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Project Risk Management

This document provides an overview of project risk management. It defines risk and discusses key concepts like risk appetite, tolerance, and threshold. It also categorizes examples of risks as external, internal, technical, and management-related. The chapter outlines the process for planning risk management, including inputs like the project management plan, charter, and stakeholder register. Tools and techniques for planning risk management include analytical methods and expert judgment. The main output is a risk management plan that defines the methodology, roles, budget, risk categories, and risk matrix to be used to manage project risks.

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Chapter  9:     Project  Risk  Management   Stevbros  Training  &  Consultancy   www.stevbros.edu.vn   Copyright@STEVBROS   Project  Mamagement  Fundamentals   1   PMI,  PMP  and  PMBOK  are  registered  marks  of  the  Project  Management  Ins9tute,  Inc.  
Overview       Ini%a%ng   process   group   Planning  process  group   Execu%ng   process   group   Monitoring  &   controlling   process   group   Closing   process   group   Project  risk   management       •  Plan  Risk   Management   •  IdenJfy  Risks   •  Perform  QualitaJve   Risk  Analysis   •  Perform  QuanJtaJve   Risk  Analysis   •  Plan  Risk  Responses       •  Control   Risks       Copyright@STEVBROS   Project  Mamagement  Fundamentals   2  
What  is  Risk?   •  Risk  is  an  uncertain  event  or  condiJon  that,  if  it   occurs,  has  a  posiJve  or  negaJve  effect  on  a   project’s  objecJves   •  Example  of  posiJve  events   –  You  ordered  new  soVware  which  is  cheaper  than  your   old  soVware  because  of  budget  constraints.  However,   the  new  soVware  turns  out  to  be  more  efficient.   •  Example  of  negaJve  events   –  The  government  mandates  a  compulsory  holiday  due   to  an  outbreak  of  swine  flu.  The  project  gets  delayed   Copyright@STEVBROS   STEVBROS  -­‐  Global  PMI  R.E.P   3  
Concepts   •  Risk  appe9te,  which  is  the  degree  of  uncertainty  an   enJty  is  willing  to  take  on,  in  anJcipaJon  of  a  reward.   •  Risk  averse,  one  who  does  not  take  risks.   •   Risk  tolerance,  which  is  the  degree,  amount,  or   volume  of  risk  that  an  organizaJon  or  individual  will   withstand.     •  Risk  threshold,  which  refers  to  measures  along  the   level  of  uncertainty  or  the  level  of  impact  at  which  a   stakeholder  may  have  a  specific  interest.  Below  that   risk  threshold,  the  organizaJon  will  accept  the  risk.   Above  that  risk  threshold,  the  organizaJon  will  not   tolerate  the  risk.     Copyright@STEVBROS   STEVBROS  -­‐  Global  PMI  R.E.P   4  
Risk  categorizaJon    examples   •  Example  1:     –  External:  regulatory,  governmental,  subcontractors,  suppliers,  and   environmental     –  Internal:  funding,  resource,  and  prioriJzaJon   –  Technical:  requirements,  technology,  and  quality   –  Project  Management:  esJmaJng,  planning,  schedule,  and  communicaJon   •  Example  2:   –  Schedule  risk:?   –  Cost  Risk?   –  Quality  Risk?   –  Scope  Risk:  Looks  like  you  have  not  understood  the  work  properly  and  you   might  have  to  redo  the  whole  thing!     –  Resource  Risk:  CEO  has  asked  the  technical  architect  to  work  on  another   project.  In  such  cases,  who  would  make  design  decisions  on  the  projects?   Copyright@STEVBROS   STEVBROS  -­‐  Global  PMI  R.E.P   5  
Plan  risk     management   •  The   process   of   defining   how   to   conduct   risk   management   acJviJes   for   a   project.   The   key   benefit   of   this   process   is   it   ensures   that   the   degree,   type,   and   visibility   of   risk   management  are  commensurate  with  both  the  risks  and  the   importance  of  the  project  to  the  organizaJon.   Copyright@STEVBROS   Project  Mamagement  Fundamentals   6   A  Guide  to  the  Project  Management  Body  of  Knowledge,  FiEh  Edi9on  (PMBOK®  Guide)  ©2013  Project  Management   Ins9tute,  Inc.    All  Rights  Reserved.    Figure  11-­‐2  Page  313.  
Inputs   1.  Project  Management  Plan     –  all   approved   subsidiary   management   plans   and   baselines   should   be   taken  into  consideraJon  in  order  to  make  the  risk  management  plan   consistent  with  them   2.  Project  Charter     –  can  provide  various  inputs  such  as  high-­‐level  risks,  high-­‐level  project   descripJons,  and  high-­‐level  requirements.     3.  Stakeholder  Register     4.  Enterprise  Environmental  Factors     –  contain   risk   aetudes,   thresholds,   and   tolerances   that   describe   the   degree  of  risk  that  an  organizaJon  will  withstand.     5.  OrganizaJonal  Process  Assets     –  contain   risk   categories,   common   definiJons   of   concepts   and   terms,   risk  statement  formats,  standard  templates,  roles  and  responsibiliJes,   authority  levels  for  decision  making,  and  lessons  learned.       Copyright@STEVBROS   Project  Mamagement  Fundamentals   7  
Tools  and   techniques   1.  AnalyJcal  Techniques   – for   example,   a   stakeholder   risk   profile   analysis   may   be   performed   to   grade   and   qualify   the   project   stakeholder   risk   appeJte   and   tolerance.   Other  techniques,  such  as  the  use  of  strategic  risk   scoring   sheets,   are   used   to   provide   a   high-­‐level   assessment   of   the   risk   exposure   of   the   project   based  on  the  overall  project  context.     2.  Expert  Judgment   3.  MeeJngs     Copyright@STEVBROS   Project  Mamagement  Fundamentals   8  
Outputs   1.  Risk  Management  Plan     –  Methodology:   approaches,   tools,   and   data   sources   that   will   be   used  to  perform  risk  management  on  the  project.     –  Roles  and  responsibiliJes   –  BudgeJng   –  Timing   –  Risk  categories   –  DefiniJons  of  risk  probability  and  impact   –  Probability  and  impact  matrix  (details  at  next  slide).     –  Revised  stakeholders’  tolerances.   –  ReporJng  formats   –  Tracking:  documents  how  risk  acJviJes  will  be  recorded  for  the   benefit   of   the   current   project   and   how   risk   management   processes  will  be  audited.   Copyright@STEVBROS   Project  Mamagement  Fundamentals   9  
Probability  &   impact  matrix   •  Risk  Probability:  High:  50  percent  or  higher  (likely);  Medium:  Between  10   and  50  percent  (unlikely);  Low:  10  percent  or  lower  (very  unlikely).   •  Risk  Impact:   Copyright@STEVBROS   Project  Mamagement  Fundamentals   10   A  Guide  to  the   Project   Management   Body  of   Knowledge,  FiEh   Edi9on  (PMBOK®   Guide)  ©2013   Project   Management   Ins9tute,  Inc.       All  Rights   Reserved.    Table   11-­‐1  Page  318.  
IdenJfy  risks   •  The   process   of   determining   which   risks   may   affect   the   project   and   documenJng  their  characterisJcs.  The  key  benefit  of  this  process  is  the   documentaJon  of  exisJng  risks  and  the  knowledge  and  ability  it  provides   to  the  project  team  to  anJcipate  events.   Copyright@STEVBROS   Project  Mamagement  Fundamentals   11   A  Guide  to  the  Project  Management  Body  of  Knowledge,  FiEh  Edi9on  (PMBOK®  Guide)  ©2013  Project  Management   Ins9tute,  Inc.    All  Rights  Reserved.    Figure  11-­‐5  Page  319.  
Inputs(1/3)   1.  Risk  Management  Plan   –  are  the  assignments  of  roles  and  responsibiliJes,  provision  for  risk   management  acJviJes  in  the  budget  and  schedule,  and  categories   of   risk,   which   are   someJmes   expressed   as   a   risk   breakdown   structure     2.  Cost  Management  Plan   –  provides  processes  and  controls  that  can  be  used  to  help  idenJfy   risks  across  the  project.   3.  Schedule  Management  Plan   –  provides   insight   to   project   Jme/schedule   objecJves   and   expectaJons   which   may   be   impacted   by   risks   (known   and   unknown).   4.  Quality  Management  Plan   –  provides   a   baseline   of   quality   measures   and   metrics   for   use   in   idenJfying  risks.   Copyright@STEVBROS   Project  Mamagement  Fundamentals   12  
Inputs(2/3)   5.  Human  Resource  Management  Plan     –  provides   guidance   on   how   project   human   resources   should   be   defined,  staffed,  managed,  and  eventually  released.   6.   Scope  Baseline     –  uncertainty   in   project   assumpJons   should   be   evaluated   as   potenJal  causes  of  project  risk.   –  the   WBS   is   a   criJcal   input   to   idenJfying   risks   as   it   facilitates   an   understanding  of  the  potenJal  risks  at  both  the  micro  and  macro   levels.   Risks   can   be   idenJfied   and   subsequently   tracked   at   summary,  control  account,  and/or  work  package  levels.     7.  AcJvity  Cost  EsJmates     –  acJvity  cost  esJmate  reviews  are  useful  in  idenJfying  risks     8.  AcJvity  DuraJon  EsJmates     –  acJvity  duraJon  esJmate  reviews  are  useful  in  idenJfying  risks     Copyright@STEVBROS   Project  Mamagement  Fundamentals   13  
Inputs(3/3)   9.  Stakeholder  Register     –  ensure   that   key   stakeholders,   especially   the   stakeholder,   sponsor,   and   customer   are   interviewed   or   otherwise   parJcipate   during   the   IdenJfy   Risks   process   10.  Project  Documents     –  include   project   charter,   project   schedule,   schedule   network   diagrams,   issue   log,   quality   checklist,   and   other   informaJon   proven   to   be   valuable   in   idenJfying  risks.     11.  Procurement  Documents     –  the  complexity  and  the  level  of  detail  of  the  procurement  documents  should  be   consistent  with  the  value  of,  and  risks  associated  with,  planned  procurement.   12.  Enterprise  Environmental  Factors   –  include   published   informaJon,   including   commercial   databases,   academic   studies,   published   checklists,   benchmarking,   industry   studies,   and   risk   aetudes.   13.  OrganizaJonal  Process  Assets     –  include  project  files,  including  actual  data,  organizaJonal  and  project  process   controls,  risk  statement  formats  or  templates,  and  lessons  learned.     Copyright@STEVBROS   Project  Mamagement  Fundamentals   14  
Tools  and   techniques(1/2)   1.  DocumentaJon  Reviews     –  The  quality  of  the  plans,  as  well  as  consistency  between  those  plans  and   the  project  requirements  and  assumpJons,  may  be  indicators  of  risk  in  the   project.     2.  InformaJon  Gathering  Techniques     –  Include  brainstorming,  Delphi  technique,  Interviewing,  Root  cause  analysis.     3.  Checklist  Analysis     –  are   developed   based   on   historical   informaJon   and   knowledge   that   has   been  accumulated  from  previous  similar  projects  and  from  other  sources   of   informaJon.   The   lowest   level   of   the   RBS   can   also   be   used   as   a   risk   checklist.   4.  AssumpJons  Analysis   –  Every  project  and  its  plan  is  conceived  and  developed  based  on  a  set  of   hypotheses,  scenarios,  or  assumpJons.  AssumpJons  analysis  explores  the   validity  of  assumpJons  as  they  apply  to  the  project.  It  idenJfies  risks  to  the   project   from   inaccuracy,   instability,   inconsistency,   or   incompleteness   of   assumpJons.   Copyright@STEVBROS   Project  Mamagement  Fundamentals   15  
Tools  and   techniques(2/2)   5.  Diagramming  Techniques   –  Include  Cause  and  effect  diagrams,  System  or  process   flow  charts,  Influence  diagrams.  (details  at  next  slides)   6.  SWOT  Analysis     –  examines   the   project   from   each   of   the   strengths,   weaknesses,  opportuniJes,  and  threats  (SWOT)     perspecJves  to  increase  the  breadth  of  idenJfied  risks   by  including  internally  generated  risks   7.  Expert  Judgment     –  Risks   may   be   idenJfied   directly   by   experts   with   relevant  experience  with  similar  projects  or  business   areas.     Copyright@STEVBROS   Project  Mamagement  Fundamentals   16  
Root-­‐cause   analysis   Copyright@STEVBROS   Project  Mamagement  Fundamentals   17  
Influence   diagram   Copyright@STEVBROS   Project  Mamagement  Fundamentals   18  
Outputs   1.  Risk  Register   – List  of  idenJfied  risks:       •  A   structure   for   describing   risks   using   risk   statements   may  be  applied,  for  example,  EVENT  may  occur  causing   IMPACT,  or  If  CAUSE  exists,  EVENT  may  occur  leading  to   EFFECT.     •  In  addiJon  to  the  list  of  idenJfied  risks,  the  root  causes   of  those  risks  may  become  more  evident.   – List  of  potenJal  responses   Copyright@STEVBROS   Project  Mamagement  Fundamentals   19  
Perform  qualitaJve   risk  analysis   •  The  process  of  prioriJzing  risks  for  further  analysis  or  acJon  by  assessing   and  combining  their  probability  of  occurrence  and  impact.  The  key  benefit   of  this  process  is  that  it  enables  project  managers  to  reduce  the  level  of   uncertainty  and  to  focus  on  high-­‐priority  risks.   Copyright@STEVBROS   Project  Mamagement  Fundamentals   20   A  Guide  to  the  Project  Management  Body  of  Knowledge,  FiEh  Edi9on  (PMBOK®  Guide)  ©2013  Project  Management   Ins9tute,  Inc.    All  Rights  Reserved.    Figure  11-­‐8  Page  328.  
Inputs   1.  Risk  Management  Plan   –  Analysis   process   include   roles   and   responsibiliJes   for   conducJng   risk   management,   budgets,   schedule   acJviJes   for   risk   management,   risk   categories,   definiJons   of   probability   and   impact,   the   probability   and   impact  matrix,  and  revised  stakeholders’  risk  tolerances   2.  Scope  Baseline   –  E.g.   Projects   of   a   common   or   recurrent   type   tend   to   have   more   well-­‐ understood   risks.   Projects   using   state-­‐of-­‐the-­‐art   or   first-­‐of-­‐its-­‐kind   technology,  and  highly  complex  projects,  tend  to  have  more  uncertainty.   3.  Risk  Register     –  contains  the  informaJon  that  will  be  used  to  assess  and  prioriJze  risks.     4.  Enterprise  Environmental  Factors     –  include   industry   studies   of   similar   projects   by   risk   specialists,   and   risk   databases  that  may  be  available  from  industry  or  proprietary  sources.     5.  OrganizaJonal  Process  Assets     –  include  informaJon  on  prior,  similar  completed  projects   Copyright@STEVBROS   Project  Mamagement  Fundamentals   21  
Tools  and   techniques   1.  Risk  Probability  and  Impact  Assessment  (next  slides)   2.  Probability  and  Impact  Matrix  (next  slides)   3.  Risk  Data  Quality  Assessment     –  assessment  is  a  technique  to  evaluate  the  degree  to  which  the  data  about  risks  is   useful  for  risk  management.  It  involves  examining  the  degree  to  which  the  risk  is   understood  and  the  accuracy,  quality,  reliability,  and  integrity  of  the  data  about   the  risk.   4.  Risk  CategorizaJon     –  risks  to  the  project  can  be  categorized  by  sources  of  risk  (e.g.,  using  the  RBS),  the   area  of  the  project  affected  (e.g.,  using  the  WBS),  or  other  useful  categories  (e.g.,   project  phase)  to  determine  the  areas  of  the  project  most  exposed  to  the  effects   of  uncertainty.  Risks  can  also  be  categorized  by  common  root  causes.     5.  Risk  Urgency  Assessment     –  risks  requiring  near-­‐term  responses  may  be  considered  more  urgent  to  address.   Indicators  of  priority  may  include  probability  of  detecJng  the  risk,  Jme  to  affect  a   risk  response,  symptoms  and  warning  signs,  and  the  risk  raJng.   6.  Expert  Judgment     Copyright@STEVBROS   Project  Mamagement  Fundamentals   22  
Probability  &   impact  matrix   •  Risk  Probability:  High:  50  percent  or  higher  (likely);  Medium:  Between  10   and  50  percent  (unlikely);  Low:  10  percent  or  lower  (very  unlikely).   •  Risk  Impact:   Copyright@STEVBROS   Project  Mamagement  Fundamentals   23   A  Guide  to  the   Project   Management   Body  of   Knowledge,  FiEh   Edi9on  (PMBOK®   Guide)  ©2013   Project   Management   Ins9tute,  Inc.    All   Rights  Reserved.     Table  11-­‐1  Page   318.  
Probability  &   impact  matrix   Copyright@STEVBROS   Project  Mamagement  Fundamentals   24   A  Guide  to  the  Project  Management  Body  of  Knowledge,  FiEh  Edi9on  (PMBOK®  Guide)  ©2013  Project  Management   Ins9tute,  Inc.    All  Rights  Reserved.    Figure  11-­‐10  Page  331.  
Outputs   1.  Project  Documents  Updates     –  Risk  register  updates.     •  As   new   informaJon   becomes   available   through   the   qualitaJve  risk  assessment,  the  risk  register  is  updated.     •  Updates   to   the   risk   register   may   include   assessments   of   probability  and  impacts  for  each  risk,  risk  ranking  or  scores,   risk  urgency  informaJon  or  risk  categorizaJon,  and  a  watch   list  for  low  probability  risks  or  risks  requiring  further  analysis.     –  AssumpJons  log  updates.     •  As   new   informaJon   becomes   available   through   the   qualitaJve  risk  assessment,  assumpJons  could  change.     •  The  assumpJons  log  needs  to  be  revisited  to  accommodate   this  new  informaJon.  AssumpJons  may  be  incorporated  into   the  project  scope  statement  or  in  a  separate  assumpJons  log.     Copyright@STEVBROS   Project  Mamagement  Fundamentals   25  
Perform  quanJtaJve   risk  analysis   •  The   process   of   numerically   analyzing   the   effect   of   idenJfied   risks   on   overall   project   objecJves.   The   key   benefit   of   this   process   is   that   it   produces  quanJtaJve  risk  informaJon  to  support  decision  making  in  order   to  reduce  project  uncertainty.  This  process  isn’t  applied  for  projects  with   low  complexity,  low  dollar  value.   Copyright@STEVBROS   Project  Mamagement  Fundamentals   26   A  Guide  to  the  Project  Management  Body  of  Knowledge,  FiEh  Edi9on  (PMBOK®  Guide)  ©2013  Project  Management   Ins9tute,  Inc.    All  Rights  Reserved.    Figure  11-­‐11  Page  334.  
Inputs   1.  Risk  Management  Plan   –  provides   guidelines,   methods,   and   tools   to   be   used   in   quanJtaJve   risk   analysis.     2.  Cost  Management  Plan   –  provides  guidelines  on  establishing  and  managing  risk  reserves.     3.  Schedule  Management  Plan   –  plan  provides  guidelines  on  establishing  and  managing  risk  reserves.     4.  Risk  Register     –  register  is  used  as  a  reference  point  for  performing  quanJtaJve  risk     analysis.     5.  Enterprise  Environmental  Factors     –  include   industry   studies   of   similar   projects   by   risk   specialists,   and   risk   databases  that  may  be  available  from  industry  or  proprietary  sources.     6.  OrganizaJonal  Process  Assets     –  include  informaJon  from  prior,  similar  completed  projects.     Copyright@STEVBROS   Project  Mamagement  Fundamentals   27  
Tools  and   techniques   1.  Data  Gathering  and  RepresentaJon  Techniques     –  Such  as  interviewing,  probability  distribuJons  (PERT)   2.  QuanJtaJve  Risk  Analysis  and  Modeling  Techniques     –  Such   as   sensiJvity   analysis,   expected   monetary   value   analysis,  modeling  and  simulaJon  (next  slides)   3.  Expert  Judgment     –  Expert  judgment  also  comes  into  play  in  the  interpretaJon   of   the   data.   Experts   should   be   able   to   idenJfy   the   weaknesses  of  the  tools  as  well  as  their  strengths.  Experts   may   determine   when   a   specific   tool   may   or   may   not   be   more   appropriate   given   the   organizaJon’s   capabiliJes   and   culture.      Copyright@STEVBROS   Project  Mamagement  Fundamentals   28  
Decision  Tree  and  EMV   •  EVM used with Decision Tree to choose between many alternative which take into account the future events •  Example: [ ]∑ ×= (Impact)ty)(ProbabiliEVM Example  Source:   Copyright@STEVBROS   Project  Mamagement  Fundamentals   29  
SensiJvity  Analysis   •  To determine which risks have the most potential impact to the project •  Changing one or more elements/variables and set other elements to its baseline then see the impact. •  One typical display of sensitivity analysis is the tornado diagram Copyright@STEVBROS   Project  Mamagement  Fundamentals   30  
Modeling  and    simulaJon   A   Guide   to   the   Project   Management   B o d y   o f   Knowledge,     FiEh   Edi9on   ( P M B O K ®   G u i d e )   © 2 0 1 3   P r o j e c t   Management   Ins9tute,   Inc.     A l l   R i g h t s   Reserved.     Figure   11-­‐17   Page  340.   Copyright@STEVBROS   Project  Mamagement  Fundamentals   31  
Outputs   1.  Project  Documents  Updates     –  ProbabilisJc   analysis   of   the   project:   EsJmates   are   made  of  potenJal  project  schedule  and  cost  outcomes   lisJng   the   possible   compleJon   dates   and   costs   with   their  associated  confidence  levels.   –  Probability  of  achieving  cost  and  Jme  objecJves:  For   instance,  in  Figure  11-­‐17,  the  likelihood  of  achieving   the  cost  esJmate  of  US$41  million  is  about  12%   –  PrioriJzed  list  of  quanJfied  risks   –  Trends   in   quanJtaJve   risk   analysis   results:   As   the   analysis   is   repeated,   a   trend   may   become   apparent   that  leads  to  conclusions  affecJng  risk  responses   Copyright@STEVBROS   Project  Mamagement  Fundamentals   32  
Plan  risk  response   •  The   process   of   developing   opJons   and   acJons   to   enhance   opportuniJes  and  to  reduce  threats  to  project  objecJves.  The   key   benefit   of   this   process   is   that   it   addresses   the   risks   by   their   priority,   inserJng   resources   and   acJviJes   into   the   budget,  schedule  and  project  management  plan  as  needed.   Copyright@STEVBROS   Project  Mamagement  Fundamentals   33   A  Guide  to  the  Project  Management  Body  of  Knowledge,  FiEh  Edi9on  (PMBOK®  Guide)  ©2013  Project  Management   Ins9tute,  Inc.    All  Rights  Reserved.    Figure  11-­‐18  Page  342.  
Inputs   1.  Risk  Management  Plan   –  include  roles  and  responsibiliJes,  risk  analysis  definiJons,   Jming  for  reviews  (and  for  eliminaJng  risks  from  review),   and  risk  thresholds  for  low,  moderate,  and  high  risks.  Risk   thresholds   help   idenJfy   those   risks   for   which   specific   responses  are  needed.   2.  Risk  Register   –  refers   to   idenJfied   risks,   root   causes   of   risks,   lists   of   potenJal  responses,  risk  owners,  symptoms  and  warning   signs,   the   relaJve   raJng   or   priority   list   of   project   risks,   risks   requiring   responses   in   the   near   term,   risks   for   addiJonal   analysis   and   response,   trends   in   qualitaJve   analysis  results,  and  a  watch  list,  which  is  a  list  of  low-­‐   priority  risks  within  the  risk  register.   Copyright@STEVBROS   Project  Mamagement  Fundamentals   34  
Tools  and   techniques  (1/3)   1.  Strategies  for  NegaJve  Risk  or  Threats:   –  Avoid:   Eliminate   the   threat   enJrely,   isolate   project   objecJves  from  the  risk’s  impact.   –  Transfer  (Deflect,  Allocate):  shiV  some  or  all  the  negaJve   impact  of  a  threat  to  a  third  party   –  MiJgate:   implies   a   reducJon   in   the   probability   and/or   impact   of   an   adverse   risk   event   to   be   within   acceptable   threshold  limits   –  Accept:   deal   with   the   risks,   project   management   plan   is   not  changed   Copyright@STEVBROS   Project  Mamagement  Fundamentals   35  
Tools  and   techniques  (2/3)   2.  Strategies  for  PosiJve  Risks  or  OpportuniJes:   – Exploit:  seek  to  ensure  the  opportuniJes  definitely   happen   – Share:  allocate  some  or  all  of  the  ownership  of  the   opportunity   to   a   third   party   who   is   best   able   to   capture  the  opportunity  for  the  project  benefit.   – Enhance:   increase   the   probability   and/or   the   posiJve  impacts  of  an  opportunity.   – Accept:  not  acJvely  pursuing  an  opportunity   Copyright@STEVBROS   Project  Mamagement  Fundamentals   36  
Tools  and   techniques(3/3)   3.  ConJngent  Response  Strategies   –  contain  events  that  trigger  the  conJngency  response,  such   as   missing   intermediate   milestones   or   gaining   higher   priority   with   a   supplier,   should   be   defined   and   tracked.   Risk   responses   idenJfied   using   this   technique   are   oVen   called   conJngency   plans   or   fallback   plans   and   include   idenJfied  triggering  events  that  set  the  plans  in  effect.     4.  Expert  Judgment     –  is   input   from   knowledgeable   parJes   pertaining   to   the   acJons  to  be  taken  on  a  specific  and  defined  risk.  ExperJse   may  be  provided  by  any  group  or  person  with  specialized   educaJon,   knowledge,   skill,   experience,   or   training   in   establishing  risk  responses.     Copyright@STEVBROS   Project  Mamagement  Fundamentals   37  
Outputs(1/2)   •  Project  Management  Plan  Updates     Include   schedule   management   plan,   cost   management   plan,   quality   management   plan,   procurement   management   plan,   human   resource   management   plan,   scope   baseline,   schedule  baseline,  cost  baseline.   Copyright@STEVBROS   Project  Mamagement  Fundamentals   38  
Outputs  (2/2)   •  Project  Documents  Updates     –  Update  to  risk  register   •  Risk  owners  and  assigned  responsibiliJes;     •  Agreed-­‐upon  response  strategies;     •  Specific  acJons  to  implement  the  chosen  response  strategy;     •  Trigger  condiJons,  symptoms,  and  warning  signs  of  a  risk  occurrence;     •  Budget  and  schedule  acJviJes  required  to  implement  the  chosen  responses;     •  ConJngency  plans  and  triggers  that  call  for  their  execuJon;     •  Fallback   plans   for   use   as   a   reacJon   to   a   risk   that   has   occurred   and   the   primary   response  proves  to  be  inadequate;     •  Residual   risks   that   are   expected   to   remain   aVer   planned   responses   have   been   taken,  as  well  as  those  that  have  been  deliberately  accepted;     •  Secondary  risks  that  arise  as  a  direct  outcome  of  implemenJng  a  risk  response;  and     •  ConJngency  reserves  that  are  calculated  based  on  the  quanJtaJve  risk  analysis  of   the  project  and  the  organizaJon’s  risk  thresholds.     –  Other   updates:   assumpJons   log   updates,   technical   documentaJon   updates,  change  requests   Copyright@STEVBROS   Project  Mamagement  Fundamentals   39  
Control  risks   •  The  process  of  implemenJng  risk  response  plans,  tracking  idenJfied  risks,   monitoring  residual  risks,  idenJfying  new  risks,  and  evaluaJng  risk  process   effecJveness   throughout   the   project.   The   key   benefit   of   this   process   is   that  it  improves  efficiency  of  the  risk  approach  throughout  the  project  life   cycle  to  conJnuously  opJmize  risk  responses.     Copyright@STEVBROS   Project  Mamagement  Fundamentals   40   A  Guide  to  the  Project  Management  Body  of  Knowledge,  FiEh  Edi9on  (PMBOK®  Guide)  ©2013  Project  Management   Ins9tute,  Inc.    All  Rights  Reserved.    Figure  10-­‐20  Page  349.  
Inputs   1.  Project  Management  Plan     –  includes  the  risk  management  plan,  provides  guidance  for  risk  monitoring   and  controlling.     2.  Risk  Register     –  has  key  inputs  that  include  idenJfied  risks  and  risk  owners,  agreed-­‐upon   risk  responses,  control  acJons  for  assessing  the  effecJveness  of  response   plans,   risk   responses,   specific   implementaJon   acJons,   symptoms   and   warning  signs  of  risk,  residual  and  secondary  risks,  a  watch  list  of  low-­‐ priority  risks,  and  the  Jme  and  cost  conJngency  reserves   3.  Work  Performance  Data     –  deliverable  status,  schedule  progress,  and  costs  incurred   4.  Work  Performance  Reports     –  take   informaJon   from   performance   measurements   and   analyze   it   to   provide   project   work   performance   informaJon   including   variance   analysis,  earned  value  data,  and  forecasJng  data.  These  data  points  could   be  impacsul  in  controlling  performance  related  risks.   Copyright@STEVBROS   Project  Mamagement  Fundamentals   41  
Tools  and   techniques   1.  Risk  Reassessment   –  oVen   results   in   idenJficaJon   of   new   risks,   reassessment   of   current   risks,   and   the   closing  of  risks  that  are  outdated.  Risk  reassessments  should  be  regularly  scheduled   2.  Risk  Audits   –  examine  and  document  the  effecJveness  of  risk  responses  in  dealing  with  idenJfied   risks   and   their   root   causes,   as   well   as   the   effecJveness   of   the   risk   management   process.     3.  Variance  and  Trend  Analysis     4.  Technical  Performance  Measurement     –  compares   technical   accomplishments   during   project   execuJon   to   the   schedule   of   technical   achievement.   Such   technical   performance   measures   may   include   weight,   transacJon  Jmes,  number  of  delivered  defects,  storage  capacity,  etc.  DeviaJon,  such   as  demonstraJng  more  or  less  funcJonality  than  planned  at  a  milestone,  can  help  to   forecast  the  degree  of  success  in  achieving  the  project’s  scope.     5.  Reserve  Analysis     –  compares  the  amount  of  the  conJngency  reserves  remaining  to  the  amount  of  risk   remaining  at  any  Jme  in  the  project  in  order  to  determine  if  the  remaining  reserve  is   adequate.   6.  MeeJngs     Copyright@STEVBROS   Project  Mamagement  Fundamentals   42  
Outputs   1.  Work  Performance  InformaJon     2.  Change  Requests     –  ImplemenJng  conJngency  plans  or  workarounds  someJmes  results  in  a   change   request.   It   includes   recommended   correcJve   acJons,   recommended  prevenJve  acJons   3.  Project  Management  Plan  Updates   4.  Project  Documents  Updates   –  outcomes  of  risk  reassessments,  risk  audits,  and  periodic  risk  reviews.   5.  Actual  outcomes  of  the  project’s  risks  and  of  the  risk  responses   6.  OrganizaJonal  Process  Assets  Updates     –  include  templates  for  the  risk  management  plan,  including  the  probability   and   impact   matrix   and   risk   register;   risk   breakdown   structure;   and   lessons  learned  from  the  project  risk  management  acJviJes.   Copyright@STEVBROS   Project  Mamagement  Fundamentals   43  
Summary   IdenJfy  Risk   • Input:  uncertainJes   • Output:  risk  register   QualitaJve/ QuanJtaJve   Analysis   • Input:  risk  register   • Output:  updated  risk  register,  watch-­‐list   Plan  Risk  Response   • Input:  risk  register   • Output:  conJngency  plan,  fallback  plan,  residual  risk,  secondary  risk   Control  Risk   • Input:  risk  register   • Output:  workaround,  correcJve  acJons,  prevenJve  acJons   Copyright@STEVBROS   Project  Mamagement  Fundamentals   44  
Summary   •  Watch   list,   residual   risk,   secondary   risk,   fallback   plan,   conJngency   plan,   conJngency   reserve,  workarounds.   •  4  response  strategies  for  threads.   •  4  response  strategies  for  opportunity.   Copyright@STEVBROS   Project  Mamagement  Fundamentals   45  
QuesJons   for  review   Copyright@STEVBROS   Project  Mamagement  Fundamentals   46   •  You  did  the  good  job  at  this  chapter.    Please   complete  quesJons  for  review  before  moving   to  next  chapter.  

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Introduction to project risk management processes including initiating, planning, executing, monitoring, controlling, and closing activities.

Definition of risk including positive and negative effects. Concepts include risk appetite, aversion, tolerance, and threshold.

Different types of risks categorized as external, internal, technical, and project management, with relevant examples.

Key inputs and tools for defining risk management plans including project management plans, charters, categories, and methodologies.

Methods for performing qualitative and quantitative risk analysis, including probability and impact matrices and identifying risks. Processes of identifying risks through various inputs including risk registers, project documents, and stakeholder involvement.

Techniques for gathering information and analyzing risks including checklists, expert judgment, and assumption analysis.

Creation of risk registers, prioritizing risks through qualitative analysis, and expected outcomes from quantitative analysis.

Developing action plans to enhance opportunities and reduce threats, and prioritizing risks for project management.

Processes of implementing risk responses, tracking risks, and monitoring the effectiveness of risk management throughout the project.

Summary of the risk management processes including identification, analysis, planning responses, and control with key strategies.

Project Risk Management

  • 1.
    Chapter  9:     Project  Risk  Management   Stevbros  Training  &  Consultancy   www.stevbros.edu.vn   Copyright@STEVBROS   Project  Mamagement  Fundamentals   1   PMI,  PMP  and  PMBOK  are  registered  marks  of  the  Project  Management  Ins9tute,  Inc.  
  • 2.
    Overview       Ini%a%ng   process   group   Planning  process  group   Execu%ng   process   group   Monitoring  &   controlling   process   group   Closing   process   group   Project  risk   management       •  Plan  Risk   Management   •  IdenJfy  Risks   •  Perform  QualitaJve   Risk  Analysis   •  Perform  QuanJtaJve   Risk  Analysis   •  Plan  Risk  Responses       •  Control   Risks       Copyright@STEVBROS   Project  Mamagement  Fundamentals   2  
  • 3.
    What  is  Risk?   •  Risk  is  an  uncertain  event  or  condiJon  that,  if  it   occurs,  has  a  posiJve  or  negaJve  effect  on  a   project’s  objecJves   •  Example  of  posiJve  events   –  You  ordered  new  soVware  which  is  cheaper  than  your   old  soVware  because  of  budget  constraints.  However,   the  new  soVware  turns  out  to  be  more  efficient.   •  Example  of  negaJve  events   –  The  government  mandates  a  compulsory  holiday  due   to  an  outbreak  of  swine  flu.  The  project  gets  delayed   Copyright@STEVBROS   STEVBROS  -­‐  Global  PMI  R.E.P   3  
  • 4.
    Concepts   •  Risk  appe9te,  which  is  the  degree  of  uncertainty  an   enJty  is  willing  to  take  on,  in  anJcipaJon  of  a  reward.   •  Risk  averse,  one  who  does  not  take  risks.   •   Risk  tolerance,  which  is  the  degree,  amount,  or   volume  of  risk  that  an  organizaJon  or  individual  will   withstand.     •  Risk  threshold,  which  refers  to  measures  along  the   level  of  uncertainty  or  the  level  of  impact  at  which  a   stakeholder  may  have  a  specific  interest.  Below  that   risk  threshold,  the  organizaJon  will  accept  the  risk.   Above  that  risk  threshold,  the  organizaJon  will  not   tolerate  the  risk.     Copyright@STEVBROS   STEVBROS  -­‐  Global  PMI  R.E.P   4  
  • 5.
    Risk  categorizaJon    examples   •  Example  1:     –  External:  regulatory,  governmental,  subcontractors,  suppliers,  and   environmental     –  Internal:  funding,  resource,  and  prioriJzaJon   –  Technical:  requirements,  technology,  and  quality   –  Project  Management:  esJmaJng,  planning,  schedule,  and  communicaJon   •  Example  2:   –  Schedule  risk:?   –  Cost  Risk?   –  Quality  Risk?   –  Scope  Risk:  Looks  like  you  have  not  understood  the  work  properly  and  you   might  have  to  redo  the  whole  thing!     –  Resource  Risk:  CEO  has  asked  the  technical  architect  to  work  on  another   project.  In  such  cases,  who  would  make  design  decisions  on  the  projects?   Copyright@STEVBROS   STEVBROS  -­‐  Global  PMI  R.E.P   5  
  • 6.
    Plan  risk     management   •  The   process   of   defining   how   to   conduct   risk   management   acJviJes   for   a   project.   The   key   benefit   of   this   process   is   it   ensures   that   the   degree,   type,   and   visibility   of   risk   management  are  commensurate  with  both  the  risks  and  the   importance  of  the  project  to  the  organizaJon.   Copyright@STEVBROS   Project  Mamagement  Fundamentals   6   A  Guide  to  the  Project  Management  Body  of  Knowledge,  FiEh  Edi9on  (PMBOK®  Guide)  ©2013  Project  Management   Ins9tute,  Inc.    All  Rights  Reserved.    Figure  11-­‐2  Page  313.  
  • 7.
    Inputs   1.  Project  Management  Plan     –  all   approved   subsidiary   management   plans   and   baselines   should   be   taken  into  consideraJon  in  order  to  make  the  risk  management  plan   consistent  with  them   2.  Project  Charter     –  can  provide  various  inputs  such  as  high-­‐level  risks,  high-­‐level  project   descripJons,  and  high-­‐level  requirements.     3.  Stakeholder  Register     4.  Enterprise  Environmental  Factors     –  contain   risk   aetudes,   thresholds,   and   tolerances   that   describe   the   degree  of  risk  that  an  organizaJon  will  withstand.     5.  OrganizaJonal  Process  Assets     –  contain   risk   categories,   common   definiJons   of   concepts   and   terms,   risk  statement  formats,  standard  templates,  roles  and  responsibiliJes,   authority  levels  for  decision  making,  and  lessons  learned.       Copyright@STEVBROS   Project  Mamagement  Fundamentals   7  
  • 8.
    Tools  and   techniques   1.  AnalyJcal  Techniques   – for   example,   a   stakeholder   risk   profile   analysis   may   be   performed   to   grade   and   qualify   the   project   stakeholder   risk   appeJte   and   tolerance.   Other  techniques,  such  as  the  use  of  strategic  risk   scoring   sheets,   are   used   to   provide   a   high-­‐level   assessment   of   the   risk   exposure   of   the   project   based  on  the  overall  project  context.     2.  Expert  Judgment   3.  MeeJngs     Copyright@STEVBROS   Project  Mamagement  Fundamentals   8  
  • 9.
    Outputs   1.  Risk  Management  Plan     –  Methodology:   approaches,   tools,   and   data   sources   that   will   be   used  to  perform  risk  management  on  the  project.     –  Roles  and  responsibiliJes   –  BudgeJng   –  Timing   –  Risk  categories   –  DefiniJons  of  risk  probability  and  impact   –  Probability  and  impact  matrix  (details  at  next  slide).     –  Revised  stakeholders’  tolerances.   –  ReporJng  formats   –  Tracking:  documents  how  risk  acJviJes  will  be  recorded  for  the   benefit   of   the   current   project   and   how   risk   management   processes  will  be  audited.   Copyright@STEVBROS   Project  Mamagement  Fundamentals   9  
  • 10.
    Probability  &   impact  matrix   •  Risk  Probability:  High:  50  percent  or  higher  (likely);  Medium:  Between  10   and  50  percent  (unlikely);  Low:  10  percent  or  lower  (very  unlikely).   •  Risk  Impact:   Copyright@STEVBROS   Project  Mamagement  Fundamentals   10   A  Guide  to  the   Project   Management   Body  of   Knowledge,  FiEh   Edi9on  (PMBOK®   Guide)  ©2013   Project   Management   Ins9tute,  Inc.       All  Rights   Reserved.    Table   11-­‐1  Page  318.  
  • 11.
    IdenJfy  risks   • The   process   of   determining   which   risks   may   affect   the   project   and   documenJng  their  characterisJcs.  The  key  benefit  of  this  process  is  the   documentaJon  of  exisJng  risks  and  the  knowledge  and  ability  it  provides   to  the  project  team  to  anJcipate  events.   Copyright@STEVBROS   Project  Mamagement  Fundamentals   11   A  Guide  to  the  Project  Management  Body  of  Knowledge,  FiEh  Edi9on  (PMBOK®  Guide)  ©2013  Project  Management   Ins9tute,  Inc.    All  Rights  Reserved.    Figure  11-­‐5  Page  319.  
  • 12.
    Inputs(1/3)   1.  Risk  Management  Plan   –  are  the  assignments  of  roles  and  responsibiliJes,  provision  for  risk   management  acJviJes  in  the  budget  and  schedule,  and  categories   of   risk,   which   are   someJmes   expressed   as   a   risk   breakdown   structure     2.  Cost  Management  Plan   –  provides  processes  and  controls  that  can  be  used  to  help  idenJfy   risks  across  the  project.   3.  Schedule  Management  Plan   –  provides   insight   to   project   Jme/schedule   objecJves   and   expectaJons   which   may   be   impacted   by   risks   (known   and   unknown).   4.  Quality  Management  Plan   –  provides   a   baseline   of   quality   measures   and   metrics   for   use   in   idenJfying  risks.   Copyright@STEVBROS   Project  Mamagement  Fundamentals   12  
  • 13.
    Inputs(2/3)   5.  Human  Resource  Management  Plan     –  provides   guidance   on   how   project   human   resources   should   be   defined,  staffed,  managed,  and  eventually  released.   6.   Scope  Baseline     –  uncertainty   in   project   assumpJons   should   be   evaluated   as   potenJal  causes  of  project  risk.   –  the   WBS   is   a   criJcal   input   to   idenJfying   risks   as   it   facilitates   an   understanding  of  the  potenJal  risks  at  both  the  micro  and  macro   levels.   Risks   can   be   idenJfied   and   subsequently   tracked   at   summary,  control  account,  and/or  work  package  levels.     7.  AcJvity  Cost  EsJmates     –  acJvity  cost  esJmate  reviews  are  useful  in  idenJfying  risks     8.  AcJvity  DuraJon  EsJmates     –  acJvity  duraJon  esJmate  reviews  are  useful  in  idenJfying  risks     Copyright@STEVBROS   Project  Mamagement  Fundamentals   13  
  • 14.
    Inputs(3/3)   9.  Stakeholder  Register     –  ensure   that   key   stakeholders,   especially   the   stakeholder,   sponsor,   and   customer   are   interviewed   or   otherwise   parJcipate   during   the   IdenJfy   Risks   process   10.  Project  Documents     –  include   project   charter,   project   schedule,   schedule   network   diagrams,   issue   log,   quality   checklist,   and   other   informaJon   proven   to   be   valuable   in   idenJfying  risks.     11.  Procurement  Documents     –  the  complexity  and  the  level  of  detail  of  the  procurement  documents  should  be   consistent  with  the  value  of,  and  risks  associated  with,  planned  procurement.   12.  Enterprise  Environmental  Factors   –  include   published   informaJon,   including   commercial   databases,   academic   studies,   published   checklists,   benchmarking,   industry   studies,   and   risk   aetudes.   13.  OrganizaJonal  Process  Assets     –  include  project  files,  including  actual  data,  organizaJonal  and  project  process   controls,  risk  statement  formats  or  templates,  and  lessons  learned.     Copyright@STEVBROS   Project  Mamagement  Fundamentals   14  
  • 15.
    Tools  and   techniques(1/2)   1.  DocumentaJon  Reviews     –  The  quality  of  the  plans,  as  well  as  consistency  between  those  plans  and   the  project  requirements  and  assumpJons,  may  be  indicators  of  risk  in  the   project.     2.  InformaJon  Gathering  Techniques     –  Include  brainstorming,  Delphi  technique,  Interviewing,  Root  cause  analysis.     3.  Checklist  Analysis     –  are   developed   based   on   historical   informaJon   and   knowledge   that   has   been  accumulated  from  previous  similar  projects  and  from  other  sources   of   informaJon.   The   lowest   level   of   the   RBS   can   also   be   used   as   a   risk   checklist.   4.  AssumpJons  Analysis   –  Every  project  and  its  plan  is  conceived  and  developed  based  on  a  set  of   hypotheses,  scenarios,  or  assumpJons.  AssumpJons  analysis  explores  the   validity  of  assumpJons  as  they  apply  to  the  project.  It  idenJfies  risks  to  the   project   from   inaccuracy,   instability,   inconsistency,   or   incompleteness   of   assumpJons.   Copyright@STEVBROS   Project  Mamagement  Fundamentals   15  
  • 16.
    Tools  and   techniques(2/2)   5.  Diagramming  Techniques   –  Include  Cause  and  effect  diagrams,  System  or  process   flow  charts,  Influence  diagrams.  (details  at  next  slides)   6.  SWOT  Analysis     –  examines   the   project   from   each   of   the   strengths,   weaknesses,  opportuniJes,  and  threats  (SWOT)     perspecJves  to  increase  the  breadth  of  idenJfied  risks   by  including  internally  generated  risks   7.  Expert  Judgment     –  Risks   may   be   idenJfied   directly   by   experts   with   relevant  experience  with  similar  projects  or  business   areas.     Copyright@STEVBROS   Project  Mamagement  Fundamentals   16  
  • 17.
    Root-­‐cause   analysis   Copyright@STEVBROS   Project  Mamagement  Fundamentals   17  
  • 18.
    Influence   diagram   Copyright@STEVBROS   Project  Mamagement  Fundamentals   18  
  • 19.
    Outputs   1.  Risk  Register   – List  of  idenJfied  risks:       •  A   structure   for   describing   risks   using   risk   statements   may  be  applied,  for  example,  EVENT  may  occur  causing   IMPACT,  or  If  CAUSE  exists,  EVENT  may  occur  leading  to   EFFECT.     •  In  addiJon  to  the  list  of  idenJfied  risks,  the  root  causes   of  those  risks  may  become  more  evident.   – List  of  potenJal  responses   Copyright@STEVBROS   Project  Mamagement  Fundamentals   19  
  • 20.
    Perform  qualitaJve   risk  analysis   •  The  process  of  prioriJzing  risks  for  further  analysis  or  acJon  by  assessing   and  combining  their  probability  of  occurrence  and  impact.  The  key  benefit   of  this  process  is  that  it  enables  project  managers  to  reduce  the  level  of   uncertainty  and  to  focus  on  high-­‐priority  risks.   Copyright@STEVBROS   Project  Mamagement  Fundamentals   20   A  Guide  to  the  Project  Management  Body  of  Knowledge,  FiEh  Edi9on  (PMBOK®  Guide)  ©2013  Project  Management   Ins9tute,  Inc.    All  Rights  Reserved.    Figure  11-­‐8  Page  328.  
  • 21.
    Inputs   1.  Risk  Management  Plan   –  Analysis   process   include   roles   and   responsibiliJes   for   conducJng   risk   management,   budgets,   schedule   acJviJes   for   risk   management,   risk   categories,   definiJons   of   probability   and   impact,   the   probability   and   impact  matrix,  and  revised  stakeholders’  risk  tolerances   2.  Scope  Baseline   –  E.g.   Projects   of   a   common   or   recurrent   type   tend   to   have   more   well-­‐ understood   risks.   Projects   using   state-­‐of-­‐the-­‐art   or   first-­‐of-­‐its-­‐kind   technology,  and  highly  complex  projects,  tend  to  have  more  uncertainty.   3.  Risk  Register     –  contains  the  informaJon  that  will  be  used  to  assess  and  prioriJze  risks.     4.  Enterprise  Environmental  Factors     –  include   industry   studies   of   similar   projects   by   risk   specialists,   and   risk   databases  that  may  be  available  from  industry  or  proprietary  sources.     5.  OrganizaJonal  Process  Assets     –  include  informaJon  on  prior,  similar  completed  projects   Copyright@STEVBROS   Project  Mamagement  Fundamentals   21  
  • 22.
    Tools  and   techniques   1.  Risk  Probability  and  Impact  Assessment  (next  slides)   2.  Probability  and  Impact  Matrix  (next  slides)   3.  Risk  Data  Quality  Assessment     –  assessment  is  a  technique  to  evaluate  the  degree  to  which  the  data  about  risks  is   useful  for  risk  management.  It  involves  examining  the  degree  to  which  the  risk  is   understood  and  the  accuracy,  quality,  reliability,  and  integrity  of  the  data  about   the  risk.   4.  Risk  CategorizaJon     –  risks  to  the  project  can  be  categorized  by  sources  of  risk  (e.g.,  using  the  RBS),  the   area  of  the  project  affected  (e.g.,  using  the  WBS),  or  other  useful  categories  (e.g.,   project  phase)  to  determine  the  areas  of  the  project  most  exposed  to  the  effects   of  uncertainty.  Risks  can  also  be  categorized  by  common  root  causes.     5.  Risk  Urgency  Assessment     –  risks  requiring  near-­‐term  responses  may  be  considered  more  urgent  to  address.   Indicators  of  priority  may  include  probability  of  detecJng  the  risk,  Jme  to  affect  a   risk  response,  symptoms  and  warning  signs,  and  the  risk  raJng.   6.  Expert  Judgment     Copyright@STEVBROS   Project  Mamagement  Fundamentals   22  
  • 23.
    Probability  &   impact  matrix   •  Risk  Probability:  High:  50  percent  or  higher  (likely);  Medium:  Between  10   and  50  percent  (unlikely);  Low:  10  percent  or  lower  (very  unlikely).   •  Risk  Impact:   Copyright@STEVBROS   Project  Mamagement  Fundamentals   23   A  Guide  to  the   Project   Management   Body  of   Knowledge,  FiEh   Edi9on  (PMBOK®   Guide)  ©2013   Project   Management   Ins9tute,  Inc.    All   Rights  Reserved.     Table  11-­‐1  Page   318.  
  • 24.
    Probability  &   impact  matrix   Copyright@STEVBROS   Project  Mamagement  Fundamentals   24   A  Guide  to  the  Project  Management  Body  of  Knowledge,  FiEh  Edi9on  (PMBOK®  Guide)  ©2013  Project  Management   Ins9tute,  Inc.    All  Rights  Reserved.    Figure  11-­‐10  Page  331.  
  • 25.
    Outputs   1.  Project  Documents  Updates     –  Risk  register  updates.     •  As   new   informaJon   becomes   available   through   the   qualitaJve  risk  assessment,  the  risk  register  is  updated.     •  Updates   to   the   risk   register   may   include   assessments   of   probability  and  impacts  for  each  risk,  risk  ranking  or  scores,   risk  urgency  informaJon  or  risk  categorizaJon,  and  a  watch   list  for  low  probability  risks  or  risks  requiring  further  analysis.     –  AssumpJons  log  updates.     •  As   new   informaJon   becomes   available   through   the   qualitaJve  risk  assessment,  assumpJons  could  change.     •  The  assumpJons  log  needs  to  be  revisited  to  accommodate   this  new  informaJon.  AssumpJons  may  be  incorporated  into   the  project  scope  statement  or  in  a  separate  assumpJons  log.     Copyright@STEVBROS   Project  Mamagement  Fundamentals   25  
  • 26.
    Perform  quanJtaJve   risk  analysis   •  The   process   of   numerically   analyzing   the   effect   of   idenJfied   risks   on   overall   project   objecJves.   The   key   benefit   of   this   process   is   that   it   produces  quanJtaJve  risk  informaJon  to  support  decision  making  in  order   to  reduce  project  uncertainty.  This  process  isn’t  applied  for  projects  with   low  complexity,  low  dollar  value.   Copyright@STEVBROS   Project  Mamagement  Fundamentals   26   A  Guide  to  the  Project  Management  Body  of  Knowledge,  FiEh  Edi9on  (PMBOK®  Guide)  ©2013  Project  Management   Ins9tute,  Inc.    All  Rights  Reserved.    Figure  11-­‐11  Page  334.  
  • 27.
    Inputs   1.  Risk  Management  Plan   –  provides   guidelines,   methods,   and   tools   to   be   used   in   quanJtaJve   risk   analysis.     2.  Cost  Management  Plan   –  provides  guidelines  on  establishing  and  managing  risk  reserves.     3.  Schedule  Management  Plan   –  plan  provides  guidelines  on  establishing  and  managing  risk  reserves.     4.  Risk  Register     –  register  is  used  as  a  reference  point  for  performing  quanJtaJve  risk     analysis.     5.  Enterprise  Environmental  Factors     –  include   industry   studies   of   similar   projects   by   risk   specialists,   and   risk   databases  that  may  be  available  from  industry  or  proprietary  sources.     6.  OrganizaJonal  Process  Assets     –  include  informaJon  from  prior,  similar  completed  projects.     Copyright@STEVBROS   Project  Mamagement  Fundamentals   27  
  • 28.
    Tools  and   techniques   1.  Data  Gathering  and  RepresentaJon  Techniques     –  Such  as  interviewing,  probability  distribuJons  (PERT)   2.  QuanJtaJve  Risk  Analysis  and  Modeling  Techniques     –  Such   as   sensiJvity   analysis,   expected   monetary   value   analysis,  modeling  and  simulaJon  (next  slides)   3.  Expert  Judgment     –  Expert  judgment  also  comes  into  play  in  the  interpretaJon   of   the   data.   Experts   should   be   able   to   idenJfy   the   weaknesses  of  the  tools  as  well  as  their  strengths.  Experts   may   determine   when   a   specific   tool   may   or   may   not   be   more   appropriate   given   the   organizaJon’s   capabiliJes   and   culture.      Copyright@STEVBROS   Project  Mamagement  Fundamentals   28  
  • 29.
    Decision  Tree  and  EMV   •  EVM used with Decision Tree to choose between many alternative which take into account the future events •  Example: [ ]∑ ×= (Impact)ty)(ProbabiliEVM Example  Source:   Copyright@STEVBROS   Project  Mamagement  Fundamentals   29  
  • 30.
    SensiJvity  Analysis   • To determine which risks have the most potential impact to the project •  Changing one or more elements/variables and set other elements to its baseline then see the impact. •  One typical display of sensitivity analysis is the tornado diagram Copyright@STEVBROS   Project  Mamagement  Fundamentals   30  
  • 31.
    Modeling  and    simulaJon   A   Guide   to   the   Project   Management   B o d y   o f   Knowledge,     FiEh   Edi9on   ( P M B O K ®   G u i d e )   © 2 0 1 3   P r o j e c t   Management   Ins9tute,   Inc.     A l l   R i g h t s   Reserved.     Figure   11-­‐17   Page  340.   Copyright@STEVBROS   Project  Mamagement  Fundamentals   31  
  • 32.
    Outputs   1.  Project  Documents  Updates     –  ProbabilisJc   analysis   of   the   project:   EsJmates   are   made  of  potenJal  project  schedule  and  cost  outcomes   lisJng   the   possible   compleJon   dates   and   costs   with   their  associated  confidence  levels.   –  Probability  of  achieving  cost  and  Jme  objecJves:  For   instance,  in  Figure  11-­‐17,  the  likelihood  of  achieving   the  cost  esJmate  of  US$41  million  is  about  12%   –  PrioriJzed  list  of  quanJfied  risks   –  Trends   in   quanJtaJve   risk   analysis   results:   As   the   analysis   is   repeated,   a   trend   may   become   apparent   that  leads  to  conclusions  affecJng  risk  responses   Copyright@STEVBROS   Project  Mamagement  Fundamentals   32  
  • 33.
    Plan  risk  response   •  The   process   of   developing   opJons   and   acJons   to   enhance   opportuniJes  and  to  reduce  threats  to  project  objecJves.  The   key   benefit   of   this   process   is   that   it   addresses   the   risks   by   their   priority,   inserJng   resources   and   acJviJes   into   the   budget,  schedule  and  project  management  plan  as  needed.   Copyright@STEVBROS   Project  Mamagement  Fundamentals   33   A  Guide  to  the  Project  Management  Body  of  Knowledge,  FiEh  Edi9on  (PMBOK®  Guide)  ©2013  Project  Management   Ins9tute,  Inc.    All  Rights  Reserved.    Figure  11-­‐18  Page  342.  
  • 34.
    Inputs   1.  Risk  Management  Plan   –  include  roles  and  responsibiliJes,  risk  analysis  definiJons,   Jming  for  reviews  (and  for  eliminaJng  risks  from  review),   and  risk  thresholds  for  low,  moderate,  and  high  risks.  Risk   thresholds   help   idenJfy   those   risks   for   which   specific   responses  are  needed.   2.  Risk  Register   –  refers   to   idenJfied   risks,   root   causes   of   risks,   lists   of   potenJal  responses,  risk  owners,  symptoms  and  warning   signs,   the   relaJve   raJng   or   priority   list   of   project   risks,   risks   requiring   responses   in   the   near   term,   risks   for   addiJonal   analysis   and   response,   trends   in   qualitaJve   analysis  results,  and  a  watch  list,  which  is  a  list  of  low-­‐   priority  risks  within  the  risk  register.   Copyright@STEVBROS   Project  Mamagement  Fundamentals   34  
  • 35.
    Tools  and   techniques  (1/3)   1.  Strategies  for  NegaJve  Risk  or  Threats:   –  Avoid:   Eliminate   the   threat   enJrely,   isolate   project   objecJves  from  the  risk’s  impact.   –  Transfer  (Deflect,  Allocate):  shiV  some  or  all  the  negaJve   impact  of  a  threat  to  a  third  party   –  MiJgate:   implies   a   reducJon   in   the   probability   and/or   impact   of   an   adverse   risk   event   to   be   within   acceptable   threshold  limits   –  Accept:   deal   with   the   risks,   project   management   plan   is   not  changed   Copyright@STEVBROS   Project  Mamagement  Fundamentals   35  
  • 36.
    Tools  and   techniques  (2/3)   2.  Strategies  for  PosiJve  Risks  or  OpportuniJes:   – Exploit:  seek  to  ensure  the  opportuniJes  definitely   happen   – Share:  allocate  some  or  all  of  the  ownership  of  the   opportunity   to   a   third   party   who   is   best   able   to   capture  the  opportunity  for  the  project  benefit.   – Enhance:   increase   the   probability   and/or   the   posiJve  impacts  of  an  opportunity.   – Accept:  not  acJvely  pursuing  an  opportunity   Copyright@STEVBROS   Project  Mamagement  Fundamentals   36  
  • 37.
    Tools  and   techniques(3/3)   3.  ConJngent  Response  Strategies   –  contain  events  that  trigger  the  conJngency  response,  such   as   missing   intermediate   milestones   or   gaining   higher   priority   with   a   supplier,   should   be   defined   and   tracked.   Risk   responses   idenJfied   using   this   technique   are   oVen   called   conJngency   plans   or   fallback   plans   and   include   idenJfied  triggering  events  that  set  the  plans  in  effect.     4.  Expert  Judgment     –  is   input   from   knowledgeable   parJes   pertaining   to   the   acJons  to  be  taken  on  a  specific  and  defined  risk.  ExperJse   may  be  provided  by  any  group  or  person  with  specialized   educaJon,   knowledge,   skill,   experience,   or   training   in   establishing  risk  responses.     Copyright@STEVBROS   Project  Mamagement  Fundamentals   37  
  • 38.
    Outputs(1/2)   •  Project  Management  Plan  Updates     Include   schedule   management   plan,   cost   management   plan,   quality   management   plan,   procurement   management   plan,   human   resource   management   plan,   scope   baseline,   schedule  baseline,  cost  baseline.   Copyright@STEVBROS   Project  Mamagement  Fundamentals   38  
  • 39.
    Outputs  (2/2)   • Project  Documents  Updates     –  Update  to  risk  register   •  Risk  owners  and  assigned  responsibiliJes;     •  Agreed-­‐upon  response  strategies;     •  Specific  acJons  to  implement  the  chosen  response  strategy;     •  Trigger  condiJons,  symptoms,  and  warning  signs  of  a  risk  occurrence;     •  Budget  and  schedule  acJviJes  required  to  implement  the  chosen  responses;     •  ConJngency  plans  and  triggers  that  call  for  their  execuJon;     •  Fallback   plans   for   use   as   a   reacJon   to   a   risk   that   has   occurred   and   the   primary   response  proves  to  be  inadequate;     •  Residual   risks   that   are   expected   to   remain   aVer   planned   responses   have   been   taken,  as  well  as  those  that  have  been  deliberately  accepted;     •  Secondary  risks  that  arise  as  a  direct  outcome  of  implemenJng  a  risk  response;  and     •  ConJngency  reserves  that  are  calculated  based  on  the  quanJtaJve  risk  analysis  of   the  project  and  the  organizaJon’s  risk  thresholds.     –  Other   updates:   assumpJons   log   updates,   technical   documentaJon   updates,  change  requests   Copyright@STEVBROS   Project  Mamagement  Fundamentals   39  
  • 40.
    Control  risks   • The  process  of  implemenJng  risk  response  plans,  tracking  idenJfied  risks,   monitoring  residual  risks,  idenJfying  new  risks,  and  evaluaJng  risk  process   effecJveness   throughout   the   project.   The   key   benefit   of   this   process   is   that  it  improves  efficiency  of  the  risk  approach  throughout  the  project  life   cycle  to  conJnuously  opJmize  risk  responses.     Copyright@STEVBROS   Project  Mamagement  Fundamentals   40   A  Guide  to  the  Project  Management  Body  of  Knowledge,  FiEh  Edi9on  (PMBOK®  Guide)  ©2013  Project  Management   Ins9tute,  Inc.    All  Rights  Reserved.    Figure  10-­‐20  Page  349.  
  • 41.
    Inputs   1.  Project  Management  Plan     –  includes  the  risk  management  plan,  provides  guidance  for  risk  monitoring   and  controlling.     2.  Risk  Register     –  has  key  inputs  that  include  idenJfied  risks  and  risk  owners,  agreed-­‐upon   risk  responses,  control  acJons  for  assessing  the  effecJveness  of  response   plans,   risk   responses,   specific   implementaJon   acJons,   symptoms   and   warning  signs  of  risk,  residual  and  secondary  risks,  a  watch  list  of  low-­‐ priority  risks,  and  the  Jme  and  cost  conJngency  reserves   3.  Work  Performance  Data     –  deliverable  status,  schedule  progress,  and  costs  incurred   4.  Work  Performance  Reports     –  take   informaJon   from   performance   measurements   and   analyze   it   to   provide   project   work   performance   informaJon   including   variance   analysis,  earned  value  data,  and  forecasJng  data.  These  data  points  could   be  impacsul  in  controlling  performance  related  risks.   Copyright@STEVBROS   Project  Mamagement  Fundamentals   41  
  • 42.
    Tools  and   techniques   1.  Risk  Reassessment   –  oVen   results   in   idenJficaJon   of   new   risks,   reassessment   of   current   risks,   and   the   closing  of  risks  that  are  outdated.  Risk  reassessments  should  be  regularly  scheduled   2.  Risk  Audits   –  examine  and  document  the  effecJveness  of  risk  responses  in  dealing  with  idenJfied   risks   and   their   root   causes,   as   well   as   the   effecJveness   of   the   risk   management   process.     3.  Variance  and  Trend  Analysis     4.  Technical  Performance  Measurement     –  compares   technical   accomplishments   during   project   execuJon   to   the   schedule   of   technical   achievement.   Such   technical   performance   measures   may   include   weight,   transacJon  Jmes,  number  of  delivered  defects,  storage  capacity,  etc.  DeviaJon,  such   as  demonstraJng  more  or  less  funcJonality  than  planned  at  a  milestone,  can  help  to   forecast  the  degree  of  success  in  achieving  the  project’s  scope.     5.  Reserve  Analysis     –  compares  the  amount  of  the  conJngency  reserves  remaining  to  the  amount  of  risk   remaining  at  any  Jme  in  the  project  in  order  to  determine  if  the  remaining  reserve  is   adequate.   6.  MeeJngs     Copyright@STEVBROS   Project  Mamagement  Fundamentals   42  
  • 43.
    Outputs   1.  Work  Performance  InformaJon     2.  Change  Requests     –  ImplemenJng  conJngency  plans  or  workarounds  someJmes  results  in  a   change   request.   It   includes   recommended   correcJve   acJons,   recommended  prevenJve  acJons   3.  Project  Management  Plan  Updates   4.  Project  Documents  Updates   –  outcomes  of  risk  reassessments,  risk  audits,  and  periodic  risk  reviews.   5.  Actual  outcomes  of  the  project’s  risks  and  of  the  risk  responses   6.  OrganizaJonal  Process  Assets  Updates     –  include  templates  for  the  risk  management  plan,  including  the  probability   and   impact   matrix   and   risk   register;   risk   breakdown   structure;   and   lessons  learned  from  the  project  risk  management  acJviJes.   Copyright@STEVBROS   Project  Mamagement  Fundamentals   43  
  • 44.
    Summary   IdenJfy  Risk   • Input:  uncertainJes   • Output:  risk  register   QualitaJve/ QuanJtaJve   Analysis   • Input:  risk  register   • Output:  updated  risk  register,  watch-­‐list   Plan  Risk  Response   • Input:  risk  register   • Output:  conJngency  plan,  fallback  plan,  residual  risk,  secondary  risk   Control  Risk   • Input:  risk  register   • Output:  workaround,  correcJve  acJons,  prevenJve  acJons   Copyright@STEVBROS   Project  Mamagement  Fundamentals   44  
  • 45.
    Summary   •  Watch   list,   residual   risk,   secondary   risk,   fallback   plan,   conJngency   plan,   conJngency   reserve,  workarounds.   •  4  response  strategies  for  threads.   •  4  response  strategies  for  opportunity.   Copyright@STEVBROS   Project  Mamagement  Fundamentals   45  
  • 46.
    QuesJons   for  review   Copyright@STEVBROS   Project  Mamagement  Fundamentals   46   •  You  did  the  good  job  at  this  chapter.    Please   complete  quesJons  for  review  before  moving   to  next  chapter.