riskmgmt session 2012 handout

7/31/2019 RiskMgmt Session 2012 Handout

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InterGlobe Consulting. All Rights Reserved. Email: [email protected]

Project Risk Management X440

Sonja Koppensteiner, PhD, MSM,

PMP


Interglobeconsulting.com

Welcome

Introduction:

Your Name

Professional Background

Project Management Experience Motivation for taking this class

Expectations

Favorite cuisine


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Logistics

Thursdays, 6.30pm to 9.30 pm

Time for in class project

Breaks as needed



Logistics Cont.

3 Short Quizzes (20%)

Student Project (50%)

Attendance & Participation (30%)


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Quizzes

In Class

Multiple Choice & Short Answers & Exercises

Closed Book

3 Quizzes

Best two out of three will be

Counted for grade


Team Project

Identify team

Each team works on the same projectthroughout the duration of this course

Each team member contributes to the project.


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Individual Presentation

Risk Management Topic of your choice

10 Minute Presentation & ending with an

engaging discussion question for class.


What is a Project?

A Project is an output-oriented activity with

the following characteristics:

Unique final product

Definite start and stop times

Tasks requiring a variety of skill sets Team members with well-defined roles and

responsibilities

What is the definition in PMBOK?


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Examples of Projects

Generic examples: Building a house

Holding a wedding

Organizing a conference

Installing a network

Implementing a new service/process

Developing and implementing new software

What are some current projects at your work?


What is Project Management?

Serving Market Need

Unique & Time Limited

Finances for Resources

Infrastructure

The application of knowledge, skills, tools, and

techniques to project activities to meet the project

requirements (Source PMBoK)


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Projects can be Difficult .

Goal confusion

Role confusion

Lack of team buy-in

Poor (or no) planning

Unrealistic schedules

Scope creep

Unforeseen project risks Inconsistent management support


What is a Successful Project?

A project is a success when:

End product is delivered complete,

on-time, and within budget.

Customers are delighted

Project Team is enthusiastic The organization is better off


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The Triple Constraint

Quality

Good, Fast, Economical-- Pick one ...

Scope


Project Roles

Executive Sponsor

Project Manager

Core Team Members

Extended Team Members


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Organizational Structure Options

Functional

Projectized

Strong Matrix

Weak Matrix

Composite


ChiefExecutive

FunctionalManager

Staff

Staff

Staff

FunctionalManager

Staff

Staff

Staff

FunctionalManager

Staff

Staff

Staff

Project Coordination

Functional Organization


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ChiefExecutive

ProjectManager

Staff

Staff

Staff

ProjectManager

Staff

Staff

Staff

ProjectManager

Staff

Staff

Staff


Project Organization (Projectized)


ChiefExecutive

FunctionalManager

Staff

Staff

Staff

FunctionalManager

Staff

Staff

Staff

FunctionalManager

Staff

Staff

Staff

PM Group

ProjectManager

ProjectManager

ProjectManager

Strong Matrix Organization


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ChiefExecutive

FunctionalManager

Staff

Staff

Staff

FunctionalManager

Staff

Staff

Staff

FunctionalManager

Staff

Staff

Staff


Weak Matrix Organization


ChiefExecutive

FunctionalManager

Staff

Staff

Staff

FunctionalManager

Staff

Staff

Staff

FunctionalManager

Staff

Staff

Staff

PM Group

ProjectManager

ProjectManager

ProjectManager

Composite Organization

A

B


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Organizational Structures Key Characteristics

Functional Project Matrix

One supervisor PM is supervisor Two supervisors

Slower information flow Project focus Decision process canslow down progress

PM no authority PM has authority Weak strong Matrix

Problems in integration ofproject components

Duplicated job functions Conflicting priorities

Team member notaffiliated with project

Dedicated teammember

Shared project resources

Better career path No home for teammember

In-depth expertise Less development ofexpertise


Balance of Influence

Projectized

OrganizationFunctional

Organization

Balance of Influence & Power

Strong

Matrix

Weak

Matrix

Project Managers

Influence & Power in

decision making

Functional Managers

Influence & Power in

decision making


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Seven Factors for PM Structure

Size of project

Strategic importance

Novelty and need for innovation

Number of departments

Number of external interfaces

Budget and time constraints

Stability of resource requirements

AuthorityAutonomy

ofProject Manager

Project Team


Project Life Cycle

Starting

the project

Organizing

and preparingCarrying out the work

Closing the

project

Project

Charter

Project Management

Plan

Accepted

Deliverables

Archived

Project

Documents

Staffing & Cost Level


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Why a Project Charter?

Clarifies the project objectives

Documents the expected project results

Obtains executive commitment

to the project approach

Provides a foundation for

making project decisions


Example Project Charter

Project Name: Quick Answer Help Desk

Sponsor: Sally Green

Project Mgr: George Boyd

Charter Version #: V 1.1

Updated by: George Boyd

Approved By: Sally Green

Approval Date: Oct 15, 2000

Project Objective Statement:

Implement an automated Expert Solutions Databaseand Request Tracking system that enables Help Deskstaff to provide top quality service to our expandingcustomer base.

Project Deliverables:

1. Vendor Selection Documentation2. Software Interface Tailoring3. Installed Help Desk Server and network4. Installed Expert Solutions Database5. Installed Service Request Tracking Database6. Help Desk Escalation Procedure7. Training Materials for Help Desk Analysts

Customer:

Help Desk Staff

IT Support Organization

Division Employees who make Service Request

Customer Benefits:

1. Ability to provide correct response to frequentlyasked questions

2. Ability to build knowledge base of successfulresponses

3. Automated tracking of call volume andresponse time

4. Improved response time and customer service

Successful Completion Criteria:

1. Expert Solution Database includes answersto 60% of all expected customer requests

2. Maximum wait time for solution databasesearch is 30 seconds

Estimated Start Date: Sept 1, 2000

Estimated End Date: June 30, 2001

Level of Uncertainty: -25% - + 75%

Triple Constraint Trade-off:

Resources S

Schedule N

Scope M

Select a different flexibility letterfor each constraint.Flexibility letter choices are:

N = Not FlexibleS = Somewhat FlexibleM = Most Flexible

Project Core Team Members

Team Member RoleSally Green SponsorGeorge Boyd Project ManagerAlicia Monfort Network SupportJerry Smith IT ArchitectKen Davis Business AnalystWilma Ellis DeveloperLouise Roberts Procurement Analyst

Project Scope:

In Scope: Help Desk process to coverApplications Support, Desk TopSupport, and Network Supportcalls

Purchasing of software andhardware

Expert Solutions databases forstandard office automationapplications

Out of scope: Organizational changes to create

the Help Desk Help Desk process to cover

procurement and trainingassistance calls.

Development of Expert Solutionsdatabase for in-house applications

Assumptions and Constraints:

1. The current budget cycle allocated sufficientmoney for purchasing hardware and softwarefor this project.

2. Minimal tailoring of the purchased solutionsdatabases.

3. The procurement cycle for new equipmentrequires no more than a 3 month l ead time.

Estimated Budget: $500,000

Funding Source: ITSD Annual Budget

Level of Uncertainty: -25% - + 75%


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Creating a Project Charter

Identify the

Problem/Opportunity

Define the Project

Outcome

Determine the Project

Approach

Project Charter

Name: Immediate Support Help DeskBackground: Current method ofprocessing customer support calls isinefficient and often inaccurate. Needa centralized facility with automatedsupport

POS:Implement a Help Desk process and anautomated solutions database andrequest tracking system ----Scope:In: Application and Desktop supportOut: Procurement & Planning supportSponsor: Sally Green


Short Form Project Charter TemplateProject Name: Project Name?

Sponsor: Who champions project?

Project Mgr: Who leads the project?

Charter Version #: What is this version #?

Updated by: Who created this version?

Approved By: Who approved this version?

Approval Date: When was it approved?

Project Objective Statement:

What must the project do? By When? Keep thisstatement short --- 25 words or less. Make it SMART(Specific, Measurable, Achievable, Relevant, andTime-based.)

Project Deliverables:

What is the project going to produce? (Create anumbered list of tangible products that will be availableas a result of this project.)

Customer:

Who is the Customer?

Customer Benefits:

What customer business requirements does thisproject address? Relate these to one of the following:increase revenue, avoid costs, improve service, and/or comply with a mandate? (Create a shortnumbered list of customer benefits.)

Successful Completion Criteria:

How will the success of the project be determinedfrom the customers perspective? Make these criteriameasurable so there is no doubt as to the projectssuccess. (Create a short numbered list.)

Estimated Start Date: Start date?

Estimated End Date: When will it finish?

Level of Uncertainty: Plus or minus %?

Triple Constraint Trade-off:

Resources

Schedule

Scope

Select a different flexibility letterfor each constraint.Flexibility letter choices are:

N = Not FlexibleS = Somewhat FlexibleM = Most Flexible

Project Core Team Members

Team Member RoleWho is on the project? What role do they play?

Project Scope:

In Scope: List the business areas andfunctionality that will be included in thisroject.

Out of scope: List the business areas andfunctionality that will not be included inthis project.

Assumptions and Constraints:

What assumptions were made in defining the project?Assumptions can affect scope, schedule, resources,stakeholders, etc. Are there constraints to theexecution of the project? Constraints describeboundaries within which the project must operate.(Create a numbered list of assumptions andconstraints.)

Estimated Budget: $$$ Allocated?

Funding Source: Where $$ come from?

Level of Uncertainty: Plus or minus %?

See PM for small

projects Pg 48 to 54


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Project Business Reasons

Customer/Stakeholders

Customer Benefits


Identify Stakeholders

Who are your customers?Are they external or internal to your organization?

Who will use the end product?

Who will need to change their processes as a result ofyour project?

Who interfaces with your project? What agencies can regulate the project?

Is there anyone else who needs to know about yourproject?


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Project Outcomes

Project Objective Statement

Project Deliverables

Successful Completion Criteria

Project Scope


Project Objective Statement (POS)

Make it SMART*

Make it SHORT

Make it ENERGIZING!

* Specific,Measurable,Achievable,

Relevant,Time-based


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POS Examples

The Apollo Project: By the end of the decade, send a man tothe moon and return him safely to earth. (19 words).

Photograph 16 landscapes around the world that are selectedin consultation with leading climate-change scientists andjournalists, in order to show persuasive visual evidence ofclimate change and its potential for devastation. Complete theproject by 2008. (38 words).

Provide a single web platform for the integrated delivery ofinformation, services and online communication tools to theUniversity community. Complete the project by February 2008and a maximum cost of $250,000. (33 words).


Identifying Deliverables

What will the customer have when we finish?

What will the support staff have when we

finish?


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Defining Completion Criteria

How do we know we are done??

Acceptable

Measurable

Testable

Achievable


Whats in Scope?

What will the project address?

Geographic areas?

Business functions?

Equipment?

Training?

Installation?

Infrastructure?

What will the project notaddress?


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Risk Management

PMBoK:

Includes the processes concerned with

conducting risk management planning,

identification, analysis, responses , monitoring

& controlling

Risk described by Probability, Impact, timing


Probability

P(A) =The Number Of Ways Event A Can Occur

The total number Of Possible Outcomes


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Project Risk

Definition

An uncertain event or condition that, if it occurs,

has a positive or a negative effect on project

objectives.

PMBOK Guide, fourth edition


Project RiskManagement

Plan RiskManagement

Identify RiskPerform

QualitativeRisk Analysis

PerformQuantitativeRisk Analysis

Plan RiskResponses

Monitor andControl Risks

Project Risk Management


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Risk Categorization

Comprehensive process

Systematically identifies risk

Consistent level of detail

Provides a structure

Effectiveness and Quality of risk identification


Benefits of Risk Categorization

Identify where risks are concentrated

Focus on specific areas to develop risk

responses

View of total risk exposure from different

perspectives

Point out risk exposures that are not apparent


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Common Risk Categories

General categories

Technical

External

Organizational

Project Management



Project area

Information

Personnel

Material

Machinery Urgency

Availability of resources

Root causes

Outdated machinery

Inadequate training of

personnel


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Political Government

Planning mechanisms

Safety mechanisms

Trade Policy

Customer Changes in strategic

orientation

Partner and Supplier Difficulties of collaboration

People Availability

Skills

Market Competitors

Customer expectations

Financial

Currency rates Economic environment


Risk Categorization - Methods

Simple approach Make a list

Use a Risk Breakdown Structure (RBS) A tool that arranges risks by categories and characteristics

Can be broken down by project type

Reminds participants of the many sources of project risks


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Project

Technical

Requirements

Technology

Complexity andInterfaces

Performances

and Reliability

Quality

External

Subcontractorsand Suppliers

Regulatory

Market

Customer

Weather

Organizational

ProjectDependencies

Resources

Funding

Prioritization

ProjectManagement

Estimating

Planning

Controlling

Communication

Example of RBS adapted from PMBOK Guide, 2004


Risk Categorization - ExampleRisk Category and Potential Risks Comments

Physical Risks

-Natural Hazards

-Damage to structures and material due

to fire

-Natural disasters may occur

- Negligent acts or improper use of

safety methods

Financial and Economic Risks

-Exchange rate variation

- Default of subcontractors

-Increase (or decrease) in costs

- Inadequate maintenance of quantity,

schedule and cost performance

Environmental Risks

-Material and equipment transport

problems due to inadequate

infrastructure

-Increase costs and delay the schedule


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Risk Categorization - Example

Risk Category and Potential Risks Comments

Design Risks

-Design errors and omissions

-Incomplete design scope

-Design errors have crucial effects on

project

- Lack of design stability can increase

costs

Legal Risks

-Civil petitions of neighbors around the

site

-Contractual misinterpretation

-Delay in construction due to petitions

and complaints

- Increase in costs due to difficulties in

interpreting contract

clauses

Government-Permits and regulations

-Delay in obtaining permits- Increase in costs and delays due to

failed inspections


Plan Risk Management

Project ScopeStatement

Costmanagementplan

Schedulemanagementplan

Communications managementplan

EEF/OPA

Planning meetingsand analysis

Riskmanagementplan

INPUTS TOOLS & TECHNIQUES OUTPUTS

Source: PMBoK, 4th edition, PMI


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Risk Management Process

Risk

Uncertain events that planning can not control.

Can be positive -> Opportunity

Can be negative -> Threat

Risk Management

A proactive attempt to recognize and manage uncertain

events that affect the likelihood of a projects success.

Issue vs. Risk


The Risk Event Graph

FIGURE 7.1Source: Project Management, McGraw-Hill, 2006


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External Risk Examples

External Unpredictable Government intervention

Standards

Export/Import

Natural Hazards

Postulated Events Vandalism

Completion Failure to complete the

project due to failure offinancial support to the endof the project

External Predictable Market Risks

Economics

Competition

User rejection

Operational Maintenance needs

Safety

Environmental Impacts

Social Impacts Currency Impacts


Internal Risk Examples

Internal, non-technical Management

Unrealistic schedule

Lack of coordination

Schedule

Late deliveries

Scope changes Cost

Under-estimating

Contractor claims

Technical Changes in Technology

Complexity introduced asa result of using newtechnology

Performance

Quality

Reliability

Design

Inadequate data

Suitability of specification Legal

Licenses

Patent Rights

Contractual


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Risk Managements Benefits

Proactive approach.

Reduces surprises & negative consequences.

Provides better control over the future.

Improves chances of reaching project performanceobjectives within budget and on time.


Key Items of Risk Management Plan

Methodology

Roles/Responsibilities

Budgeting

Risk categories (PMBoK pg 280) Definitions of probability and impact

Probability and impact matrix (PMBoK pg 281)

Reporting format and Tracking


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Methology

Defines what approach, tools and data

sources team uses to perform risk

management on the project.


The Risk

Management

Process

FIGURE 7.2

Source: Project Management, McGraw-Hill, 2006


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Roles and Responsibilties

Defines the roles and responsibilities of risk

management team members for each type of

the activity in the risk management plan.


Project

Technical

Requirements

Technology

Complexity andInterfaces

Performancesand Reliability

Quality

External

Subcontractorsand Suppliers

Regulatory

Market

Customer

Weather

Organizational

ProjectDependencies

Resources

Funding

Prioritization

ProjectManagement

Estimating

Planning

Controlling

Communication

Example of RBS adapted from PMBOK Guide, 2004


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Defining Probability and Impact

Probability or Likelihood

Likelihood that the risk will occur

Qualitative High, Medium, Low

Quantitativenumeric probability in percentage

Impact


Quantitativenumeric probability and $ value

Timing

Phase of project phase

Trigger

Frequency One time

Multiple eventsRefers to qualitative and quantitative risk analysis

in PMBoK


Probabilityand impact matrix

HL HM HH

ML MM MH

LL LM LH

LIKELIHOOD

Low Medium High

IMPACT

High

Medium

Low

Source: Project Management, McGraw-Hill, 2006

* Simplified version of the risk matrix shown in PMBoK, PMI


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Reporting format and Tracking

Reporting Format

How outcomes of risk management process will

be documented, analyzed and communicated.

Format of risk register

Tracking

How risk activities will be recorded

How risk management processes will be audited.


Simple Risk Register Example

RiskID

Description Owner Impact Likelihood Priority

1 Use of newtechnologycan delayproject

FunctionalManager

Medium High MH

2

3


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Identify Risks

Risk managementplan

Activity costestimates

Activity durationestimates

Scope baseline

Stakeholder register

Cost managementplan

Schedule

management plan Quality management

plan

Project documents

EEF/OPA

Documentationreviews

Informationgatheringtechniques

Checklist analysis

Assumptionsanalysis

Diagrammingtechniques

SWOT analysis

Expert judgment

Risk Register

INPUTS

TOOLS & TECHNIQUES OUTPUTS



Risk Identification T&T Overview

Documentation reviews review of projectdocumentation

Information gatheringtechniques Examples:

Brainstorming

Delphi Technique

Interviewing

Root Cause Analysis

Checklist analysis riskidentification checklist

Assumptions analysis

Diagrammingtechniques Examples:

Cause and Effectdiagrams

System or process flowcharts

SWOT analysis

Expert judgment


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Example: Risk ChecklistExample: Partial Risk Profile for Product Development Project

FIGURE 7.3Source: Project Management, McGraw-Hill, 2006


Root Cause Analysis

Root cause analysis is not a single, sharplydefined methodology; there are many differenttools, processes, and philosophies for performingRCA analysis.

Common techniques

Failure mode and effects analysis

5 Whys ask why why why why over until exhausted

Ishikawa diagram, also known as the fishbone diagramor cause-and-effect diagram.

Pareto analysis "80/20 rule"
http://en.wikipedia.org/wiki/Failure_mode_and_effects_analysishttp://en.wikipedia.org/wiki/5_Whyshttp://en.wikipedia.org/wiki/Ishikawa_diagramhttp://en.wikipedia.org/wiki/Pareto_analysishttp://en.wikipedia.org/wiki/Pareto_analysishttp://en.wikipedia.org/wiki/Pareto_analysishttp://en.wikipedia.org/wiki/Ishikawa_diagramhttp://en.wikipedia.org/wiki/Ishikawa_diagramhttp://en.wikipedia.org/wiki/5_Whyshttp://en.wikipedia.org/wiki/5_Whyshttp://en.wikipedia.org/wiki/Failure_mode_and_effects_analysishttp://en.wikipedia.org/wiki/Failure_mode_and_effects_analysis


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Management Oversight Risk Tree(MORT)

Materials Defective raw material

Wrong type for job

Lack of raw material

Man Power Inadequate capability

Lack of Knowledge

Lack of skill

Stress

Improper motivation

Machine / Equipment Incorrect tool selection

Poor maintenance or design

Poor equipment or tool placement

Defective equipment or tool

Environment Orderly workplace

Job design or layout of work

Surfaces poorly maintained

Physical demands of the task

Forces of nature

Management No or poor management involvement

Inattention to task

Task hazards not guarded properly

Other (horseplay, inattention....)

Stress demands

Lack of Process

Lack of Communication

Methods No or poor procedures

Practices are not the same as written procedures

Poor communication Management system

Training or education lacking

Poor employee involvement

Poor recognition of hazard

Previously identified hazards were not eliminated


FMEA

Failure Mode and Effects Analysis (FMEA)

A step-by-step approach for identifying all possible

failures in a design, a manufacturing or assembly

process, or a product or service.

Identification of

failures, their priorities

their impact on system,

their causes

Process controls

Source: http://www.asq.org/


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Fishbone Diagram

Also know as Cause and Effect Diagram or

Ishikawa

To identify possible causes for a problem and

relates them to categories.


Method Personnel

Effect

MaterialSite &

Equipment

Cause

Cause

Cause

Cause

Cause

Cause

Cause

Cause and Effect Diagram /Fishbone

Source: Effective Project Management by R. Wysocki, Wiley


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We have 15 causes forfailure (A O).

Which cause do weaddress first?

Pareto Principle = the80/20 rule:

20% of sources cause80% of the problems

Gather the frequencies,sort and chart

Cause # Failures

35

250

15

8

36

25

15

14

350

150

75

18

30

42

ID

1000

Late

arrival

Missing part

Access

A

B

C

D

E

F

G

H

I

J

KL

M

N

O

Pareto Analysis Cont.

Source: Effective Project Management

by R. Wysocki, Wiley


Cause

0%

5%

10%

15%

20%

25%

30%

35%

I B J O E A N F M C G H D K L

Percentage

Pareto Chart




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Flowcharting

Process step

Direction of Flow

Begin and end of

process

Document

Shows inputs and

outputs

Decisions

Delays

Connector to other

page or part of chart

Source: http://www.asq.org/learn-about-quality/process-analysis-tools/overview/flowchart.html


Haircut

needed?

No

Yes

B

Car

ready?No

Yes

Drive Walk

Barber

ready?No

Yes

>3 people

waiting?

Yes

B

Wait

Haircut

B

No

Start

Stop

Flow Chart Example




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SWOT Analysis

INTERNAL EXTERNAL

Strength Opportunities

Weaknesses Threats

E.g.: specific section or set of activities

of a project are being outsourced


SWOT Some Questions: Strength

What are the advantages of the proposition?

How competent is the project team?

What are the Unique Selling Points of the

proposition or project?

Do we have the necessary resources, assets, andpeople?

What is the estimated profitability of the project?

Source: http://www.brighthub.com/office/project-management/articles/45156.aspx
http://www.brighthub.com/office/project-management/articles/45156.aspxhttp://www.brighthub.com/office/project-management/articles/45156.aspx


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SWOT Some Questions: Threats

Is the market demand sustainable?

Are there any competing technologies or servicesthat'll make success challenging?

How will we account for staff attrition?

Do we have sustainable financial backing?

What are the current global economical implications?

Are there any threats that'll make Cost PerformanceIndex (CPI) go under one or the Schedule

Performance Index (SPI) over one (usefulecomputations Earned Value Management)?

Source: http://www.brighthub.com/office/project-management/articles/45156.aspx


Risk Description

Two Sections

Description of the risk

Impact on the project.

Example:

Use of new technology XYZ can delay project schedule.
http://www.brighthub.com/office/project-management/articles/45156.aspxhttp://www.brighthub.com/office/project-management/articles/57944.aspxhttp://www.brighthub.com/office/project-management/articles/57944.aspxhttp://www.brighthub.com/office/project-management/articles/57944.aspxhttp://www.brighthub.com/office/project-management/articles/57944.aspxhttp://www.brighthub.com/office/project-management/articles/57944.aspxhttp://www.brighthub.com/office/project-management/articles/57944.aspxhttp://www.brighthub.com/office/project-management/articles/45156.aspx


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Perform Qualitative Risk Analysis

Risk register

Risk managementplan

Project scopestatement

OPA

Risk probability/Impactassessment

Probability/ImpactMatrix

Risk data qualityassessment

Risk categorization

Risk urgency

assessment

Expert judgment

Risk Registerupdates




Describing a Risk

Probability or Likelihood

Likelihood that the risk will occur


Quantitativenumeric probability in percentage

Impact


Quantitativenumeric probability and $ value

Timing

Phase of project phase

Trigger

Frequency

One time

Multiple events


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Qualitative Risk Assessment

RiskID



FunctionalManager

Medium High

2

3


Qualitative Approach to Prioritizing Risks

HL HM HH

ML MM MH

LL LM LH

LIKELIHOOD

Low Medium High

IMPACT

High

Medium

Low

See also PMBoK, page 292


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Risk Priority

RiskID



FunctionalManager

Medium High MH

2

3


More Qualitative Risk Analysis

Risk Categorization by

Sources of risk

Affected project area

Project phase

Grouping by common rootcauses can guide to effective

risk responses.

Risk Urgency Assessment

Urgent Risk

Risk that requires upcoming

risk responses.

Can be combined with risk

ranking (impact/probability

matrix)


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Perform Quantitative Risk Analysis

Risk register

Risk managementplan

Cost managementplan

Schedulemanagement plan

OPA

Data gathering andrepresentationtechniques

Quantitative riskanalysis and modelingtechniques

Expert judgment

Risk Registerupdates




Examples for Quantitative Risk Analysis

Data gathering andrepresentation techniques

Interviewing Identifying risk ranges for

low, medium, highprobability distributions

Document rational of risk

ranges Probability Distribution

Continuous distribution

Quantitative risk analysisand modeling techniques

Sensitivity Analysis Which risk has most

potential impact onproject

Expected Monetary

Value Analysis Calculated average

outcome for possiblefuture scenarios

Modeling and Simulation Monte Carlo Simulation


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Decision Tree Example


Quantitative Risk Assessment

RiskID

Description Owner Cost Probability EMV

1 Use of newtechnologycan delay

project

FunctionalManager

$100k 0.5 $50k

2

3


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Process: Plan Risk Responses

Purpose: Develop options and establish actions to

enhance opportunities and reduce threats project

objectives.

Updates of the project plan required due to adding risk

response activities and resources into the scope, schedule,

and cost baselines.

Key Outputs: Updated risk register,

Risk-related contract agreements


Plan Risk Responses

Risk register

Riskmanagementplan

Strategies for negativerisks or threats

Strategies for positiverisks or opportunities

Contingent responsestrategies

Expert judgment

Risk registerupdates

Risk-relatedcontract

decisions Project

managementplan updates

Projectdocumentupdates




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Risk Response Types - Threat

Mitigating Risk

Transferring Risk

Avoiding Risk

Acceptance

Contingency


Risk Response Types - Opportunity

Exploit

Share

Enhance

Acceptance

Contingency


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Risk Response Matrix

FIGURE 7.7

RiskID

Description Owner RiskResponse

Trigger ResponseType


FunctionalManager

Train teammembers innewtechnology

AfterProjectBudget isapproved

Mitigation

2

3


Contingency Funding and Time Buffers

Contingency Reserve

Cover potentially required changes related to the

outcome of identified risks

Management Reserves unforeseen risks/changes

are not part of the project cost baseline

May be included in total budget

Not included for earned value analysis


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Monitor and Control Risks

Risk register

Projectmanagementplan

Workperformanceinformation

Performancereports

Risk reassessment

Risk audits

Variance and trendanalysis

Technicalperformancemeasurement

Reserve analysis

Status meetings

Risk registerupdates

Organizationalprocess assets

Change Requests

Projectmanagementplan updates

Projectdocumentupdates




Key Tools and Techniques

Risk Audits

Examine and document effectiveness of risk responses and

risk management process

Technical Performance Measurement

Compares technical accomplishments to the schedule of

technical achievement.

Requires definition of objective quantifiable measures of

technical performance, e.g.: weight, transaction times,

etc..

compares actual results against targets.


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Key Tools and Techniques

Reserve Analysis

Compare remaining amount of reserve to the remaining

amount of risks

Status Meetings

Project risk management should be an agenda item at

periodic status meetings.

References

Ackermann F, Eden C, Williams T, and Howick S. (2007, January). Systemic risk assessment: a

case study. The Journal of the Operational Research Society, 58(1), 39-52.

Blackwood KB. (2009, April). A data-driven approach to managing operational risk The RMA

Journal, 91(7), 68-73.

Hillson D. (2002). Using the risk breakdown structure (RBS) to understand risks. Proceedinsgs

of the 33rdAnnual PMI Seminars and Symposium.

Kim S, Bejaj D. (2000, January). Risk management in construction: An approach for

contractors in South Korea. Cost Engineering,42(1), 38-44.

Project Management Institute (2004). A Guide to the Project Management Body of

Knowledge (PMBOK Guide). Third ed. Project Management Institute, Philadelphia.