Risk Management Figure 4 4 Estimate of Project

Risk Management Figure 4 -4 Estimate of Project Cost: Estimate Made at Project Start

Risk Management What is Risk? n An uncertain event or condition that, if it occurs, has a positive or negative effect on a project’s objectives. n PMI (project management institute)

Risk Management Risk Analysis n Risk analysis includes the estimating its probability, evaluating its impact and preparing for solution in advance. n Project size/complexity vs. risk n Risk analysis is not free

Risk Management Successful Risk Management SEI summaries successful risk management as follows n n n A successful risk management practice is one which risks are continuously identified analyzed for relative importance. Risks are mitigated, tracked, and controlled to effectively use program resources. Problems are prevented before they occur and personnel consciously focus on what could affect product quality and schedules

Risk Management Common Risk factors n n n n n Lack of top management commitment to the project Failure to gain user commitment Misunderstanding the requirement Lack of adequate user involvement Failure to manage end user expectation Changing scope and objectives Lack of required knowledge/skill in the project personnel New technology Insufficient / inappropriate staffing Conflict between user departments

Risk Management Anticipating Problems n The first stage of risk analysis requires a review of all project technical and administrative plans in order to identify potential problems. It includes: w The project development plan w The requirement specification w The design specification w External dependences w Project support issues

Risk Management Risk Identification Problem Description Late delivery of the development computer If the development computer is not delivered by DATE (e. g. 05/01/03) as planned , the integration phase will be delayed Internet communication is slow Information to be posted and download from the Internet site is too slow and cannot support the amount of data to be transmitted No operating systems expert The system requires changes to the standard operating system. Ben and Alyssa are the only Unix experts in the company and they will not be available for this project High staff turnaround The schedule is tight with only minimal slack time. If there is more than average staff replacement during development, we will slip the schedule. Nadia and Effie already informed us that they are leaving the or the company. Late delivery of the database system The database subsystem is subcontracted to Software Development Inc (SDI), which has committed to delivery by August, 1. SDI may not deliver on time, thus delaying the final integration and test phase

Risk Management Risk Analysis n Evaluate each problem w Estimate the probability that the problem will occur w Estimate the impact of the problem on the project if occurred w Attribute a measure of severity to the problem

Risk Management Measuring the severity for each anticipated problem 1. Assign an expectation number between 1 -10 based on the probability that the problem will occur. w 10 = high probability w 1= low probability 2. Assign a number between 1 and 10 based on the impact of the problem on the project. w 10 = high impact w 1= low impact 3. Multiply the value produced in step 1 by the value produced in step 2 to produce the measure of the severity for the problem.

Risk Management Problem Expectation Impact Severity Late delivery of the development computer 6 5 30 Internet communication is slow 4 2 8 No operating systems expert 5 5 25 High staff turnaround 8 8 64 Late delivery of the database system 3 9 27

Risk Management Risk Analysis and contingency plan n Sort according to the severity of the problem n Severity less than may not be considered n Develop a contingency plan for each problem Problem Severity Contingency plan Tracker High staff turnaround 64 Allocated big bonus for successful project completion. Hire new people PM and Sponsor Late delivery of the development computer 30 Make arrangement for alternative computer systems Kelly Late delivery of the database system 27 Design a database subsystem simulator to be used for integration. David No operating systems expert 25 Locate an OS expert outside the company, and hire a consultant PM and Becky Internet communication is slow 8 Not considered Jason if condition get worse.

Risk Management Anticipating, Analyzing and Implementing Risk analysis w Project severity = expectation (1 -10) * impact (1 -10) w When should risk analysis be formed? Problem Description Severity Contingency Tracker plan

Risk Management Implementing contingency plan n Contingency plans are implemented in one of the following instances w The anticipated problem occurs, or becomes imminent w The contingency plan requires advance preparation

Individual Assignment 20% n Using the Bigelow Inc. case study conduct a risk analysis for the top 10 risks. w You may make any assumption, simply state your assumptions.