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CHAPTER 14

CHAPTER 14. Project Risk Management. Risk Event Graph. Risk Management Process. Risk Management Process (cont.). Step 1: Establishing the risk context Step 2: Risk identification Step 3: Risk analysis Step 4: Risk evaluation Step 5: Risk treatment Step 6: Contingency planning.

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CHAPTER 14

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  1. CHAPTER 14 Project Risk Management

  2. Risk Event Graph

  3. Risk Management Process

  4. Risk Management Process (cont.) • Step 1: Establishing the risk context • Step 2: Risk identification • Step 3: Risk analysis • Step 4: Risk evaluation • Step 5: Risk treatment • Step 6: Contingency planning

  5. Step 1: Establishing the Risk Context • What is the organisation’s context for risk? • How does this affect the project environment? • How are ‘individual’ risk tolerances levelled? • Do you use the ‘As Low As Reasonably Possible’ (ALARP) approach?

  6. Step 2: Risk Identification • WBS • RBS • Risk Profiles • Lessons learned • Delphi method • SWOT • Others…

  7. Step 2: Risk Identification (cont.) The Risk Breakdown Structure (RBS)

  8. Step3: Risk Analysis • Probability refers to the probability of the event. (This is otherwise known as the likelihood of the risk occurring.) • Impact refers to the impact of the event. (This is otherwise known as the consequence of the risk if the event occurs.)

  9. Step 3: Risk Analysis Simple ‘inherent’ risk analysis

  10. Step 3: Risk Analysis (cont.) Impact considered over multiple criteria

  11. Step 3:Risk Analysis (cont.) Decision tree analysis

  12. Step 4: Risk Evaluation • The purpose of risk evaluation is to assist in making decisions, based on the outcomes of the risk analysis, about which risks need treatment and the priority for treatment implementation. • Risk evaluation involves comparing the level of risk found during the analysis process with risk criteria established when the context was considered. • Based on this comparison, the need for treatment can be considered. (AS/NZS/ISO 31000:2009)

  13. Step 5: Risk Treatment for Threat Risks • Mitigating risk • Avoiding risk • Transferring risk • Accepting (retaining) risk

  14. Step 5: Risk Treatment (cont.) Mitigation and residual risk assessment

  15. Step 5: Risk Treatmentfor Opportunity Risks • Exploit • Share • Enhance • Accept

  16. Step 6: Contingency Planning A contingency plan is an alternative plan that will be used if a possible foreseen risk event becomes a reality (an issue).

  17. Step 6: Contingency Planning (cont.) Risk contingency plan

  18. Step 6: Contingency Planning (cont.) Common methods for handling risk • Technical risks • Schedule risks • Cost risks • Funding risks

  19. Contingency Funds and Risk • Budget reserves • Management reserves • Time buffers How are risk contingencies managed in your organisations?

  20. Risk Management Plan • Risk context • Risk methodology • Risk roles and responsibilities • Risk escalation process • Risk reporting • Risk audits and health checks • Lessons learned

  21. Risk Monitoring and Review

  22. Key Terms Monte Carlo technique opportunity risk PERT PERT simulation probability (likelihood) risk analysis risk breakdown structure (RBS) risk context risk evaluation risk identification Risk Management Plan risk monitoring and review risk profile Risk Register risk severity matrix root cause analysis threat risk • 5 Whys • ALARP • AS/NZS/ISO 31000:2009 • assumptions • constraints • contingency plan • contingency planning • decision trees • decision tree analysis • Delphi Method • Failure Mode and Effects Analysis (FMEA) • impact (consequence) • mitigation strategy (risk response)

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