project management learning program 19 – 30 april 2010, mekong institute, khon kaen, thailand...
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Pro
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Assumptions and Risk
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By the end of the session, participants will be able to:
•Identify and validate project assumptions;
•Identify and analyze project risk;
•Have hands-on experience in completing the 4th column of the DMF.
Session Objectives
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• Presentation (30min)
• Learning Team Exercise (1hr 15min)
• Team Presentation of Output (1hr 30min)
Session Flow
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Project Framework
ACTIVITIESACTIVITIES
Design and Monitoring Framework Reference
ACTIVITIES
DesignSummary
PerformanceTargets/Indicators
Data Sources/Reporting Mech.
Assumptions/Risks
Outcome
Impact
Outputs
Activities with Milestones Inputs
Version
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Describe necessary internal and external conditions in order to ensure that the activities will produce results
Assumptions are risks, which can jeopardize the success of the project
Are worded positively, i.e. they describe circumstances required to achieve certain objectives
Assumptions
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Should be relevant and probable
If an assumption is not important or almost certain: Do not include
If an assumption is unlikely to occur: Killer assumption – abandon project
Assumptions
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Example of Assumptions: Political – stability of government Economic – sustainable economy
Assumptions
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Example of Assumptions: Adequate funds materials. Skilled people – training needs. Approvals & contracts – legal,
administrative. Participation of stakeholders.
Assumptions
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Outcome
Impact
Activities
Assumptions
AssumptionsOutputs
Assumptions
Activities to Impact through Assumptions
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Risk Definition
PMBOK® guide definition.
Uncertain event or condition, that if it occurs, has a positive or negative effect on a project’s objectives.
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Amount of RiskAmount of Risk
TotalUncertainty
RelativeUncertainty
TotalCertainty
NoInformation Some
Information CompleteInformation
Information vs. Uncertainty Relationship
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Risk Management Processes
Risk Identification
Risk Analysis
Risk Response Planning
Risk Monitoring & Control
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Risk Identification
Determining the risk events that are likely to affect the project and classifying them according to their cause or source.
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Types of Risks
Business risks – those normal risks of doing business that carry opportunities for both gain and losses.
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Types of Risks
Pure or insurable risks – those risks that present only an opportunity for loss
• Direct property damage
• Indirect consequential loss (business interruptions
• Legal liability
• personnel
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Risk Identification Tools
• Brainstorming
• Delphi technique
• Interviewing
• Checklists
• Assumptions analysis
• Cause and effect diagram
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Risk Management Processes
Risk Identification
Risk Analysis
Risk Response Planning
Risk Monitoring & Control
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Qualitative Risk Analysis
IMPACT
PROBABILITY
Very High
High
Moderate
Low
Very Low
Very Low
Low Moderate
High Very High
19 14 9 4 1
21 16 11 6 2
23 18 13 8 3
24 20 15 10 5
25 22 17 12 7
Probability / Impact Matrix
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Risk Probability- 5 Level Scale
Level Probability of Occurrence Intervention Difficulty
1
Very Low
You would be surprised if this happened.
Your normal management processes should easily ensure an acceptable outcome
2
Low
Less likely to happen than not. Careful oversight of your normal management processes will probably bring about an acceptable outcome.
3
Medium
Just as likely to happen as not. Additional time and effort will be required to move forward an acceptable outcome.
4
High
More likely to happen than not. Your resources and authority are sufficient to permit only a minor effect on the outcome.
5
Very High
You would be surprised if this did not happen.
Your ability to affect the outcome is effectively zero.
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Risk Impact – 5 Level Scale
1 Very Low
2 Low
3 Medium
4 High
5 Very High
Cost Insignificant cost increase
< 5% cost increase
5-10% cost increase
10-20% cost increase
>20% cost increase
Schedule Insignificant schedule slippage
Overall project slippage < 5%
Overall project slippage 5-10%
Overall project slippage 10-20%
Overall project slippage >20%
Scope Scope decrease barely noticeable
Minor areas of scope are affected
Major areas of scope areaffected
Scopereduction unacceptableto the client
Project end item is effectively useless
Quality Quality degradation barely noticeable
Only very demanding application are affected
Quality reduction requires client approval
Quality reduction unacceptableto the client
Project end item is effectively unusable
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Risk Management Processes
Risk Identification
Risk Analysis
Risk Response Planning
Risk Monitoring & Control
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Risk Response Planning
Identification of specific actions to minimize the occurrence of specific risks in a project
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Responding to Risks
• Avoidance
• Transference
• Mitigation
• AcceptanceTransference?
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Risk Response Strategies
Avoidance: “ I do not accept this option because of the potentially unfavorable results…”
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Risk Response Strategies
Transference: “ I am aware of the risk and will transfer all or a portion of it to another party…”
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Risk Response Strategies
Mitigation (or control): “ I am aware of the risk, and I will do my best to minimize its occurrence and effect…”
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Risk Response Strategies
Acceptance: “ I am aware of the risk, and I am willing to accept the consequences should they occur…”
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Other Risks
• Residual risks – those that remain after avoidance, transfer of mitigation or other minor risks that have been accepted and addressed.
• Secondary Risks – those that arise as a direct result of implementing a risk response.