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Chapter 17

Chapter 17. Risk Management. RISK MANAGEMENT. RISK MANAGEMENT FOCUSES ON THE FUTURE RISK AND INFORMATION ARE INVERSELY RELATED. RISK MANAGEMENT (CONT.). HISTORICALLY, WE FOCUSED OUR ATTENTIONS ON SCHEDULE AND COST RISK MANAGEMENT.

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Chapter 17

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  1. Chapter 17 Risk Management

  2. RISK MANAGEMENT • RISK MANAGEMENT FOCUSES ON THE FUTURE • RISK AND INFORMATION ARE INVERSELY RELATED

  3. RISK MANAGEMENT (CONT.) • HISTORICALLY, WE FOCUSED OUR ATTENTIONS ON SCHEDULE AND COST RISK MANAGEMENT. • TODAY, OUR PRIMARY EMPHASIS IS ON TECHNOLOGICAL RISK MANAGEMENT: • CAN WE DESIGN IT AND BUILD IT? • WHAT IS THE RISK OF OBSOLESCENCE?

  4. Definition Of Risk Risk = f(Likelihood, Impact) event • Likelihood is the probability of occurrence of an event • Impact is the amount at stake • Likelihood up  risk up • Impact up  risk up

  5. Definition Of Risk-2 Risk = f(Hazard, safeguard) Hazard: source of danger Safeguards: ways of overcoming Hazard up  risk up Safeguard up  risk down

  6. Tolerance For Risk • Risk avoider • Risk neutral • Risk seeker

  7. Risk Management (RM) • The act or practice of dealing with risk • Is proactive rather than reactive • Includes: • Planning for risk • Assessing (identifying and analyzing) risk issues • Develop risk handling strategies • Monitor risk

  8. Decision-Making Categories • Decision Making under certainty • Decision making under risk Decision making under uncertainty • Maximax, maximin, minimax, laplace criterion, decision trees

  9. Risk Management Processes • Risk planning • Risk assessment • Risk identification • Risk analysis/quantification • Risk handling • Risk monitoring

  10. Types Of Risks (General) • Business risks • Insurable (pure) risk • Direct property damage • Indirect consequential loss • Legal liability • Personnel

  11. Risk Planning • Develop and document a comprehensive risk management strategy • Determine the methods to be used • Plan for adequate resources • Develop Risk Management Plan (RMP)

  12. Risk Assessment • One of the most important phases of risk management process • Risk identification • Identify all potential risk issues • Life-cycle risk analysis • Risk analysis

  13. Types Of Risk (PMI Method) • External – unpredictable • External – predictable • Internal – non-technical • Internal – technical • Legal

  14. After risk analysis convert the results into risk levels. • High risk • Moderate risk • Low risk • be careful with uncertainty statements

  15. Risk Handling • Deal with known risk, identify who is responsible • Assumption (retention) • Avoidance • Control (mitigation) • Transfer

  16. Assumption • I know the risk exists, I am aware of consequences, I accept the risk should it occur • Avoidance • I will not accept this option, change the design, change the requirements • Risk control • I will take necessary measures to prevent unfavorable results

  17. Risk transfer • I will share the risk through insurance or warranty • Which method to use?

  18. Risk Monitoring • Earned Value • Program metrics: formal periodic performance assessments • Schedule performance monitoring • Technical performance measurement: product design assessment

  19. How Much Risk Is Acceptable? • High tolerance for risk • Medium tolerance for risk • Low tolerance for risk

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