risk management slides
TRANSCRIPT
Project Risk Project Risk ManagementManagement
Sections of this presentation were adapted Sections of this presentation were adapted from from A Guide to the Project Management A Guide to the Project Management
Body of KnowledgeBody of Knowledge 3 3rdrd Edition, Project Edition, Project Management Institute Inc., © 2004Management Institute Inc., © 2004
Risk ManagementRisk Management
““The process involved with identifying, The process involved with identifying, analyzing, and responding to risk. It analyzing, and responding to risk. It includes maximizing the results of positive includes maximizing the results of positive risks and minimizing the consequences of risks and minimizing the consequences of negative events”negative events”
Why Do We Manage Risk?Why Do We Manage Risk?
Project problems can be reduced as much Project problems can be reduced as much as 90% by using risk analysisas 90% by using risk analysisPositives:Positives: More info available during planningMore info available during planning Improved probability of success/optimum Improved probability of success/optimum
projectproject
Negatives:Negatives: Belief that all risks are accounted forBelief that all risks are accounted for Project cut due to risk levelProject cut due to risk level
Key TermsKey Terms
Risk Tolerance – The amount of Risk Tolerance – The amount of acceptable riskacceptable riskRisk Adverse – Someone that does not Risk Adverse – Someone that does not want to take riskswant to take risksRisk FactorsRisk Factors Probability Probability of occurrenceof occurrence Impact Impact of eventof event RangeRange of outcomes of outcomes TimingTiming of event of event
How Do We Manage Risk?How Do We Manage Risk?Use the six risk management processesUse the six risk management processes Risk Management PlanningRisk Management Planning Risk IdentificationRisk Identification Qualitative Risk AnalysisQualitative Risk Analysis Quantitative Risk AnalysisQuantitative Risk Analysis Risk Response PlanningRisk Response Planning Risk Monitoring and ControlRisk Monitoring and Control
Risk Management Planning
Risk Identification
Qualitative Risk Analysis
Quantitative Risk Analysis
Risk Response Planning
Risk Monitoring and Control
Risk Management PlanningRisk Management Planning
Project Scope Statement
Enterprise Environmental Factors
Organizational Process Assets
Project Management Plan
Risk Management Plan
Planning Meetings and Analysis
Inputs
Outputs
Tools & Techniques
Risk Management Planning
Risk Identification
Qualitative Risk Analysis
Quantitative Risk Analysis
Risk Response Planning
Risk Monitoring and Control
What is a Risk Management Plan?What is a Risk Management Plan?Methodology – Approach, tools, & dataMethodology – Approach, tools, & data
Roles & ResponsibilitiesRoles & Responsibilities
Budgeting – Resources to be put into risk Budgeting – Resources to be put into risk managementmanagement
Timing – When and how oftenTiming – When and how often
Risk Categories – Risk Breakdown Risk Categories – Risk Breakdown Structure (RBS)Structure (RBS)
Definitions – Risk probabilities and impactDefinitions – Risk probabilities and impact
What is a Risk Mgmt Plan (Cont’d)?What is a Risk Mgmt Plan (Cont’d)?Probability and Impact MatrixProbability and Impact Matrix
Stakeholder tolerancesStakeholder tolerances
Reporting formatsReporting formats
TrackingTracking
Risk Breakdown StructureRisk Breakdown StructureLists categories and subcategories where Lists categories and subcategories where risks may ariserisks may arise
Project
Technical Organizational Project Management
Limited Design Time
Specifications Adherence
Funding
Prioritization
Resource Availability
Estimates
Scheduling
Communication
Risk IdentificationRisk Identification
Project Scope Statement
Enterprise Environmental Factors
Organizational Process Assets
Risk Management Plan
Risk Register
Documentation Reviews
Information Gathering Techniques
Checklist Analysis
Assumption analysis
Diagramming techniques
Inputs
Outputs
Tools & Techniques
Risk Management Planning
Risk Identification
Qualitative Risk Analysis
Quantitative Risk Analysis
Risk Response Planning
Risk Monitoring and Control
Project Management Plan
Information Gathering TechniquesInformation Gathering Techniques
BrainstormingBrainstorming
Delphi techniqueDelphi technique Successive anonymous questionnaires on Successive anonymous questionnaires on
project risks with responses summarized for project risks with responses summarized for further analysisfurther analysis
InterviewingInterviewing
Root cause identificationRoot cause identification
Strengths, weaknesses, opportunities, and Strengths, weaknesses, opportunities, and threats (SWOT) analysisthreats (SWOT) analysis
Diagramming TechniquesDiagramming TechniquesCause and Effect DiagramsCause and Effect Diagrams Also known as Ishikawa or fishboneAlso known as Ishikawa or fishbone
Product Delivered
Late
Bad SpecsInsufficient Resources
Inadequate Time
Project Prioritization
Testing
Materials
Potential Causes Effect
Personnel
Risk RegisterRisk Register
List ofList of Identified risksIdentified risks Potential responsesPotential responses Root causesRoot causes
Updated risk categories (if required)Updated risk categories (if required)
Risk Management PlanningRisk Management Planning
Risk Management Plan
Organizational Process Assets
Project Scope Statement
Risk Register
Risk Register (UPDATED)
Risk probability and impact statement
Probability and impact matrix
Risk data quality assessment
Risk categorization
Risk urgency assessment
Inputs
Outputs
Tools & Techniques
Risk Management Planning
Risk Identification
Qualitative Risk Analysis
Quantitative Risk Analysis
Risk Response Planning
Risk Monitoring and Control
MethodologiesMethodologies
Probability and Impact MatrixProbability and Impact Matrix Based on Failure Modes and Effects Based on Failure Modes and Effects
Analysis (FMEA)Analysis (FMEA) From 1950’s analysis of military systemsFrom 1950’s analysis of military systems
Probability and Impact MatrixProbability and Impact Matrix
Define Probability Scale & Impact ScaleDefine Probability Scale & Impact Scale
Likelihood ClassLikelihood of Occurrence
(events/year)
Not Likely (NL)<0.01% chance of
occurrence
Low (L)0.01 - 0.1% chance of
occurrence
Moderate (M)0.1 - 1% chance of
occurrence
High (H)1 - 10% chance of
occurrence
Expected (E) >10% chance of occurrence
Probability Scale
Consequence Health and Safety
ExtremeFatality or multiple fatalities
expected
HighSevere injury or disability likely; or
some potential for fatality
Moderate
Lost time or injury likely; or some potential for serious injuries; or
small risk of fatality
LowFirst aid required; or small risk of
serious injury
Negligible No concern
Impact Scale
Probability and Impact PlotsProbability and Impact Plots
Rate each Rate each risk on risk on scales then scales then plot on matrixplot on matrix
Develop Develop mitigation mitigation technique for technique for risks above risks above tolerancetolerance
Risk Register UpdateRisk Register Update
Add Add Probability and Impact Matrix resultsProbability and Impact Matrix results Perform quality check on resultsPerform quality check on results Categorize the risks to make them easier to Categorize the risks to make them easier to
handlehandle Perform urgency assessment to determine Perform urgency assessment to determine
which risk need immediate attentionwhich risk need immediate attention
Risk RegisterRisk Register
Quantitative Risk AnalysisQuantitative Risk Analysis
Risk Management Plan
Organizational Process Assets
Project Scope Statement
Risk Register
Risk Register (UPDATED)
Data gathering
Quantitative risk analysis and modeling
Inputs
Outputs
Tools & Techniques
Risk Management Planning
Risk Identification
Qualitative Risk Analysis
Quantitative Risk Analysis
Risk Response Planning
Risk Monitoring and Control
Project Management Plan (Schedule & Cost Plans)
Quantitative Risk AnalysisQuantitative Risk Analysis
Analyze numerically the probability and Analyze numerically the probability and consequence of each riskconsequence of each risk
Monte Carlo analysis popularMonte Carlo analysis popular
Decision Tree analysis on testDecision Tree analysis on test Diagram that describes a decision and Diagram that describes a decision and
probabilities associated with the choicesprobabilities associated with the choices
Expected Monetary Value Analysis (EMV)Expected Monetary Value Analysis (EMV)
Expected Monetary Value (EMV)Expected Monetary Value (EMV)
Building Cost Probability
Optimistic OutcomeOptimistic Outcome $150K$150K 0.20.2 $30K$30K
Likely OutcomeLikely Outcome $225K$225K 0.50.5 $113K$113K
Pessimistic Pessimistic OutcomeOutcome
$300K$300K 0.30.3 $100K$100K
Expected Value $243K$243K
Decision Tree AnalysisDecision Tree Analysis
Build or Upgrade
Plant
New Plant
-$120
Upgrade Plant
-$50
Strong Demand
Weak Demand
Strong Demand
Weak Demand
65%
$200
35%
$90
65%
$120
35%
$60
$80
-$30
$70
$10
Decision Definition
Decision Node
Chance Node
Net Path Value
EMV of New Bldg Node = $41.5!
EMV of Upgrade Node = $49!
Risk Response PlanningRisk Response Planning
Risk Management Plan
Risk Register
Risk Register (UPDATED)
Strategies for negative risks or threats
Strategies for positive risks or opportunities
Strategy for both threat and opportunity
Contingent response strategy
Inputs
Outputs
Tools & Techniques
Risk Management Planning
Risk Identification
Qualitative Risk Analysis
Quantitative Risk Analysis
Risk Response Planning
Risk Monitoring and Control
Project Management Plan (UPDATE)
Risk-related contractual agreements
StrategiesStrategies
Negative Risks (or Threats)Negative Risks (or Threats) AvoidAvoid TransferTransfer MitigateMitigate AcceptanceAcceptance
Positive Risks (or Opportunities)Positive Risks (or Opportunities) ExploitExploit ShareShare EnhanceEnhance AcceptanceAcceptance
Risk Monitoring and ControlRisk Monitoring and Control
Approved Change Requests
Risk Management Plan
Risk Register
Work Performance Information
Risk Register (UPDATED)
Risk reassessment
Risk audits
Variance and trend analysis
Technical performance measurement
Reserve analysis
Status meetings
InputsOutputsTools & Techniques
Risk Management Planning
Risk Identification
Qualitative Risk Analysis
Quantitative Risk Analysis
Risk Response Planning
Risk Monitoring and Control
Performance Reports
Requested Changes
Recommended Corrective Actions
Recommended Preventive Actions
Org Process Assets (Update)
Project Management Plan (Update)
Risk Management SummaryRisk Management Summary
Risk Management Planning – NewRisk Management Planning – New
Risk ID – Develop categories & typesRisk ID – Develop categories & types
Risk Qualitative – Probability & Impact Analysis Risk Qualitative – Probability & Impact Analysis
Risk Quantitative – Decision Tree, EMV, Monte Risk Quantitative – Decision Tree, EMV, Monte CarloCarlo
Risk Response – Mitigation & contingency plansRisk Response – Mitigation & contingency plans
Risk Monitoring and Control – Recurring Risk Monitoring and Control – Recurring evaluationsevaluations
Risk Management Planning
Risk Identification
Qualitative Risk Analysis
Quantitative Risk Analysis
Risk Response Planning
Risk Monitoring and Control