PROJECT RISK

SLIDE PRESENTATION

1

LECTURER;

ASSOCIATE PROFESSOR SAMIAPPAN

MARAPPAN

GROUP MEMBER;

1) MOHD. NORIZAM MD. SALLEH

IC NO: 670703-01-6045

STUDENT ID:CGS00534317

2) REIDZUAN BIN AHMAD

IC NO: 691218-04-5275

STUDENT ID: CGS00541817

Risk Management (EMRM5103)

- Slides Presentation

2

CONTENT

1. PROJECT BRIEF

2. DEFINATION RISK MANAGEMENT

3. OBJECTIVES

4. RISK MANAGEMENT 6 PROCESSES

5. MATRIX SHOWS THE SIX MAIN PROCESS & ALL OF THE DELIVERABLES

6. MATRIX SHOWS THE SIX PROCESS AND THE RESPONSIBILITIES

7. PLAN RISK MANAGEMENT

8. IDENTIFY RISK

� DESIGN RISK

� EXTERNAL RISK

� ENVIRONMENTAL RISK

� ORGANISATIONAL RISK

� PROJECT MANAGEMENT RISK

� ROW RISK

� CONSTRUCTION RISK

� ENGINEERING SERVICE RISK

9. RISK WERE PUT INTO WERW PUT INTO RISK BREAKDOWN STRUCTURE.

10. RISK SHALL BE PUT INTO PROJECT RISK REGISTER (SAMPLE)

11. PERFORM RISK ANALYSIS – QUALITATIVE

3

4

CONTENT (conti.)

12. RISK BEEN PUT INTO PROBABILITY/IMPACT MATRIX (SAMPLE)

13. PROBABILITY/IMPACT MATRIX FOR QUALITATIVE RISK ASSESSMENT

(SAMPLE)

14. CHART SHOWING HIGH, MEDIUM, AND LOW RISK TECHNOLOGIES (SAMPLE)

15. TOP TEN RISK ITEM TRACKING.

16. TOP TEN RISK ITEM TRACKING (SAMPLE)

17. EXPERT JUDGEMENT.

18. PROJECT RISK GET RANKED (SAMPLE).

19. QUANTITATIVE RISK ANALYSIS

20. DECISION TREES AND EXPECTED MONETARY VALUE (EMV).

21. EXPECTED MONETARY VALUE (EMV) EXAMPLE.

22. SIMULATION

23. FINISHED DATE PROBABILITY - USING MONTE CARLO SIMULATION (SAMPLE).

24. PLAN RISK RESPONSE.

25. Risk Handling Techniques

26. Monitor & Control Risk

27. Some risk in this project (example) & How to Monitor & Control them???A. Risk Funding Techniques.

B. CAPITAL RISK

C. Schedule Risks.

D. Cost Risks

E. Communication Risks

F. Quality Risks

G. CONSTRUCTION RISK

H. SAFETY RISK

28. THANK YOU

1. PROJECT BRIEF

PROJECT: CONCTRUCTION OF REINFORCE

CONCRETE BRIDGE.

CLIENT: JABATAN KERJA RAYA MALAYSIA.

CONTRACTOR : ZR CONST SDN. BHD.

CONTRACTOR CLASS: A

CONTRACT AMOUNT: RM 20,000,000.00

CONTRACT SECURED: VIA TENDER.

5

2. DEFINATION OF RISK MANAGEMENT

The process of planning, leading and

controlling the resources and activities of

an organization/project

To fulfill its objectives cost effectively

To protect and grow corporate assets

To enhance shareholder value6

3. OBJECTIVES

� Understand what risk is and the importance of good project risk

management.

� Discuss the elements involved in risk management planning and

the contents of a risk management plan.

� List common sources of risks in this project.

� Describe the risk identification process, tools, and techniques to

help identify project risks, and the main output of risk

identification, a risk register.

� Discuss the qualitative risk analysis process and explain how to

calculate risk factors, create probability/impact matrixes, apply

the Top Ten Risk Item Tracking technique, and use expert

judgment to rank risks.7

3. OBJECTIVES

(CONT’D)

� Explain the quantitative risk analysis process and

how to apply decision trees, simulation, and

sensitivity analysis to quantify risks.

� Provide examples of using different risk response

planning strategies to address both negative and

positive risks.

� Discuss what is involved in risk monitoring and

control.

� Describe how software can assist in project risk

management.

8

4. RISK MANAGEMENT 6 PROCESSES

Based on: PMBOK Chapter 11, APM PRAM Guide, AS/NZ S4360 9

5. MATRIX SHOWS THE SIX MAIN PROCESS & ALL OF THE

DELIVERABLES ASSOCIATED WITH PROJECT RISK MANAGEMENT

10

6. MATRIX SHOWS THE SIX PROCESSES AND THE

RESPONSIBILITIES OF THE PROJECT MANAGER AND

STAKEHOLDERS.

11

7.PLAN RISK

MANAGEMENT

� Careful and explicit planning enhances the possibility of success of

the five other risk management processes.

� Risk Management Planning is the process of deciding how to

approach and conduct the risk management activities for a project.

� Planning of risk management processes is important to ensure that

the level, type, and visibility of risk management are commensurate

with both the risk and importance of the project to the organization,

to provide sufficient resources and time for risk management

activities, and to establish an agreed-upon basis for evaluating

risks.

� The Risk Management Planning process should be completed early

during project planning, since it is crucial to successfully

performing the other processes described in this handbook.

� The risk management plan identifies and establishes the activities

of risk management for the project in the project plan (RMP) 12

POTENTIAL RISK SECTOR ARE DETERMINE AS

FOLLOWS;

� ENVIRONMENTAL

� DESIGN

� RIGHT OF WAY

� ENGINEERING SERVICE RISK

� CONSTRUCTION

� PROJECT MANAGEMENT

� EXTERNAL

� NATURAL DISASTER

NOTE; RISK FOR EACH SECTOR ARE DETAIL OUT IN THE NEXT 8

SLIDES;

8.IDENTIFY RISK

13

14

15

16

17

18

19

20

21

22

9. RISK WERE PUT INTO RISK BREAKDOWN

STRUCTURE

23

10. RISK SHALL BE PUT INTO PROJECT RISK REGISTER (SAMPLE)

Notes; All the risk indentified shall be put in the register.

11. PERFORM RISK ANALYSIS -

QUALITATIVE

� Using established methods and tools,

qualitative risk analysis assesses the

probability and the consequences (impact) of

each identified risk to determine its overall

importance.

� Using these tools helps to correct biases that

are often presented in a project plan. In

particular, careful and objective definitions of

different levels of probability and impact are

the keys to the credibility of the results.

24

12. RISK BEEN PUT INTO

PROBABILITY/IMPACT MATRIX (SAMPLE)

25

26

13. PROBABILITY/IMPACT MATRIX FOR

QUALITATIVE RISK ASSESSMENT (SAMPLE)

14. CHART SHOWING HIGH, MEDIUM, AND LOW

RISK TECHNOLOGIES (SAMPLE)

27

15. TOP TEN RISK ITEM TRACKING

� Top Ten Risk Item Tracking is a qualitative risk analysis tool

that helps to identify risks and maintain an awareness of risks

throughout the life of a project.

� Establish a periodic review of the top ten project risk items.

� List the current ranking, previous ranking, number of times the

risk appears on the list over a period of time, and a summary of

progress made in resolving the risk item.

28

16. TOP TEN RISK ITEM TRACKING

(SAMPLE)

Monthly Ranking

Risk Item This

Mont

h

Last

Mont

h

Number

of

Months

Risk Resolution

Progress

Inadequate

planning

1 2 4 Working on revising

the entire project plan

Poor

definition of

scope

2 3 3 Holding meetings

with project customer

and sponsor to clarify

scope

Absence of

leadership

3 1 2 Just assigned a new

project manager to

lead the project after

old one quit

Poor cost

estimates

4 4 3 Revising cost

estimates

Poor time

estimates

5 5 3 Revising schedule

estimates

29

17. EXPERT JUDGMENT

� Many organizations rely on the intuitive feelings

and past experience of experts to help identify

potential project risks.

� Experts can categorize risks as high, medium, or

low with or without more sophisticated

techniques.

� Can also help create and monitor a watch list, a

list of risks that are low priority, but are still

identified as potential risks.

30

31

18. PROJECT RISK GET RANKED (SAMPLE)

No. Rank Risk Description Category Root

Cause

Triggers Potential

Responses

Risk

Owner

Probability Impact Status

R44 1

R21 2

R7 3

Note: The assigned project team members SHALL arrange the project risk

according to their rank.

19. QUANTITATIVE RISK

ANALYSIS

� Often follows qualitative risk analysis, but both can be done together.

� Large, complex projects involving leading edge technologies often require extensive quantitative risk analysis.

� Main techniques include:

� Decision tree analysis

� Simulation

� Sensitivity analysis

32

20. DECISION TREES AND EXPECTED

MONETARY VALUE (EMV)

� A decision tree is a diagramming analysis technique

used to help select the best course of action in situations

in which future outcomes are uncertain.

� Estimated monetary value (EMV) is the product of a

risk event probability and the risk event’s monetary

value.

� You can draw a decision tree to help find the EMV.

33

21. EXPECTED MONETARY VALUE (EMV)

EXAMPLE

34

22. SIMULATION

� Simulation uses a representation or model of a

system to analyze the expected behavior or

performance of the system.

� Monte Carlo analysis simulates a model’s

outcome many times to provide a statistical

distribution of the calculated results.

� To use a Monte Carlo simulation, you must have

three estimates (most likely, pessimistic, and

optimistic) plus an estimate of the likelihood of the

estimate being between the most likely and

optimistic values. 35

36

23. Finished Date Probability - Using Monte Carlo

simulation (Sample).

The yellow arrow, pointing at 08/05/02, this is the date shown as the project completion date on the project plan. Now that we’ve performed the risk analysis we can determine that our chances of actually finishing the project on or before that date are just 15%!

24. PLAN RISK

RESPONSE

� Risk Response Planning is the process of developing options, and

determining actions to enhance opportunities and reduce threats to

the project’s objectives.

� It focuses on the high-risk items evaluated in the qualitative and/or

quantitative risk analysis.

� In Risk Response Planning parties are identified and assigned to take

responsibility for each risk response.

� This process ensures that each risk requiring a response has an owner

monitoring the responses, although a different party may be

responsible for implementing the risk handling action itself.

� The project manager and the PDT identify which strategy is best for

each risk, and then design specific action(s) to implement that

strategy. 37

Risk Avoidance •Avoiding a high risk approach to software development by selecting a

lower-risk approach

•Statement – “I will not accept this risk; I will look for a less risky

solution to the problem”

–A lower risk approach is not always appropriate

–A higher risk approach has increased design flexibility, potentially lower

cost, or potentially early delivery of the product.

•Not every risk can be avoided.

•Avoiding risk in one area of a project might increase risk in another

area.

Risk Assumption •A decision to accept the consequences when an undesired event

occurs.

•Statement – “I am aware of the risk, and I chose to accept this risk

because of the potential benefits of this approach”

•Risk assumption acknowledges the existence of risk and a decision to

accept the consequences if problems occur.

Risk Control •Continuous monitoring of project status and the development of

other solutions if the risk becomes a problem.

•Statement – “I am aware of the risk, and I will develop options to

reduce the potential of the problem occurring and to reduce its effect

should the problem occur.”

25. Risk Handling Techniques

38

39

Risk Control [Contd.] •Uses reviews, verification and validation, development of

fallback positions, and similar management actions.

•Involves development of a risk reduction plan and tracking to

that plan.

•Involves continual measurement of project status and

development of options and fall-back positions to permit

alternative, lower risk approaches when the problem occur.

Risk Transfer •Transferring potential problems to other areas of responsibility.

•Care must be taken that transfer of a risk factor includes

transfer of responsibilities for a successful outcome

• Transferring a difficult technical issue to a subcontractor does

not eliminate the risk of product failure because failure of the

subcontractor will result in failure of the overall product.

Knowledge

Acquisition

•Gathering additional information to further assess risk and to

develop new contingency plans

•A continuous process that enables the participants to perform

risk management with greater confidence.

•Techniques – Prototyping, Benchmarking, Simulation and

modeling, Incremental development

25. Risk Handling Techniques (contd.)

26. MONITOR & CONTROL

RISK

� Risk monitoring and control keeps track of the identified

risks, residual risks, and new risks.

� It also monitors the execution of planned strategies on the

identified risks and evaluates their effectiveness.

� Risk monitoring and control continues for the life of the

project. The list of project risks changes as the project

matures, new risks develop, or anticipated risks disappear.

� Typically during project execution there should be regularly

held risk meetings during which all or a part of the Risk

Register is reviewed for the effectiveness of their handling

and new risks are discussed and assigned owners.

� Periodic project risk reviews repeat the process of

identification, analysis, and response planning. Risk

ratings and prioritization commonly change during the

project lifecycle. 40

� If an unanticipated risk emerges, or a risk’s impact is greater

than expected, the planned response may not be adequate. The

project manager and the PDT must perform additional response

planning to control the risk.

� Risk control involves:

� Choosing alternative response strategies

� Implementing a contingency plan

� Taking corrective actions

� Re-planning the project, as applicable

� The individual or a group assigned to each risk (risk owner)

reports periodically to the project manager and the risk team

leader on the status of the risk and the effectiveness of the

response plan. The risk owner also reports on any unanticipated

effects, and any mid-course correction that the PDT must

consider in order to mitigate the risk.

41

26. Monitor & Control Risk (Contd.)

27. SOME RISK IN THIS PROJECT

(EXAMPLE)

& HOW TO MONITOR & CONTROL

THEM???

42

After we have ranked all the risks and some got

eliminated as they give minimal impact or eliminated

by the response action taken, the remaining risks shall

be monitored and controlled closely.

The next few slides shall discuss some of the risk in this

project and how they are monitor & control.

A. Risk Funding Techniques:

• Current Expensing

• Unfunded Reserves

• Funded Reserves

• Borrowing

• Captive Insurers

• Commercial Insurance

• Contractual Transfer for Risk Financing

43

B. CAPITAL RISKTHE BOTTOM LINE: IT ALL BOILS DOWN TO CAPITAL

� “Capital”

� Assets less liabilities; owners’ equity; net worth

� Support for (riskiness of) operations

� Thus, supports profitability and solvency of firm

� “Capital Management”

� Determine need for and adequacy of capital

� Plans for increasing or releasing capital

� Strategy for efficient use of capital

For our project, despite the estimated/forecast profit plays a big role in

its viability, finance cost, company net worth, escalation of material

price, politics , man powers, machineries are also important. 44

C. SCHEDULE

RISKS

� Techniques to use;� Algorithmic scheduling models

� Critical Path model

� PERT analysis

1

F

(5) (2)

2

3

4

5

8 9

6

10

7

A

(1)

C

(3)

B(6)

D (1)

(2)

E

(6)

G

H(1)

J

K(1

)

K

(1)L

(1

)

M

(1)

Letters = Activities; Numbers = Milestones; (x) = Activity duration45

C. SCHEDULE RISKS

(CONTD.)

� The schedule network is a source of identifying potential

risks

� Nodes or junction points with a high degree of fan-in and

those with a high degree of fan-out are potential risk areas.

� A node with a high degree of fan-in has many tasks that

must be completed before the milestone can be achieved.

[Node 8]

� No subsequent tasks can be initiated until all tasks fanning

into the node are completed.

� Delay in any one node will delay all subsequent tasks.

� Activity (nodes) on the critical path also are potential areas

of high risk [path ABGJKLM]

� A slip in schedule for any activity on the critical path will

result in a slip of the overall schedule.46

D. COST RISKS

� Aggregation of costs and associated risk factors for each element of the work

breakdown structure provides a detailed Cost-risk analysis.

� Budgets are determined using EFFORT (people * time) as the primary cost

factor.

� Nonlinear increase in cost with decreasing schedule may result in a very

high risk that the project cannot be completed within the budget.

� Other factors influencing cost and schedule

� Creeping requirements

� Schedule compression

� Unreasonable budgets

� Techniques (Monitor using);

� Algorithmic cost models

� Analysis of project assumptions

� S –curves

� Resources Vs Work Progress

� Nominated suppliers and sub-contractor (fixed price)

� Control resources.

� Training

� Clear Job delineation

47

E. COMMUNICATION RISKS

COMMUNICATION

BREAKDOWN

• Client & consultant meeting

• Contract documents

• Proper job delineation

• proper correspondences

• Progress/site meeting

• Co-ordination meeting

• Tool box meeting

• Clear Job delineation

48

F. QUALITY RISKS

� Many software project risks result from delivery of unexpectedly poor software quality

� Unreliable software

� Unusable software

� Unmaintainable software

� Nonportable software

� Nonexpandable software

� Techniques� Performance modeling

� Reliability softwares

� Quality factor analysis

� Knowledge.

� Training.

� Experience personnel.

49

Technique;

� Choose contractor with specialist track record.

� Choose contractor with strong financial backup.

� Choose contractor technology “know how”.

� Contractor with experience personnel.

� Giving training.

50

G. CONSTRUCTION RISK

- Inability of a sub-contractor to perform

� Worker injured or killed

� A job accident that injures the public

� A construction vehicle is involved in an accident off the

project.

Solution;

� Public awareness

� Safety Briefing

� Trainning

� Contractor safety programs

� Traffic management and signboard

� Insurance51

H. SAFETY RISK

52

28. Thank You