PMI North Area PMP Exam Study Group Risk

PMI North Area PMP Exam Study Group Risk Presentation Prepared by Denise Robertson 15 March 2003 Denise Robertson Information derived or quoted from PMI, Mulcahy, and Look Glass Development's PMP Exam Prep Materials Page 1

Risk Management Processes n n Process I/O and Tools/Techniques emphasized on exam, so memorize them Memorize process in order: 1. 2. 3. 4. 5. 6. Risk Management Planning Risk Identification Qualitative Analysis Quantitative Analysis Risk Response Planning Risk Monitoring and Control Denise Robertson Information derived or quoted from PMI, Mulcahy, and Look Glass Development's PMP Exam Prep Materials 2

Risk Concepts n n n Risk tolerance Risk adverse Risk factors n n Probability Impact Range of possible outcomes Expected timing in project life cycle Denise Robertson Information derived or quoted from PMI, Mulcahy, and Look Glass Development's PMP Exam Prep Materials 3

Unknowns n n Risks are also called “Unknowns” “Known Unknowns” are identified during Risk Management and are documented in the project plan n n Can be planned for with Risk Response “Unknowns” are unanticipated risks n Cannot be planned for in advance Denise Robertson Information derived or quoted from PMI, Mulcahy, and Look Glass Development's PMP Exam Prep Materials 4

Policy Level n n Organization’s Risk Management Policy on how to approach risk is now part of PMBOK Policy describes: n n Level of tolerance Level of acceptable risk Denise Robertson Information derived or quoted from PMI, Mulcahy, and Look Glass Development's PMP Exam Prep Materials 5

Project Status n 3 possible statuses: n n n In Jeopardy Committed to Approved Denise Robertson Information derived or quoted from PMI, Mulcahy, and Look Glass Development's PMP Exam Prep Materials 6

Risk Probability/Impact Matrix n 2 -D rating system that rates: n n Likelihood (probability) of a risk occurring between 0. 0 and 1. 0 or 100% certainty Impact of risk should it occur n Impact scale can be n n n Ordinal (ordered) Cardinal (assigned numeric values) Risk Score = Probability * Impact Denise Robertson Information derived or quoted from PMI, Mulcahy, and Look Glass Development's PMP Exam Prep Materials 7

Evaluating Project Data for Use in Assessing Risk n Assumption Testing Criteria: n n n Stability of assumption Impact to project if assumption proves false Data Precision Ranking Accuracy Dependencies: n n Extent risk is understood Data available about risk Quality of data Reliability and integrity of data Denise Robertson Information derived or quoted from PMI, Mulcahy, and Look Glass Development's PMP Exam Prep Materials 8

Monte Carlo Simulation n n n Used in Quantitative Risk Analysis and Cost Analysis Evaluates the project, not the tasks, however: n Provides probability of completing project on any specific day or for any specific task n Provides probability of any task actually being on the critical path n Provides percent probability that each task will be on critical path Takes into account path convergence Translates uncertainties into impacts to total project Can be used to assess cost and schedule impacts Results in probability distribution Denise Robertson Information derived or quoted from PMI, Mulcahy, and Look Glass Development's PMP Exam Prep Materials 9

Decision Tree Analysis n n Quantitative Analysis Tool Diagram describes decision and probabilities associated with choices Determines aggressive or conservative route to highest Expected Monetary Value (EMV) Total of Probabilities * Consequences for a Choice Event = EMV Denise Robertson Information derived or quoted from PMI, Mulcahy, and Look Glass Development's PMP Exam Prep Materials 10

Cost Reserve n PMI recommends at least 10% OR n Based on EMV: n n Total of Probability * Risk Cost for all risks Remember risk can be negative or positive Denise Robertson Information derived or quoted from PMI, Mulcahy, and Look Glass Development's PMP Exam Prep Materials 11

Risk Response Techniques Technique Description Avoidance Changing project plan to eliminate risk or protect objectives from its impact Mitigation Reduces probability and/or consequences of adverse event to acceptable threshold Transference Shifting consequences of risk and ownership to a third party (Insurance is a form of transference. ) Acceptance Project plan not changed to deal with risk. Project team unable to identify any other suitable strategy Denise Robertson Information derived or quoted from PMI, Mulcahy, and Look Glass Development's PMP Exam Prep Materials 12

Residual and Secondary Risks n n n Outputs from Risk Response Planning Residual Risks are those that remain after Avoidance, Transference, and Mitigation have been taken. Secondary Risks arise as a direct result of implementing a risk response n Secondary risks should be identified and responses planned Denise Robertson Information derived or quoted from PMI, Mulcahy, and Look Glass Development's PMP Exam Prep Materials 13