Managing Project Risk A simplified approach Presented by
Managing Project Risk – A simplified approach Presented by : Damian Leonard
Agenda 4 What is risk? 4 Types of risk 4 Risk Management Process 4 Risk Management Game 4 Action Plan 4 Questions 2
What is Risk? 4 Risk 4 The possibility that an undesired outcome - or the absence of a desired outcome – disrupts your project 4 An uncertain event or condition that, if it occurs, has a positive or negative effect on at least one project objective (time, cost, scope or quality) 4 Elements of Risk 4 Event 4 Probability 4 Impact 3
Types of Risk 4 Type of risks 4 External or Internal 4 Business risks – Risks of doing business 4 Pure, or insurable, risks – Risk that cause loss only 4 Known or Unknown 4 Known – Risks that have been thoroughly documented, reviewed 4 Unknown – Risk that can not be proactively managed 4
Risk Management Process 4 Risk Management 4 “. . Includes the processes concerned with conducting risk management planning, identification, analysis, responses, and monitoring and control on a project” (PMI Body of Knowledge, 2009). 4 How? 4 Increase the probability and impact of positive events 4 Decrease the probability and impact of events adverse to the project 4 PMBOK, 2009 5
Risk Management Process 4 Risk Management Planning – Steps 4 Identify – Comprehensive identification of potential risks. 4 Analyze – Estimate the probability of occurrence and impact and rank them 4 Plan – Using prioritized risks, create strategies, primary response and incorporate options into the project plan. 4 Execute – Carry out risk management plan as part of project. 4 Monitor – Evaluate the results of risk strategies. 4 Document – Create documentation for historical purposes. 6
Risk Management – Identification 4 Risk Identification 4 Comprehensive identification of potential risk 4 Iterative process that occurs through the project lifecycle 7
Risk Management – Identification 4 Identification method 4 Nominal Group Technique 4 Create Risk Planning Teams 4 Each member of the team writes down 6 – 12 major issues on postit notes 4 Continue until all lists are complete 4 Team Leader finalizes risk 4 Places on risk form 4 Provide findings back to a larger group 8
Risk Management – Analysis 4 Risk Analysis 4 Estimate probability and impact (Qualitative Risk Analysis) 4 Prioritize risks analyzed during qualitative analysis (Quantitative Analysis) 9
Risk Management – Analysis 4 Estimate probability and impact (Qualitative Risk Analysis) 4 Assess probability and impact for each identified risk, determining 4 The level of probability for each identified risk against each objective (time, cost, etc) 4 The impact of each risk on each objective 4 Develop Risk Probability and Impact Matrix 4 Develop risk rating 4 Determine classifications for high, medium and low risks 10
Risk Management – Analysis 4 Estimate probability and impact (Qualitative Risk Analysis) 4 Evaluate Risk Data Quality 4 Categorize risk based on parts of the project affected 4 Assess risk response urgency 11
Risk Management – Analysis 4 Prioritize risks analyzed during Qualitative Analysis 4 Put a figure on project outcomes 4 Estimate the probability of meeting project objectives (time, cost, etc) 4 Raise up risks requiring the most attention 4 Update project cost, schedule and scope 12
Risk Management – Analysis 4 Prioritize (Quantitative Risk Analysis) 4 Filter list 4 Probability exceed 25% 4 Cost impact of risk exceeds $10 K 4 Will this risk occur within the next 3 months? 4 Impact – Will any customer see impact of this risk? 4 Likelihood – Have you seen this before? Is this likely? 4 Remaining list use CRR 4 Review each risk and compare with other risks 4 Ask each team member which risk deserves higher priority 4 Points are given each time a risk gets a vote 4 List is prioritized based on scores 4 Team Leader will review with the group 13
Risk Management Game 4 Plan 4 Develop and document options and plans to reduce threats to the project’s outcomes 4 Document actions needed to enhance opportunities 4 Determine best response strategy for each risk (acceptance, mitigation, transference, and avoidance 14
Risk Management Game 4 Plan – Response Strategy 4 Acceptance (accept the consequences) only if you believe the risk exposure is acceptable to your organization 4 Active – Develop a contingency plan 4 Passive – Fully accept the consequences or implement a workaround 4 Mitigation (reducing the expected value of a threat by reducing probability or impact) 4 Transference (pass the threat to another group) 4 Avoidance (eliminating a specific threat) 15
Risk Management Game 4 Plan 4 4 Work through prioritized risk listing Create risk response strategies for both threats and opportunities Evaluate and select a primary response Answer the following for each risk 4 How can this threat be avoided or opportunity be pursued? 4 What does it mean to transfer this threat or enhance the opportunity 4 Can we mitigate or transfer this threat or enhance the opportunity 16
Risk Management Game 4 Execute & Monitor 4 Determine how to carry out risk management plan with project areas 4 Carry out risks as actual events occur 4 Establish an early warning system 4 Changes in stakeholder attitudes 4 Changes in forecasted project end dates 4 Cost variance 4 Schedule variance 17
Questions? 18
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