7-1 risk management. 7-2 risk risk (in general, in finance): deviation, variance the change can be...
TRANSCRIPT
7-1
Risk Management
7-2
Risk
Risk (in general, in finance): deviation, variance
The change can be positive or negative
Project risk: any possible event that can negatively affect the viability of a project
Project Risk = (Probability of Event) (Consequences of Event)
Project opportunity: possible events that can positively affect the project
Expected value of the risk
Risk management
Risk management = the art and science of identifying, analyzing, and responding to risk factors throughout the life of a project and in the best interest of its objectives.
7-3Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
7-4Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
Risk Vs Amount at Stake
Phase 1 Conceive
(C)
Phase 2 Develop
(D)
Phase 3 Execute
(E)
Phase 4 Finish
(F)
Time
$ V
alue
Incr
easi
ng R
isk
Total Project Life Cycle
Amount at stake
Plan Produce
Opportunity and riskPeriod of highest
risk impact
Combined risk impact
7-5Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
Process of Risk Management
• What is likely to happen?
• What can be done?
• What are the warning signs?
• What are the likely outcomes?
7-6Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
Four Stages of Risk Management
1. Risk identification: reasonable risk factors
2. Analysis of probability and consequences
3. Risk mitigation strategies
4. Control and documentation: knowledge base
7-7Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
Identification: Risk Clusters
• Financial
• Technical
• Contractual/Legal
• Commercial
• Execution
Common Types•Absenteeism•Resignation•Staff pulled away•Time overruns
• Skills unavailable• Ineffective Training• Specs incomplete• Change orders
7-8Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
Risk Factor Identification
Brainstorming meetings
Expert opinion
Past history
Multiple (or team based) assessments
Project Risk Scoring I.
• Identify factors and assess the probability and consequences of failure
• Measure the factors individally and their effect• Summarize them
• Two factors:– Technological failure– Market failure
Project Risk Scoring I.
• Probability of failure: – Probability of techn. failure: 0.3– Probability of market failure: 0.1
• Consequence of failure: – Consequence of techn. failure: 1000 dollar– Consequence of market failure: 10000 dollar
• Overall project risk: 0.3*1000+0.1*10000
7-11Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
Risk Impact Matrix
ConsequencesLi
kelih
ood
Hig
hLo
w
Low High
7-12Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
Project Risk Scoring II.
1. Identify factors and assess the probability (Pf ) and consequences (Cf) of failure
2. Create scaling for both dimensions that is generally used in the whole organization
3. Calculate overall probability & consequence
4. Calculate overall risk factor
Project Risk Scoring II.
• Sources (factors) of risks:– Maturity: low (0.2)– Complexity: low (0.1)– Dependency: high (0.8)
• Effects (consequences) of failure:– Cost: medium (0.5)– Schedule: medium (0.4)– Reliabilty: medium (0.6)– Performance: high (0.8)
3m c d
f
P P PP
4c s r p
f
C C C CC
( )( )f f f fRF P C P C
0.37
0.575
0.73225
7-14Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
Risk Mitigation Strategies
• Accept/ignore: if risk is not strong
• Minimize
• Share
• Transfer
• Contingency Reserves–Task contingency
–Managerial contingency
• Mentoring & Cross training
7-15Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
Control & Documentation
Help managers classify and codify risks, responses, and outcomes
Change management report system answers• What?• Who?• When?• Why?• How?
7-16Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
Project Risk Analysis & Management
Extends risk management over project’s life cycle
Key Features of PRAMRisk management follows a life cycleRisk management strategy changes over the
project life cycleSynthesized, coherent approach
7-17Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
Nine Phases of Risk Assessment
1.Define2.Focus3. Identify4.Structure5.Clarify ownership of risks6.Estimate7.Evaluate8.Plan9.Manage
Thanks for your attention!
7-18Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall