scribd up lg22

7/31/2019 Scribd Up LG22

1/13

1

RISK MANAGEMENT


2/13

What is Risk Management

Project risk management is identifying, analyzing,and responding to risk(s) throughout the life of aproject in the interest of meeting project objectives.

Risk management is often overlooked in projects,but it can help improve project success by helpingselect good projects, determining project scope and

developing realistic estimates.

2


3/13

Importance & Benefits from Risk Management Practices

80%

60%

47% 47% 43%35%

6%

0%

20%

40%

60%

80%

100%

Anticipa

te/av

oidproble

ms

Prev

ents

urprise

s

Improve

ability

toneg

otiate

Meet

custom

ercomm

itments

Reduc

esche

dule

slips

Redu

cecost

overruns

None

3

Figure 11.1


4/13

Definition of Risk Management

A dictionary definition of risk is the possibility of loss or injury.

Negative risk involves understanding potential problems that might occur inthe project and how they might impede project success.

Negative risk management is like a form of insurance; it is an investment.

Positive risks are risks that result in good things happening; sometimescalled opportunities.

A general definition of project risk is an uncertainty that can have a negativeor positive effect on meeting project objectives.

The goal of project risk management is to minimizepotential negative riskswhile maximizing potential positive risks.

4


5/13

Risk Management (RM) Processes (6)

1. Risk management planning: Deciding how to approach and plan the riskmanagement activities for the project.

2. Risk identification: Determining which risks are likely to affect a project anddocumenting the characteristics of each.

3. Qualitative risk analysis: Prioritizing risks based on their probability andimpact of occurrence.

4. Quantitative risk analysis: Numerically estimating the effects of risks onproject objectives.

5. Risk response planning:Taking steps to enhance opportunities and reducethreats to meeting project objectives.

6. Risk monitoring and control: Monitoring identified and residual risks,identifying new risks, carrying out risk response plans, and evaluating theeffectiveness of risk strategies throughout the life of the project.

5


6/13

1. Risk Management Planning

The main output of risk management planning is arisk management plana plan that documents theprocedures for managing risk throughout a project.

The project team should review project documentsand understand the organizations and the sponsorsapproaches to risk.

The level of detail will vary with the needs of theproject.

6


7/13

1. RM Planning Topics

Methodology

Roles and responsibilities

Budget and schedule

Risk categories

Risk probability and impact

Risk documentation

7


8/13

1. RM Planning Contingency, Fallback, Allowances

Contingency plans are predefined actions that theproject team will take if an identified risk eventoccurs.

Fallback plans are developed for risks that have ahigh impact on meeting project objectives, and areput into effect if attempts to reduce the risk are noteffective.

Contingency reserves or allowances are provisionsheld by the project sponsor or organization toreduce the risk of cost or schedule overruns to anacceptable level.

8


9/13

1. RM Planning Common Risk Factors

Lack of top management commitment to the project

Failure to gain user commitment

Misunderstanding the requirement

Lack of adequate user involvement

Failure to manage end user expectation

Changing scope and objectives

Lack of required knowledge/skill in project personnel

New technology

Insufficient / inappropriate staffing

Conflict between user departments

9


10/13

1. RM Planning IT Success Potential Scoring

Success Criterion Relative Importance

User Involvement 19

Executive Management support 16

Clear Statement of Requirements 15

Proper Planning 11

Realistic Expectations 10

Smaller Project Milestones 9

Competent Staff 8

Ownership 6

Clear Visions and Objectives 3

Hard-Working, Focused Staff 3

Total 100

10


11/13

1. RM Planning Categories of Risk & RBS

Market risk (Business)

Financial risk

Technology risk

People risk

Organizational risk (structure/process)

A risk breakdown structure (RBS) is a hierarchy of potential riskcategories for a project.

Similar to a work breakdown structure but used to identify andcategorize risks.

11


12/13

1. RM Planning

Sample Risk Breakdown Structure (RBS)

IT Project

Business Technical OrganizationalProject

Management

Competitors

Suppliers

Cash flow

Hardware

Software

Network

Executive

support

User support

Team support

Estimates

Communication

Resources

12


13/13

Negative Risk Conditions To Knowledge Area

13

Knowledge Area Risk Conditions

Integration Inadequate planning; poor resource allocation; poor integration

management; lack of post-project review

Scope Poor definition of scope or work packages; incomplete definition

of quality requirements; inadequate scope control

Time Errors in estimating time or resource availability; poor allocation

and management of float; early release of competitive products

Cost Estimating errors; inadequate productivity, cost, change, or

contingency control; poor maintenance, security, purchasing, etc.

Quality Poor attitude toward quality; substandard

design/materials/workmanship; inadequate quality assurance

program

Human Resources Poor conflict management; poor project organization and

definition of responsibilities; absence of leadership

Communications Carelessness in planning or communicating; lack of consultation

with key stakeholders

Risk Ignoring risk; unclear assignment of risk; poor insurance

management

Procurement Unenforceable conditions or contract clauses; adversarial relations

scribd up lg22

Documents