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How to manage risk in Primavera P6Professional

Risk Manag emen t in Prim avera P6Release 8.2Risks are uncertain events/conditions that have the potential to

negatively (or positively) impact proje ct o bjectives. Prim avera P6

Release 8.2 Professional includes an integrated Risk Management

feature that enables you to identify, categorize and prioritize risks,assign a responsible person for managing the risk, assign risks to

one or more activities that may be impacted by the risk, and

conduct qualitative analysis on each risk. Additionally, you have

the ability to record a risk response.

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HOW TO MANAGE RISK IN PRIMAVERA P6 PROFESSIONAL

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P6 generates a Risk Score based on information that is entered

for each risk. The Risk Score can then be used to help you

evaluate the significance of the risk. This tutorial demonstrates the

process of using the Risk Management functionality in P6 R8.2.

Step 1. We will document a possible risk to our project involvingthe Design and Engineering process. We want to document that if

the customer changes the design of our Office Building Addition,

the project may incur additional costs as well as schedule delays.

The image below illustrates the Design and Engineering WBS

element (work breakdown structure). As you can see below, this

portion of the project is currently scheduled to start on Jan. 11 and

finish on Feb. 9, and the total budgeted cost is $3120. We can alsoview the activities comprising this WBS element and their

corresponding dates & budgeted cost. Please note that we have

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Step 2. Access the Risks icon on the directory bar and click the

add icon on the Command Bar to begin the process of

documenting the potential risk. The details pertaining to the risk

are added using the detail tabs. The General tab is used to

identify the risk category, risk type, owner or person responsible

for resolving the risk, and status. The Exposure Start and

Exposure Finish dates correspond to the start and finish of the

activities in the Design and Engineering WBS. These dates

represent the earliest and latest dates this risk may occur. The

Pre-Response Exposure Cost represents the possible cost this

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risk may impose, and the Post-Response Exposure Cost is the

cost the risk may impose based on your risk response. We will

discuss the calculations behind these values shortly. Notice that

you can also provide the date the risk was identified as well as the

resource that identified the risk.

Step 3. The impact tab enables you to identify both pre-response

and post-response parameters. Notice that you can select the

Probability that the risk will occur, the impact that the risk may

have on the schedule, and the monetary impact on the project if

this risk occurs. The Risk Score is calculated based upon the

values selected for the above mentioned parameters. The impact

tab can also be utilized to document a response plan as well as

response impact parameters to arrive at a Post-Response Risk

Score.

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The Help menu indicates how the Risk Score (both Pre-

Response and Post-Response) is calculated:

The overall risk score based on the values you select for three

fields: Probability, Cost, and Schedule. Two of these fields, Cost

and Schedule, are known as the impact fields.

The Probability field and each impact field have these possible

values: Very High, High, Medium, Low, Very Low, and Negligible.

The application uses the highest value selected for the Cost and

Schedule fields as the overall impact value. The application

using resource lag
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determines the Score by plotting the overall impact value with the

value entered for Probability, as shown in the table below.

For example, if you enter the value Low for Cost and the value

Medium for Schedule, the application uses Medium, the higher of

the two, as the overall impact value. The application then uses the

table below to determine the Score value by plotting the overall

impact and Probability values. The columns in the table represent

the overall impact values (Negligible through Very High), while the

rows represent the Probability values (Very High through

Negligible). The application determines the Score as the number

that corresponds to the intersection of the applicable Impact

column and Probability row. So, to continue our example, if youentered a value of High for Probability, the Score would display as

14, the number shown where the Impact Medium column

intersects the Probability High row.

Impact

Negligible

Impact

Very

Low

Impact

Low

Impact

Medium

Impact

High

Impact

Very

High

Probability

Very High

0 5 9 18 36 72

Probability 0 4 7 14 28 56


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High

Probability

Medium

0 3 5 10 20 40

Probability

Low

0 2 3 6 12 24

Probability

Very Low

0 1 1 2 4 8

Probability

Negligible

0 0 0 0 0 0

The Help menu identifies how the Pre-Exposure and Post-Exposure cost values are calculated. These values can be

viewed on the General tab (see the image for Step 2 above):

The application calculates the potential cost of a risk. The potential

cost displays in the Pre-Response Exposure Cost and Post-

Response Exposure Cost fields on the Risks, General tab. (The

Post-Response Exposure Cost field displays only after a responseis made to a risk using the Post-Response fields on the Impact

tab.) The following discussion refers to both the Pre- and Post-

Response Exposure Cost fields generically as Exposure Cost

fields because both are calculated using the same equation.


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The value for the Exposure Cost field is based on the values

selected for the Probability and Cost fields, located on the Risks,

Impact tab, and on cost figures associated with the activities

assigned to the Risk or to the project, if no activity assignments

have been made.

The application calculates the Exposure Cost value using this

equation: Exposure Cost = Planned/Budgeted Total Cost *

(Probability Midpoint * Cost Midpoint).

The Planned/Budgeted Total Cost is the sum of the

Planned/Budgeted Cost values for each activity assigned to the

risk (or the planned project cost, if no activities are assigned to the

risk).

The Probability Midpoint is the midpoint of the Probability field

value for the selected risk. The Cost Midpoint is the midpoint of the

Cost field value for the selected risk. The way each is calculated is

discussed below.

Note: The Cost and Probability midpoint for the value Negligible is

always zero, so the value of Negligible is not relevant to the

following discussion.

The equation for the calculation of Probability Midpoint and

Cost Midpoint varies, depending on which values are selected


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for the Probability and Cost fields:

When using a value between highest and lowest:

When a value of High (50% to 70%), Medium (30% to

50%), or Low (10% to 30%) is selected for the Probability

field, then the Probability Midpoint is calculated using this

equation: Probability Midpoint = (lower range for selected

value + higher range of selected value)/2. So if the

Probability value is Medium (30% to 50%), then the

Probability Midpoint is calculated as follows: (30+50)/2 =

40%.

When a value of High (20% to 40%), Medium (10% to

20%), or Low (1% to 10%) is selected for the Cost field,then the Cost Midpoint is calculated using the same

equation as Probability Midpoint. So if the Cost value is

Medium (10% to 20%), then the midpoint is calculated as

follows: (10 + 20)/2 = 15%

For highest values:

When the value Very High (70% or higher) is selected for

the Probability field, then the Probability Midpoint iscalculated as the midpoint between the lower value and

100%. So the Probability Midpoint for the value Very High

(70% or higher) midpoint is calculated as follows: (70 +

100)/2 = 85%.

When the value Very High (40% or higher) is selected for


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the Cost field, then the Cost Midpoint is calculated using

this equation: ((the lower range for the selected value * 2) +

the high range for the selected value)/2. So the Cost

Midpoint for the value Very High (40% or higher) is

calculated as follows: ((40 * 2) + 100)/2 = 90%.

For lowest values:When the value Very Low (


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Step 5. Use the Description tab to further describe the risk.
http://projectmanagementblog.mssprojectsanalytics.com/wp-content/uploads/2013/12/Risk-Management-4.png


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Step 6. Use the Cause tab to document the cause of the risk.
http://projectmanagementblog.mssprojectsanalytics.com/wp-content/uploads/2013/12/risk-management-5.png


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Step 8. Additional Notes can be entered.
http://projectmanagementblog.mssprojectsanalytics.com/wp-content/uploads/2013/12/Risk-management-7.png


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Step 9. In the Activities window, you can view and/or assign risks

to activities using the Risks tab in activity details.
http://projectmanagementblog.mssprojectsanalytics.com/wp-content/uploads/2013/12/Risk-management-8.png


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17/19

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