Project Management Certificate Program Risk Management

1. Project Management Certificate Program Risk Management Module 11

3. Module Objectives • By module end, you will be able to: • Understand how to plan for, identify and quantify Risk for a project • Understand the purpose for using these processes for the project or phase • Understand what tools will be used to plan for, identify and quantify Risk

4. Risk Management Risk Management plans how to address Risk • The primary purpose is to plan for basic control during executing • The main outcomes are: • Risk management plan • Risk management approaches • Risk identification • Risk response plans

5. Risk Management In Risk Management Planning, 5 PMBOK processes are used: • Plan Risk Management • Identify Risk • Perform Qualitative Risk Analysis • Perform Quantitative Risk Analysis • Plan Risk Responses

6. Plan Risk Management • Project risk management is now recognized as one of the most important areas in project management • Risk infiltrates into each and every aspect of a project

7. Plan Risk Management • The first process used during risk management is Plan Risk Management. • Decide how to approach and plan our risk management activities • Applied to develop the project’s Risk Management Plan

8. What is Project Risk? “The risk of the project being unsuccessful” Project Risks are associated with Project Work! Threats = unfavorable risks Opportunities = favorable risks • Source: Project & Program Risk Management: A Guide to Managing Project Risks and Opportunities, Max Wideman

9. What is Project Risk Management? • Definition: “Describes the processes concerned with conducting risk management planning, identification, analysis, responses, and monitoring & control on a project; most are updated throughout the project.” • Risk Management is managing Risk Events (Discrete occurrences of an uncertain event) • Identify alternatives • Uncover additional opportunities

10. SCOPE COMMUNICATIONS INTEGRATION Life Cycle and Environment Variables Expectations Feasibility Ideas, Directives, Data Exchange Accuracy QUALITY PROJECT RISK HUMAN RESOURCE Requirements Availability Standards Productivity Time Objectives Restraints Services, Plant, Materials Performance Cost Objectives Restraints TIME CONTRACTS COST Project Risk Management Integrated with Other Areas

12. Plan Risk Management Think about the practical application of this process : • Process Documents • Document Templates • Process Tasks • Think About It Exercise

13. Must Know Concepts

14. Identify Risks • Applied to determine which risks may affect the project and to document their characteristics • The primary objective: • Create a list of identified risks with the indications that the risk has occurred or is about to occur

15. Identify Risks • To identify as many risks as possible, many knowledgeable people should participate • Several iterations are likely • While most risk identification is done during planning, identifying risks is a process that should be encouraged throughout the project life cycle

17. Risk Identification (How?) Techniques: • Brainstorming • Delphi technique • Nominal group technique • Checklist analysis • Assumptions • Flowcharting • Documentation reviews • All project artifacts should be subjected to review to identify inherent risks in: • Completeness of content • Comprehensiveness of content • Compliance to defined policies or standards • Quality of content (e.g. timeliness) • Scope of items such as cost, schedule, budget

18. Brainstorming Unstructured generation of ideas by a group of people • offer ideas without judgment or evaluation • build on the ideas offered • repeat until exhausted Interview stakeholders forrisk ID and quantification

19. Root Cause Identification Helps to identify root cause of a project’s risk so that appropriate action can be taken (Address causes not symptoms!) Multiple Diagramming Techniques are available which can be used for root cause analysis: • Fishbone diagrams • System process flowcharts • Influence diagrams Cause(s)  Risk  Symptom(s)

20. Customer Communication misunderstood verbal order only orders wrong item changes mind bad connection Wrong Merchandise Shipped not clear training forgot careless numbers transposed overworked training Order Clerk Picking Crew Cause and Effect Diagram Fishbone – Ishikawa Diagram Issue or Symptom

21. Delphi Estimation Technique • Select several experts in fields pertinent to the item to be estimated • Identify key elements of component being estimated • Circulate list of elements to experts for generating estimates; each anonymouslygenerates a total for the component based on their experience. Their rationale for the estimates is also included. • Meeting moderator gathers inputs anonymously • Moderator puts estimates on a spread line where all can see • Round-robin, experts cite their considerations for key issues like: • what element takes the most time? why? • what element is negligible? why? • what element has to be added? • Repeat estimation cycle until reasonable agreement is reached

22. Nominal Group Technique Technique for getting balanced participation (unbiased) in adata gathering effort Good for: problem solving creative decision making (e.g. estimates) idea generating situations Procedure: • Each participant privately generates a list of inputs • Round robin, each participant provides one new item for the common list (everyone gets a turn). No talking during this part. List items with letters not numbers. • Group discusses items as needed after list is complete to eliminate duplicates, sound-alikes, etc. • Each person privately ranks the n most important items • Using these anonymous votes, the leader calculates a team ranking for each item • Group discusses the resulting ranking, anomalies, etc. • Repeat steps 4, 5, and 6 until a consensus top set is reached. Usually, this is no more than 2 or 3 rounds.

23. C A B D Process Flowcharting • A flowchart is a graphical representation of a process • Identifies potential risk areas • Used in process improvement

24. þ þ þ Checklist Analysis A structured risk checklist that organizes risks into a certain framework • Developed by iteratively creating lists of points that you want to review for risks • Similar to a risk taxonomy which is a category hierarchy, or tree, that can serve as a basis for a navigation scheme • Can be presented in the form of a questionnaire

25. Assumptions Analysis The goal is to develop dialog between team members to gain insight into the thoughts of their colleagues Hearing the underpinnings of a team member’s assumptions often allows one to rethink a problem. • Members step back to examine their beliefs--the ideas and information which led to their present positions • Assumptions analyzed for truth and importance

26. Identify Risks Think about the practical application of this process : • Process Documents • Document Templates • Process Tasks • Think About It Exercise

27. Must Know Concepts

28. Perform Qualitative Risk Analysis • Perform Qualitative Risk Analysis is the process of assessing the impact and likelihood of identified risks. • This process is intended to help prioritize identified risks and identify risks that are serious enough for additional analysis.

30. Probability and Impact Matrix A Two Dimensional Rating System • Rates the likelihood of a risk occurring between 0.0 and 1.0 or 100% certainty • The matrix then measures the impact of the risk should it occur • Classify risks in terms of Probability and Impact • Gain consensus from project management team members on classifications • Results can be illustrated in a P-I matrix and are useful for ranking risks in the Risk Register

31. Qualitative Risk Analysis(What Is A Probability-Impact (P-I) Matrix?) PROBABILITY VHI HI MED LO VLO Biggest threats to project VLO LO MED HI VHI IMPACT

32. Perform Qualitative Risk Analysis Think about the practical application of this process : • Process Documents • Document Templates • Process Tasks • Think About It Exercise

33. Must Know Concepts

34. Perform Quantitative Risk Analysis • Perform Quantitative Risk Analysis is applied to: • Determine a numerical value for overall project risk • Guide the additional analysis of individual risks: • Determine the numerical value of its probability of occurrence and the numerical value of its consequence

36. Perform Quantitative Risk Analysis Think about the practical application of this process : • Process Documents • Document Templates • Process Tasks • Think About It Exercise

37. Must Know Concepts

38. Plan Risk Responses • A primary objective is to create the project’s Risk Response Plan • Develop options and determine actions to enhance opportunities (positive risks), and to develop options and determine actions to reduce threats (negative risks).

40. Avoid Avoidance - Change the project plan to eliminate the risk or protect project objectives from its impact • Advantages: • Removes the risk from the project • Eliminates the effort needed to manage the risk • Disadvantages: • Effort to eliminate the risk may be costly

41. Mitigation Mitigation – Reduce the exposure by a reduction in the probability and/or impact of the risk below an acceptable threshold • Advantages: • Makes the risk manageable and provides a level of control from the ability to effect a change in probability and/or impact • Disadvantages: • Additional effort and/or costs required to manage the risks • Effort to mitigate the risks can introduce secondary risks which must also be managed

42. Transfer Shifting the negative impact as well as ownership to a third party. Examples include insurance, outsourcing, contracting • Advantages: • Affords a high level of protection against the risk • Requires less effort on the part of the project team • Disadvantages • Can be very costly • Reduces the team’s ability to manage or control the risk • Risk associated with proper selection and/or failure of third party

43. Exploit For risks with positive impacts where the organization wishes to ensure that the opportunity is realized. Examples are introducing a new product to a market or Deployment of software to reduce operational costs • Advantages • Potential for significant payback from ensuring the opportunity occurs • Disadvantages • Potential high costs associated with eliminating uncertainty • High level of uncertainty associated with the risk

44. Share Allocating the opportunity to a third party who is best able to capture the opportunity for the benefit of the project Examples are outsourcing, contracting of work, or joint ventures • Advantages • Higher potential for realizing the opportunity • Shared exposure to the risk • Disadvantages • Sacrifice full control and realization of opportunity • Reliant on external organization for realization of opportunity • Additional resources, time, and cost for managing the relationship

45. Enhance Modify the “size” of the opportunity by increasing probability and /or positive impacts, and by identifying and maximizing key drivers of these positive-impact risks Examples are: Increasing the value of the final product to increase the positive-impact. Could be achieved through research and/or leveraging subject matter expertise to better understand the opportunity • Advantages • Obviously a greater benefit from realization of opportunity • Potential for identification of additional opportunities. • Disadvantages • Additional financial investments and potential increase in project scope • Potential for introduction of an even greater negative-impact risk and/or additional effort to risk management

46. Acceptance The project team has decided not to change the project management plan to deal with the risk, or is unable to identify any suitable response strategy. • Passive is to accept the risk and deal with them as they occur • Active is to allocate some contingency in the event of occurrence • Advantages • Little or no effort is required to analyze or manage the risk • Possibility that the risk will never trigger and therefore no effort is ever required. This could potentially enhance the opportunity • Disadvantages • Impact from risk occurrence could be significant enough to require termination of the project. . • May be very difficult to get executive buy-in to accept a risk and or approval of contingency reserves

47. Risk: Requirements grow uncontrollably resulting in increased development cost Containment Alternatives: Accept the exposure Passive vs. Active Avoid Invoke contract termination Restrict to well-defined parts Transfer Specify requirements as responsibility of the customers Mitigate Use phased approach Chg mgmt procedure in contract Risk reserve Set aside a reserve (cost, time) Example: Create Multiple Strategies

48. Plan Risk Responses Think about the practical application of this process : • Process Documents • Document Templates • Process Tasks • Think About It Exercise

49. Must Know Concepts

50. MODULE Review