risk management a key project management knowledge area an essential part of the project plan ©...
TRANSCRIPT
Risk ManagementA Key Project Management Knowledge Area
An Essential Part of the Project Plan
© Edward B. Farkas, CHS, CPM, MIEEE, PMP
I’m Edward …
& you are?
Total Project Plan Development (simplified view)
Scope Documents & Scope Management Plan
‘Blended’ Work Breakdown Structure
Risk Management Plan
Activity Network Diagram/Schedule
Resource Management Plan
Communications Plan
Project Quality Plan
Integrated Change Management Plan
Expectations Management
Project Risk Management Process
• Risk identification• Risk qualification• Risk quantification• Risk response planning• Risk monitoring & control
Project Risk Management Process
Risk Identification
Risk Identification Sources• Documentation/Contracts• History
– Accurate stakeholder(s) identification– Mismanaged requirements gathering– Lack of documentation– Unchallenged assumptions
• Integration• Seamless• Compatible• Import/Export Functionality
• Work Breakdown Structure• Scheduled Triggers• Risk Breakdown Structure• Design• Testing/Technology• Operation/Maintenance/Support• Copy write/Patent/License
What do I need for this activity/deliverable? Dependency RisksIs what I need available (When I need it)?
Human resources?Documentation?Hardware?Approvals?Funding?
Does this activity/deliverable assume anything? Assumption RisksIs the assumption(s) valid?
Does this activity/deliverable have constraints? Constraint RisksCan it be done with the constraints?
Work Breakdown Structure (WBS) Prompts
FF
SS
SS
SS
FF
FF
SS
FF
Scheduling Prompts
FS Does anything have to happen before I can start this?
Is there any risk in that dependency?
SS If these start at the same time, do I have the resources?Are the resources at risk?
FF Why do they have to end at the same Time? Does that dependency have any risks?
SF What needs to be finished before the other can start?Is there any risk that it won’t
be finished?
Risk Management Checklist
“PM completes Risk Checklist” Should Be Part of Methodology
Risk Management of Triggers(Time based trigger example below.)
Risk Identification
The process of systematically identifying all possible risk events which may impact a project
– Generate a Risk List that will later be quantified and qualified. – Cumulative effect of several risk events occurring in concert with each other may be of greater significance
than the impact of a single issue
Classify by cause, not effect or impact!Classify by cause, not effect or impact!
Risk Breakdown Structure
Web Site
Security
Security Policy
Authentication SW
Firewalls
• Is the deliverable well defined?• Is this item a dependency?• Do I have the resources?• Do I have the funding?• Is there anything we’re assuming?• Etc…
Scheduling Risks
• Level of Effort (LOE) subjectively estimated • LOE estimated by incorrect stakeholder
• Work Package in Work Breakdown Structure (WBS) too large for accurate estimates• LOE based on a resource with overestimated skills &/or experience
Project Risk Management Process
Risk Qualification
Qualitative Risk Rating
• High Likely to cause significant impact to schedule/cost/scope/quality
• Moderate Has potential to cause impact to schedule/cost/scope/quality
• Low Has little potential impact to Schedule/cost/scope/quality
COST
SCHEDULE
SCOPE
Remember ETR’s Triangle of Truth!
Project Risk Management Process
Risk Quantification
Risk Quantification
• Probabilities & Statistical Equations• Decision Tree Calculations• Subjective Scales• Formulas Project Managers use … • Can be expressed numerically
– mean– median– mode– range– variance – standard deviation
Quantification of Dollar Value
• Product of two variables– Risk Event Probability:
• An estimate of the probability that a given risk event will occur
– Risk Event Value: • An estimate of the gain or loss that will be
incurred if the risk event does occur
{Probability of Impact x Dollar Value = Event Monetary Value: (P)I=EVM}
Reference: PMBOK, 1996. Ch. 11
COST
SCHEDULE
SCOPE
Quantify in an integrated way!
Quantification of Duration Ranges
• (O + 4M + P) / 6 is PERT (Program Evaluation & Review Technique)
• (P – 0) / 6 is Standard Deviation
• [(P – O) / 6] is Task Variance
• is Project Variance (sum of the task variances)
Handy formulas to help quantify risk activity/task duration:O = Optimistic, M = Most Likely, P = Pessimistic
Please remember that subjective P, M, and O inputs yield subjective outputs.Historical inputs are preferred for P, M, and O values
2
[(P – O) / 6] 2
Project Risk Management Process
Risk Response
Risk Response Options
Ways to address risk issues.
– Avoidance: Eliminate up front (e.g. activity sequence in test plan)
– Reduction: (mitigation) Minimize anticipated impact
– Transfer: (deflection) Redirect issue ownership (sub/direct property/indirect consequential)
– Retention: (acceptance) Accept real or potential impacts
Project Risk Management Process
Risk Control
Risk Management Plan
• Should document the procedures that will be used to manage risk throughout the project
Reference: PMBOK, 1996. Ch.11
[If applicable] [Y-yes, N-no] [Open/Closed] Priority Scale [0= Will impact Critical Path, 1=1 day, 2= 1week, 3= > 1 week]
No. Unit Risk Item/Issue Status
Open Date Due Date
Revised Due Date
Finish Date Priority Initiator Owner
Notes
1 International N Contact list Open 6/20/2000 ####### 8/24/2001 1 J oe Customer J anet Smith Send Bill the List
2 EV4 Y Add unit Open 7/30/2001 ####### ####### 0 Customer PM
Esure that new unit requirements are incorporated into overall plan
3 N
4
Risk & Issues Log (for control)
Risk Management Process & the Project Plan
•
• Document risks in project plan• Use communication sub-plan to manage expectations • May require WBS or RBS elaboration • Budget for risk events • May imply adding mitigation tasks in schedule • Document status of risk issue • Assume risk reviews are part of entire project life cycle
Project Risk Management Process
• Risk identification• Risk quantification• Risk qualification• Risk response• Risk control
summary
Q&AQ&A
For additional information & copies of this presentation: Email Edward B. Farkas, PMP Managing Director, Project Management
Practice:
ETR Technology Center, Inc.180 Oser Avenue
Hauppauge, NY [email protected]
631.952.1300A certified WBE firm established in 1980
A must have book for project managers! (www.authorhouse.com)
Available on-line, search by ISBN # (Amazon, Barnes & Noble, etc.)ISBN: 1-4184-0136-6 Hands-On & Practical