Project Risk Management

Project Risk Management

AgendaWhat is Risk?Risk Management PlanningRisk IdentificationQualitative Risk AnalysisQuantitative Risk AnalysisRisk Response PlanningRisk Monitoring and Control

What is risk?What is Risk?Risk Management PlanningRisk IdentificationQualitative Risk AnalysisRisk Response Planning

Project Risk ManagementRisk Management should be completed ________ the planning phase. Early inA . End ofC: Early inB: Middle D: Any time

Project Risk ManagementProject risk is the uncertainty that an event or condition that effects ________ will be realized.At least on of the project objectives cost, scope time or quality A . Project performance as measured by the functional managersB . Project Impact on the organizationC . Opportunities that project could realizeD . At least on of the project objectives cost, scope time or quality

What is Risk?A risk is any uncertain event or condition that affect the project. It is something that may or may not happen.but if it does, then it will impact the project Not all the risks are negativeSome events (finding an easier way to do an activity) or conditions (lower price for certain material) can help your project. When this happens it is called as an Opportunity

Risk Management PlanningWhat is Risk?Risk Management PlanningRisk IdentificationQualitative Risk AnalysisRisk Response Planning

Risk Management PlanningIf you need water today, you should dig well yesterday Old Chinese proverbWhen the risk planning happens?Plan for the risks from beginning and keep coming back to do more planning through out the project.Organizational Process AssetsEnterprise Environmental FactorsProject Management PlanProject Scope StatementLearnings from similar projectsStandard TemplatesRoles and ResponsibilitiesRisk CategoriesAre the people in the company or risk takers?Do they play it safe?Inputs

Risk Management PlanningDo all your risk planning by meeting with the teamKeep meeting with them throughout the project to stay on top

Risk Management PlanningTools and TechniquesThe plan has parts that are really useful for managing the riskTools and TechniquesBunch of categories that are used to classify the risk. Eg: Technical, External, Organizational, Project ManagementRisk Breakdown structure (RBS) similar to WBS (Work Breakdown Structure)Guidelines to help figuring out how big is risk impactA scale to figure out probability of the risk

Risk Management PlanningTools and TechniquesRisk Breakdown Structure

Risk Management PlanningOutput of Risk Management PlanningMethodology- Defines how risk management will be doneRoles and responsibilities- Defines the risk management team and their responsibilities for risk management activitiesBudgeting- Assigns budget for risk management activitiesTiming- When and how often risk management activities appear in the project scheduleRisk Categories- Defines types and sources of the risksDefinitions- Operational definitions for the project team to use to ensure consistency in the assessment of risks and opportunitiesProbability and impact Matrix- Specifies combinations of impact and probability, which lead to risk ratings such as high, medium and low

Risk Management PlanningOutput of Risk Management PlanningRevised Thresholds- Revised or validated descriptions that trigger taking action; scope, quality, cost, and time thresholds may be different from each otherReporting formats- How to communicate risk activities and their resultsTracking- How to document risk monitoring and management activities

Risk Management PlanningSample definition of impact on Project Objectives

Risk IdentificationWhat is Risk?Risk Management PlanningRisk IdentificationQualitative Risk AnalysisRisk Response Planning

Risk Identification ProcessRisk Identification process out put is Risk RegisterOrganizational Process AssetsEnterprise Environmental FactorsProject Management PlanProject Scope StatementLearnings from similar projectsRisk Management PlanInputsCreate an atmosphere where team members are comfortable bringing up potential risksTeam must be able to identify potential risks without evaluationAll ideas should belong to the team, not individualInclude the right people

Risk Identification ProcessHow to do effective risk identification?Brain Storming- Using the project team and other experts to generate list of risk events. BS sessions always have a facilitator, without her its just a disorderly meetingDelphi Method- Developing consensus through a polling technique in multiple rounds, moderated by a facilitator. Identity of each expert is kept anonymous to get honest feedback.Interviews- Interviewing SMEs (Subject Mater experts) or other experienced in projectsSWOT Analysis- Lets you analyse strengths, weaknesses, opportunities and threats.Root Cause Identification- Analyse each risk and figure out whats actually behind it.Tools and Techniques

Risk Identification ProcessHow to do effective risk identification?Checklist Analysis- Checklists are usually developed based on historical information and previous project team experience. A lowest level of RBS of some other project can be used as checklist.Assumptions Analysis- It is a matter of validating the assumptions that you identified and documented during the course of the projects. Strength of assumption.Consequences if assumption turns out to be false.Diagramming Techniques- Cause and affect diagrams, process flow charts, and influence diagrams Tools and Techniques

Risk Identification ProcessHow to do effective risk identification?MaterialStaffAvailabilityNo TrainingMaterial DefectsHardwareProcessWrong OrderDamagedIncompatibleCauseEffectProblem or Defective StatementCause and effect Diagram

Risk Identification ProcessHow to do effective risk identification?Arranged MarriageLoveMarriageParents are not happyLow acceptance in societyNeed to compromise on many thingsLow EducationHighlyEducatedWill not obey ordersCauseEffectUnhappy personCause and effect DiagramWill not mix with others

Risk Identification ProcessHow to do effective risk identification?AttritionFrequent Scope ChangesDefectsReduction inTesting budgetDelivery timeCustomerSatisfactionRevenueInfluence Diagram

Risk Identification ProcessHow to do effective risk identification?Identify the Trigger on time. Observe what is happening around

Risk Identification ProcessHow to do effective risk identification?What is the difference between Brainstorming and the Delphi method technique?Can you think of a situation where one would be more useful than the other?Brain power

Risk Identification ProcessHow to do effective risk identification?

What technique is used?Your project requires that you setup a campsite on the edge of a cliff. You gather your team members, including a geologist, a meteorologist, a tracker, and three campsite workers, and lead them a direct discussion where they identify as many risks as possible. You meet individually with many different people: the sponsor, stakeholders, team members and experts. You ask each of them detailed questions about what they think could go wrong on the project

Risk Identification ProcessSample risk register

Qualitative Risk AnalysisWhat is Risk?Risk Management PlanningRisk IdentificationQualitative Risk AnalysisRisk Response Planning

Qualitative Risk AnalysisOrganizational Process AssetsProject Scope StatementRisk Management PlanRisk RegisterInputsMake sure that the information in Risk Register is absolutely rightExamine carefully how likely risks are to happen and how bad it will be if they doIf a risk is going to occur early in the project, its a good idea to think of response strategy early too

Qualitative Risk AnalysisOrganizational Process AssetsProject Scope StatementRisk Management PlanRisk RegisterInputsMake sure that the information in Risk Register is absolutely rightExamine carefully how likely risks are to happen and how bad it will be if they doIf a risk is going to occur early in the project, its a good idea to think of response strategy early too

Qualitative Risk AnalysisHow to do Qualitative Risk Analysis?Risk Probability and Impact Assessment- Investigate the likelihood and effect on project objectives for each riskProbability and impact Matrix- A look up table that integrates probability and impact combinations into risk ratings such as high, medium, or low.Risk Data Quality Assessment- Examining the data used to evaluate risks to determine whether it is accurate and reliable, including the distinction between fact and opinionRisk Categorisation- Sources and location of project risksRisk Urgency Assessment- Designation of critical nature of risk for warning signs, severity, and time to implement a responseTools and Techniques

Qualitative Risk AnalysisThe outputs of Qualitative Risk Analysis include the updated risk register with some or all of the followingPriority- Each individual risk is ranked according to significance and increased chance of meeting project objectives (scope, cost, time, or quality) from a risk response.Category- Looking at the cause or location of risks can lead to an understanding of root cause and hence more effective responsesNear-term response- Risks that require an immediate response are grouped so that they can be addressed in a timely fashionAdditional Analysis- Risks that require more analysis and response.Low priority risks for watch lists- Risks that are low priority but that should be watchedTrends in Qualitative Risk Analysis- Trends that require additional analysis that may point the team to a potential problem areaOutput

Risk Response Planning_______ and ________ are assessed for each identified risk in the Qualitative Risk Analysis processProbability and ImpactProbability and ImpactImpact and PriorityProbability and CostPriority and Impact

Qualitative Risk AnalysisExample of Qualitative Risk Analysis

Qualitative Risk AnalysisProbability and Impact analysisProbability: Likely hood that an event will occur Impact: Amount of pain or gain the risk event poses to the project

Qualitative Risk AnalysisProbability and Impact analysis

Qualitative Risk AnalysisInputs to Qualitative Risk Analysis process includeH: A, B, C and DA . Risk RegisterB: project Scope StatementC: Risk Management PlanD: Org process AssetsE: Probability and Impact F: All (A to E)G: A, B, C and EH: A, B, C and D

Qualitative Risk AnalysisWhich one of the following is not an information gathering technique for risk management. Probability and Impact MatrixA . InterviewsC: Probability and Impact Matrix B: Delphi Method D: Root Cause Analysis

Risk Response PlanningWhat is Risk?Risk Management PlanningRisk IdentificationQualitative Risk AnalysisRisk Response Planning

Risk Response PlanningRisk RegisterRisk Management PlanInputsWithout discipline of previous risk management processes, project teams may tempted to run into developing responses, which is not correctUnderstanding of the causes and impact is important before response planningTips

Risk Response PlanningIf your project requires that you stand on the edge of a cliff, then there is a risk that you could fall. If its very windy or the ground is slippery and uneven, then falling is more likely

Risk Response PlanningHow to deal with risk? AvoidThe best thing that you can do is to avoid it. Also called as eliminateThe easiest way to avoid this risk is to walk away from the cliff.but that may not be an option on this project

Eg: Not flying in order to not take the risk that the airplane were to be hijacked.Avoidance most of the times mean loosing the business

Risk Response PlanningHow to deal with risk? MitigateAlso called as reduction. Take some action that will cause little impact to the project. Reduces the probability of risk.Eg: Fire extinguishers kept onsite to reduce the risk in case of fire.

Risk Response PlanningHow to deal with risk? TransferPay someone else to accept it for you. The most common way to outsource or buy insurance

Risk Response PlanningHow to deal with risk? AcceptWhen you accept the risk, at least you have looked at all the alternatives and you know what will happen if it occursLooks like falling is the best option

Risk Response PlanningHow to deal with risk? US Department of Defense calls these categories as ACAT - Avoid, Control, Accept, or Transfer Some of these strategies may involve trade-offs that are not acceptable to the person of organization which makes the decisions difficultTip

Risk Response PlanningDealing with Positive Risk or Opportunities ExploitDirectly exploit the risks with positive impacts to take advantage of an opportunity for improved performance ShareAllocate ownership of the risk to a third party more capable of capturing the positive risk or opportunityEnhanceIdentify and maximize key drivers for opportunities, thereby strengthening the impact or increasing the positive risk event

Risk Response PlanningDealing with threats and opportunitiesContingency planning involves, planning alternatives, to deal with risk if it occurs.Contingency comes into play only when the risk event occurs.Contingency reserves is a common contingency response. Contingency reserves include project funds that are held to offset any un avoidable threats that may occur for project scope, schedule, cost or qualityPassive AcceptanceDo nothing. Used when there is no possibility of elimination or when the costs are prohibitive Contingency PlanningActive Acceptance

Risk Response PlanningRisk Response Strategies

Risk Response PlanningName the strategies for negative risks?Avoid, Mitigate, Transfer, Contingency, AcceptAvoid, Mitigate, Transfer, Contingency, AcceptAvoid, Mitigate, TransferAvoid, Mitigate, Transfer, AcceptNone of the above

Risk Response PlanningUpdated Risk Register

Risk Response PlanningRisk register is updated periodically throughout the project life cycle. The risk register is initiated during the ______________ and further updated based on the information developed in the ____________________Risk Identification, Qualitative Risk AnalysisRisk Management Planning, Qualitative Risk AnalysisRisk Identification, Risk Management PlanningRisk Identification, Qualitative Risk AnalysisRisk Management Planning and Risk Identification

Risk Response PlanningMitigation as a response strategy will always add time and/or money to the project. True or False?False

Risk Response PlanningRisks may have one or more causes and one or more impacts. True or False?True

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