Project Management
8. Project Risk Management
Risk is an uncertain event or condition that if it occurs has a positive or negative effect on one or more of a project’s objectives and is classified as an opportunity or a threat.
Project Risk management includes the process of conducting risk management planning, identification, analysis, response planning, response implementation, and monitoring risk.
Positive Risk - Opportunities
· Enhanced
· Shared
· Exploit
· Accept
Negative Risk -- Threat
· Avoid - eliminate risk
· Transfer - shift to 3rd party
· Mitigate - reduce occurrence
· Accept - no action taken
Terms Used
· Positive risk--- opportunity
· Negative risk -- threat
· Pure risk --negative risk
· Business risk --- can be positive or negative
· Risk Averse - one who does not take risk
· Risk tolerance – level of risk that can be tolerated
· Risk threshold -- amount of risk that is acceptable
Risk
1.) Must be prioritized and measured when limited resources are available to manage them.
2.) Risk are measure by assigning a monetary value to each of the risk
3.) Risk is calculated by multiplying the probability and impact of risk
a. Formula
i. Risk expense = risk probability X risk impact
1. Quantification of risk
a. Expected Monetary Value (EMV)
b. Definition of impact scale
i. Risk probability and impact levels are specific to the project context and reflect the risk threshold of the organization
4.) Risk categorization
a. External risk – arise from external sources like government agency
b. Internal Risk -Within project complexity of project
i, Technical risk
1. arise out of technology used
ii. Project Management risk
1. Arise out of project management activity
5.) Risk Classification
a. Scope
b. Resources
c. Schedule
d. Cost
e. Quality
6.) Tools
a. Decision Tree
i. Is used to analyze risk and it impact on decisions in the face of uncertainties
7.) Risk Reserves
a. Contingency Reserves
b. Management Reserves – not part of baseline based on unknown uncertainties.
8.) Key Objectives of risk management
a. Increase the probability and impact of positive risk
b. Decrease the probability and impact of negative risk
A. Plan Risk Management
Plan Risk Management is the process of defining how to conduct risk management activities. The key benefits of the process is to ensure that the degree, type, and visibility of risk management are proportionate to both risk and the importance of the project to the organization and other stakeholders.
It requires the involvement of the project sponsor, customers, and other key stakeholders along with the project manager.
It is the key project management activity and thus requires proper planning.
a. Input
i. Project Charter
ii. Project Management Plan
iii. Project Documents
a. Stakeholder register
b. Risk threshold
c. Risk templates
iv. Enterprise Environmental Factors
v. Organizational Process Assets
b. Tools
i. Expert Judgement
ii. Data Analysis
iii. Meetings
c. Output
i. Risk Management Plan
ii. Methodologies
B. Identify Risk
a. Input
i. Project Charter
ii. Project Management Plan
iii. Project Documents
a. Agreements
b. Procurement Documents
iv. Enterprise Environmental Factors
v. Organizational Process Assets
b. Tools
i. Expert Judgement
ii. Data Gathering
iii. Data Analysis
iv. Meetings
v. Strength Weakness Opportunity Threats
vi. SWOT Analysis
vii. Inter-personal Skills
viii. Prompt List
a. Pestal
b. Vouga
c. Output
i. Risk Register
ii. Risk Report
iii. Project Documents Updates
C. Perform Qualitative Risk Analysis
Perform qualitative risk analysis is the process of prioritizing individual project risk for further analysis or action by assessing their probability or occurrence and impact as well as other characteristics,
Probability & Impact Matrix - tabulates the probability and impact scales for the opportunities and threats on the project.
Once the probability and impact matrix is filled a threshold can be defined beyond which a risk becomes a candidate for active management.
a. Input
i. Project Charter
ii. Project Management Plan
iii. Project Documents
a. Stakeholder register
b. Risk threshold
c. Risk templates
iv. Enterprise Environmental Factors
v. Organizational Process Assets
b. Tools
i. Expert Judgement
ii. Data Analysis
iii. Probability & Impact matrix
iv. Risk Cauterization
v. Data Representation
vi. Inter-personal Skills
vii. Meetings
c. Output
i. Project Document Updates
D. Perform Quantitative Risk Analysis
Perform quantitative risk analysis is the process of numerically analyzing the combined effect of individual risk and other sources of uncertainty on the overall project objectives. And is performed on the highest risk on the project.
a. Input
i. Project Charter
ii. Project Management Plan
iii. Project Documents
a. Stakeholder register
b. Risk threshold
c. Risk templates
iv. Enterprise Environmental Factors
v. Organizational Process Assets
b. Tools
i. Expert Judgement
ii. Data Analysis
iii. Mote Carlo analysis
iv. Decision Tree
v. Data Representation of risk
vi. Inter-personal Skills
vii. Meetings
c. Output
i. Project Document Updates
E. Plan Risk Responses
a. Input
i. Project Charter
ii. Project Management Plan
iii. Project Documents
a. Stakeholder register
b. Risk threshold
c. Risk templates
iv. Enterprise Environmental Factors
v. Organizational Process Assets
b. Tools
i. Expert Judgement
ii. Data Analysis
iii. Strategies for overall project risk
iv. Strategies for opportunities
v. Inter-personal skills
vi. Data Representation
vii. Decision Making
viii. Meetings
c. Output
i. Change Request
ii. Project Management Plan Updates
iii. Project documents Updates
F. Implement Risk Responses
Implement risk responses is the process of implementing agreed-upon risk response plans. The key benefit of this process is it ensures that agreed-upon risk responses are executed as planned in order to address overall project risk exposure, minimize individual project threats, and maximize overall project opportunities.
a. Input
i. Project Charter
ii. Project Management Plan
iii. Project Documents
a. Risk Management Plan
b. Work Performance Data
c. Work Performance Reports
iv. Enterprise Environmental Factors
v. Organizational Process Assets
b. Tools
i. Expert Judgement
ii. Project Management Information System
c. Output
i. Change Request
ii. Project Document Updates
G. Monitor Risk
Monitor Risk is the process of monitoring the implementation of agreed-upon risk plans, tracking, identified risk, and analyzing new risk, and evaluating risk response effectiveness.
a. Input
i. Project Charter
ii. Project Management Plan
iii. Project Documents
a. Risk Register
b. Work Performance Data
c. Work Performance Reports
iv. Enterprise Environmental Factors
v. Organizational Process Assets
b. Tools
i. Risk Audits
ii. Risk Assessment
iii. Reserve Analysis
iv. Variance and Trend Analysis
v. Technical Performance
c. Output
i. Work Performance
ii. Change Request
iii. Project Management Updates
iv. Project Document Updates
v. Organizational Process Assets Updates
