Project Risk Management Processes

1. Manage Project RiskProject Risk Processes Part 1Diploma of Project Management 17872Qualification Code BSB51507Unit Code BSBPMG508A

2. Project Risk Management Processes PMBOK Project Risk Management Processes - 11.1 Plan Risk Management 11.2 Identify Risks 11.3 Perform Qualitative Risk Analysis 11.4 Perform Quantitative Risk Analysis 11.5 Plan Risk Responses 11.6 Monitor and Control Risks Related processes from Project Integration Management – 4.1 Develop Project Charter 4.2 Develop Project Management Plan 4.6 Close Project PMBOK 4th Edition

3. Learning Objectives Be able to plan for risk events on projects Understand risk management processes and how to develop risk management strategies Understand how to identify and prioritise potential risks Describe and use risk analysis and reporting tools Understand qualitative and quantitative risk analysis Understand the use of the Risk Register and how to manage and control high priority risks Understand how to report on risk during a project Understand how to assess risk management outcomes at the end of a project

4. Reading – Risk Processes • Please take some time to review – • PMBOK Chapters 11.1, 11.2, 11.3, 11.4, 11.5 and 11.6 • NEW - Risk Management Standard – AS/NZS ISO 31000:2009 • Risk Management Companion- HB4360 • This could take 60 to 90 minutes

5. 4.1 Develop Project Charter The process of developing a document that formally defines and authorises a project by documenting the initial requirements that will satisfy the needs of the Project Sponsor and stakeholder The high level Project Risks are identified and an estimate is made of the overall risk of the project, this can be important to project prioritisation decisions he Project Charter establishes a partnership between the Project Sponsor or client and the Project Manager Occurs during the Initiation Phase Monitor Initiation Planning Execution Close Control Adapted from PMBOK 4th Edition

6. 4.1 Develop Project Charter Inputs into the Project Charter - Business need or rationale Product and project description Strategic Plan Business Case Regulations and standards Contractual requirements Methodologies, policies and procedures Adapted from PMBOK 4th Edition

7. 4.1 Develop Project Charter Common contents of a Project Charter – Project purpose or justification Project objectives – should be measurable Project description High level requirements High level risks or overall risk analysis Preferred timeframe Estimated high level budget High level project structure – Project Sponsor, Project Manager Authorisation or Governance processes PMBOK 4th Edition

8. 4.2 Develop Project Management Plan This is the process of defining and documenting the actions necessary to prepare and integrate all subsidiary plans for each of the 8 key knowledge areas of project management. The planning processes for all project management key knowledge areas are normally performed at the same time and during this process, or expanded upon shortly afterwards. It is progressively updated during project execution via the Perform Integrated Change Control process (PMBOK 4.5) Monitor Initiation Planning Execution Close Control Adapted from PMBOK 4th Edition

9. Typically, a detailed Risk Log will be developed during this process. Very high priority risks may also have specific Risk Action Plans developed to ensure that they can be enacted quickly if the risk occurs. Together with Scope Creep, risks and issues that occur on critical path activities cause the biggest delays and financial impacts to projects. The Risk planning process (11.1) happens concurrently with the project management planning process (4.2) 4.2 Develop Project Management Plan Adapted from PMBOK 4th Edition

10. 11.1 Plan Risk Management The process of defining how to conduct risk management activities for a project Detailed risk planning enhances the overall probability of successful project completion Risk planning creates visibility of the degree and types of risk inherent in a specific project For high risk, large and complex projects – contingency is often added to cover responses to unexpected risks The risk planning process (11.1) happens concurrently with the project management planning process (4.2) Occurs during Planning Monitor Initiation Planning Execution Close Control Adapted from PMBOK 4th Edition

11. 11.1 Plan Risk Management Inputs to Plan Risk Management Project Scope Statement Cost Management Plan Schedule Management Plan Communications Management Plan Enterprise Environmental factors Organisational Process Assets - Risk management standards Risk management policies and procedures Risk categories and definitions Standard templates Lessons learned from previous projects Stakeholder registers Monitor Initiation Planning Execution Close Control Adapted from PMBOK 4th Edition Adapted from PMBOK 4th Edition

12. 11.1 Plan Risk Management • The PMBOK includes only one technique for this process – Planning Meetings and Analysis, this is a very simplistic view. • Other tools and techniques have been included here from practice - Risk Management Standards Workshops Risk Management Methodologies Planning Meetings Risk Analysis Tools Stakeholder Consultation Subject Matter Experts Templates Standard Risk Categories Risk Registers

13. 11.1 Plan Risk Management Outputs of this process include – Risk Management Plan Risk management methodology Risk management roles and responsibilities Risk Action plans including costs and resources required to manage specific risks Risk categories Risk probability and likelihood matrix Risk Log Project Document Updates Stakeholder Register and Responsibility Assignment Matrices (part of Project HR) Change Requests Monitor Initiation Planning Execution Close Control Adapted from PMBOK 4th Edition

14. Risk Management Plan The Risk Management Plan describes how risk management will be structured and performed on the project. It is a subset of the overall Project Management Plan. Common inclusions in the Risk Management Plan – Risk management methodology Risk management roles and responsibilities Risk Action plans including costs and resources required to manage specific risks Risk categories Risk probability and likelihood matrix Risk Log Monitor Initiation Planning Execution Close Control Adapted from PMBOK 4th Edition

15. Risk Categories • Risk categorisation is critical • It helps to ensure that all aspects of risk on the project are considered • Standard risk categories are hard to find • Start with the Project Management Key Knowledge Areas and industry frameworks • Risk Breakdown Structure – • Lists the categories and sub-categories within which risks may arise for a typical project • Different RBSs will be appropriate for different types of projects, different organisations and different industries • Provides a framework to help ensure all risks are considered

16. Example Risk Breakdown Structure Adapted from PMBoK Guide – Fourth Edition

17. 11.2 Identify Risks The process of determining which risks may affect the project and documenting their characteristics This is an interactive process as new risks may evolve or become known during the project Participants in risk identification activities can include – Project Manager and Project Team Project Sponsor and Stakeholders Risk management experts Customers Subject Matter Experts Other Project Managers Occurs during Planning Monitor Initiation Planning Execution Close Control Adapted from PMBOK 4th Edition

18. 11.2 Identify Risks Inputs to Identify Risk Risk Management Plan Activity Cost Estimates Activity Duration estimates Scope Baseline Stakeholder Register Cost Management Plan Schedule Management Plan Quality Management Plan Monitor Initiation Planning Execution Close Control Adapted from PMBOK 4th Edition Adapted from PMBOK 4th Edition

19. 11.2 Identify Risks Inputs to Identify Risk (continued) Project Documents – Assumptions Log Work performance reports Requirements Enterprise Environmental Factors - Research and publications External Risk Management Standards Checklists and Benchmarks Industry studies Risk Attitudes Organisational Process Assets - Project Files Risk Management Templates Lessons Learning Standard risk categories Lists of standard risks Monitor Initiation Planning Execution Close Control Adapted from PMBOK 4th Edition Adapted from PMBOK 4th Edition

20. 11.2 Identify Risks • Tools and techniques for identifying risk include - Questionnaires Interviews and Surveys Documentation Reviews Brainstorming Workshops Root Cause Analysis System or Process Flowcharts Assumptions Analysis Risk Checklists Cause & Effect Diagrams SWOT Analysis Expert Judgement Influence Diagrams Risk Categories Lessons Learnt Industry Risk Frameworks Adapted from PMBOK 4th Edition

21. 11.2 Identify Risks Risk Checklists & Questionnaires • Many organisations and certain industries have standard risk checklists and questionnaires that assist with the identification of the overall risk on a project, as well as the specific risks that may be applicable Assumptions Analysis • Any assumptions that have been documented during the planning processes need to be analysed and included in the Risk Log. Is any assumption does not prove to be true there will be impacts to project objectives, the risk of assumptions proving untrue must be evaluated. Risk Categories • Many organisations and certain industries have standard risk categories which help to ensure that all risk areas are reviewed when undertaking risk planning

22. 11.2 Identify Risks SWOT Analysis • Standard approach used to identify risks and opportunities during business planning and marketing activities. Can also be applied to project risk identification. Involves the identification of an organisations Strengths, Weaknesses, Opportunities and Threats. Weakness and Threats may need to documented in project risk logs. Expert Judgement • Many organisations will have specialised risk management teams that can provide expert assistance to projects in the planning and identification of risks. In very risky projects it may also be helpful to consult external subject matter experts. Industry Risk Frameworks • Some industries, particularly Construction and Defence, have standard risk frameworks which are extremely helpful to project risk management.

23. 11.2 Identify Risks Outputs of this process include – Initial entries on the Risk Register List of identified risks Potential risk owners List of potential responses Sample column headings in a typical Risk Register Adapted from PMBOK 4th Edition

24. Inclusions in Risk Register during Planning • Risk Id • Can be a simple as a number • May relate to the risk category • Used as a unique identifier • may be an internal standard • Risk Description • Plain English explanation of the risk • One to two sentences in length • Ensures common understanding • Risk Category • Can be taken from industry frameworks • Can be set at internal standards • May need to be developed/tailored • Ensures identification of all risks • Assists with monitoring and control • Risk Owner • A specific person or role • Ensures clear ownership of the risk • Responsible for monitoring & control Adapted from PMBOK 4th Edition

25. Risk Planning and Identification Take some time to locate the risk management polices and procedures of you organisation. Take some time to review the Australian Risk Management Standards and companion handbook. Are there specific standards, tools and templates that your organisation provides to assist project managers to plan for and identify risks? Compare your organisation’s risk management policies to the suggestions in the standard. How can they be improved? Then go to the Forum on Risk Planning and Identification answer the questions posed and discuss your findings with other students. Reflect Discuss Research

26. Next Steps Please proceed to Risk Processes Part 2 in the Learning Program. Best of Luck!