational perspective. One of the tasks of these
institutions is to monitor the implementation of organizational processes and procedures, as
well as to escalate individual or group risks to senior management during negative signals
from the project. But also, to improve, based on useful practical experiences from projects,
the methodology for risk management.
Project manager and team
The project manager has the greatest responsibility for risk management in the project. But
without the support of organizational methodology and senior management, the project
manager is not able to adequately implement the risk management process, and thus is not
able to achieve the required quality, effectiveness and success of the project. Of course, all
stakeholders (sponsor, client, consumer, project team, etc.) have their own share and
responsibility in risk management, but the way in which activities, risk monitoring and
control, reports, actions and reactions when coordinating project risks will affect the project,
determines and plans the project manager.
Qualitative risk management
The risk management process is an iterative process. This process is not completed by the
identification, analysis and qualification of risks (probability of events and impact on the
project) at the beginning of the project, in which all stakeholders should be involved. During
the project, the existing risks must be re-analyzed, and qualified, new risks can be identified
and / or existing risks can be eliminated. Risk management should aim at prevention, not
inspection. Right at the beginning of the project (initialization and planning), the risks and
their impact are greatest (Figure 1). In the initial phase of the project, the project manager
and the team have the least information and knowledge, not only about the risks, but also
about the project in general, its scope and interest groups.

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With effective risk management (project planning), the impact of risk and the impact of
unknown factors on the project is decreasing. By timely risk analysis and response planning,
the project manager develops preventive processes that will eliminate or reduce factors that
call into question the achievement of project objectives.
The result of such iterative planning and risk management usually has an impact on the
current project plan and basic project factors such as costs, required work, project scope and
quality. Thus, project management is possible.
Quantitative risk management
One of the problems for project managers is to incorporate the results from the identification and
qualification of project risks into the basic project factors (baseline), especially when it comes to
numerical description of the impact on the project (cost, schedule).
In the practice the organization, the project and managers often approach a lump sum, based on
intuition and their own experience, determining the quantitative impact on the project.

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Or often based on historical project databases, they determine the percentage impact on the
complete project budget or time plan. In doing so, especially in the European area, only risks that
have a negative impact on the project are taken into account (increase in the budget and / or
increase in the duration of implementation). This methodology and approach to risk management
has its advantages, especially in small and medium-sized projects. However, in the case of big
projects (multi-year, multi-million, infrastructure projects), with hundreds of stakeholders (internal
and external), with teams of hundreds of members (multi-international areas), this approach does
not give an objective result of the project plan, budget or duration of the project. This reflects on the
quality of planning the necessary resources, as well as the complete quality of project and project /
product implementation.
Namely, in complex projects, it is necessary to analyze and qualify also the positive risks.
Risks that reduce the necessary activities or shorten the duration of implementation during
the project. Such risks are, for example, planning the timely engagement of more
experienced experts, purchasing the necessary resources for the project during the season
of reduced prices or planning construction during the season when the probability of better
weather is higher, etc.
The technique that enables the exact calculation of the costs caused by the risk is expected
monetary value (EMV).
Expected Monetary Value (EMV) is a statistical technique in risk management used to
quantify risks and calculate the contingency reserve.
It calculates the average outcome of all future events that may or may not happen.
You multiply the probability with the impact of the identified risk to get the EMV:
Expected Monetary Value (EMV) = Probability % * Impact %
By summarizing the EMV of positive and negative risks, it is possible to numerically calculate
the required budget (cost) for the management of identified risks. In the case of planning
risk responses using the technique of reducing the probability of risk or reducing the impact
on the project (in the case of positive risks it would be the other way around), then the initial
percentage of probabilities of risks and impacts changes, hence the cost of risk (EMV).

7. Bankverbindung
Hari Maslic – MerisCon
Bank: Deutsche Bank AG
IBAN: DE71 5007 0024 0719
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Of course, this only applies to the calculation of the budget of identified risks. For
unidentified risks, usually one percentage (lump sum) additional budget should be
determined.
EMV is also a very good tool when it comes to making project decisions in a situation where
more options are available.
Risk monitoring and controlling
After the risks are qualitatively and quantitatively integrated into the complete project plan
and calculated in the basic project factors (baseline), iterative monitoring and control of risks
in the project remains. During this process, the identified risks will be analyzed qualitatively
and quantitatively, new identified risks will become part of the risk register or existing risk
that are no longer relevant to the project will be excluded from the project scope.
Based on the results from the process of monitoring and controlling the risk, the project
manager will be able to identify trends, forecast and report on the status of project risks.
Based on these results, it is often necessary to take corrective and preventive actions or
changes in order for the project to remain in line with the planned costs, time and scope
(baseline).
The final process of risk management
Completion of one project phase or a complete project (realization of the desired product,
service or results) requires the risk management process and all other processes in the
project phase or project (based on organizational processes and procedures) to be finished
(closed). One of the most important and useful activities in this process should be archiving
of identified risks, planned responses, qualitative and quantitative factors and making these
documents available to the institution in charge of defining and improving the risk
management process in the project. Thus, what was learned in the project or what should be
made better (lesson learned) after archiving will benefit the entire organization and future
projects.

8. Bankverbindung
Hari Maslic – MerisCon
Bank: Deutsche Bank AG
IBAN: DE71 5007 0024 0719
0564 02 BIC: DEUTDEDBFRA
MerisCon ARTfeature
www.meriscon.com
Niederhöchstädter Str. 20
61449 Steinbach
USt.:DE292722734
21.03.21 Seite 7 von 7
At the end, it can be said that risk management is a set of several iterative, interdependent
processes which the project manager integrates in the project so that they impact
positively and as a whole on the realization of the project itself and the achievement of
project goals.
Hari Maslic, Dipl.-Ing., Project management