Risky Business Essentials of Risk Management Avneet Mathur

Risky Business Essentials of Risk Management Avneet Mathur (PMP) avneet_mathur@hotmail. com

What is a Project? A project is a temporary endeavor undertaken to produce a unique product or service Temporary Characteristics of Projects Unique Temporary – Definitive beginning and end Unique – New undertaking, unfamiliar ground

Risk RISK can be defined as “the threat or probability that an action or event, will adversely or beneficially affect an organization's ability to achieve its objectives”*. In simple terms risk is ‘Uncertainty of Outcome’, either from pursuing a future positive opportunity, or an existing negative threat in trying to achieve a current objective. * Luhmann 1996: 3

Issue vs. Risk ISSUE TODAY RISK FUTURE

Issue vs. Risk ISSUE If not fixed today, task stops Issue… already impacting the cost, time or quality RISK If not identified, may become issue later Risk… POTENTIAL negative impact to project

What’s the Plan? Identification Quantification Response Monitoring and Control

Identification Risk Types Business (risk to overall business) Delivery (risk to project delivery) Technical (specific to particular technology) Vendor not meeting deadline Cause Budget will be exceeded Impact "The vendor not meeting deadline will mean that budget will be exceeded"

Quantification Risk Impact Likelihood

Quantification LIKELIHOOD Title Description Very low 20 20 Highly unlikely to occur based on current information, as the circumstances likely to trigger the risk are also unlikely to occur. Low 40 Unlikely to occur. However needs to be monitored as certain circumstances could result in this risk becoming more likely to occur during the project. Medium 60 Likely to occur as it is clear that the risk may eventuate. High 80 Very High 100 Very likely to occur, based on the circumstances of the project. Highly likely to occur as the circumstances that will cause this risk to eventuate are also very likely to eventuate Title IMPACT Score Description Impact * Very low 20 Insignificant impact on the project. - Low 40 Minor impact on the project. < 5% Medium 60 Measurable impact on the project. 5 - 10 % High 80 Significant impact on the project. 10 - 25 % Very high 100 Major impact on the project. > 25% * Deviation in scope, scheduled end-date or project budget

Quantification Priority = [Likelihood + Impact] ---------------2 Risk ID Likelihood Impact 1. 1 20 80 1. 2 80 60 1. 3 100 40 2. 1 40 20 2. 2 90 100 2. 3 20 80 Priority Score Priority Rating Priority Color -----------------------------------0– 20 Very Low Black 21– 40 Low Green 41– 60 Medium Yellow 61– 80 High Orange 81– 100 Very High Red Priority 50 70 70 30 95 50 Rating Medium High Low Very High Medium

Response Address risks rated based on severity. Very-High-rated risks warrant the highest priority, and should be addressed before the less severe classes of risks, and should be tracked until they can be downgraded. Create a Risk Schedule to address these risks. In a risk schedule, for every risk identified, preventive actions are listed that are required to reduce the likelihood of the risk occurring, as well as the contingent actions needed to reduce the impact to the project should the risk occur. Risk ID 2. 2 Rating Very High 2. 3 High … … Action Resource Project sponsor Action Date DDMMYY Contingent Actions Measure the actual business benefits achieved by the project Action Resource Project Manager Action Date DDMMYY All requirements need Project sponsor to be well defined. DDMMYY Stakeholders need to sign-off on the requirements. Project Manager DDMMYY Preventive Actions Clearly identify the expected business benefits

Monitoring and Control Continually monitor risks to identify any change in the status, or if they turn into an issue. Hold regular risk reviews To identify actions outstanding, risk probability and impact Remove risks that have passed Identify new risks

Case Study – Buying a Used Car online Requirements Buy a car over the internet Price less than $15, 000 Reliable Specific make and model Mileage

Case Study – Buying a Used Car online Sample Risks Buy a car over the internet Most people would say don’t! to eliminate the risk, but this is a requirement Websites that do not have good ratings Price less than $15, 000 Owner may increase price or additional cost after finalizing the deal. Hidden cost Reliable Does not need frequent repairs Does not breakdown Good brand Specific make and model Not getting the same model after finalizing the car Mileage Odometer rollback

Case Study – Buying a Used Car online Risk Quantification Buy a car over the internet Websites that do not have good ratings ID Likelihood Impact Priority 1. 1 40 60 (40+60)/2 = 50 Medium Price less than $15, 000 Owner may increase price or additional cost after finalizing the deal. Hidden cost ID Likelihood Impact Priority 2. 1 20 40 (20+40)/2 = 30 Low

Case Study – Buying a Used Car online Risk Quantification Reliable Does not need frequent repairs Does not breakdown Good brand ID Likelihood Impact Priority 3. 1 60 100 (60+100)/2 = 80 High 3. 2 20 80 (20+80)/2 = 50 Medium 3. 3 40 80 (40+80) /2 = 60 Specific make and model Medium Not getting the same model after finalizing the car ID Likelihood Impact Priority 4. 1 20 40 (20+40)/2 = 30 Low

Case Study – Buying a Used Car online Risk Quantification Mileage Odometer rollback ID Likelihood Impact Priority 5. 1 80 80 (80+80)/2 = 80 High

Case Study – Buying a Used Car online Risk Response Risk ID 5. 1 Rating High Preventive Actions Get a Car Fax report and check mileage history 1. 1 Medium Check website rating before initiating a purchase … … Action Resource Project sponsor Action Date DDMMYY Contingent Actions Avoid cars with no car fax history. Action Resource Project Manager Action Date DDMMYY Project sponsor DDMMYY Avoid “suspicious websites” or too good to be true deals. Project Manager DDMMYY

Summary Risk management is a project management tool for handling events that might adversely impact the project, thereby increasing the likelihood of success. A sound process like this removes the uncertainty and empowers the project manager to complete their project within schedule and within budget. Mitigate Risk Control Risk Measure Risk Control Risk Identify Risk Analyze Risk Asses Risk Prioritize Risk

About the Author Avneet Mathur is a Certified Project Management Professional, as awarded by the Project Management Institute, USA and has been involved in IT for more than a decade. He holds an MBA in General Business Administration, with an additional Master's Degree in Computer Science and Networking from University of Missouri, Kansas City. He also has a Bachelor's Degree in Computer Science from the Aurangabad University, India. He can be reached at avneet_mathur@hotmail. com

About Project Perfect is a project management software consulting and training organisation based in Sydney Australia. Their focus is to provide organisations with the project infrastructure they need to successfully manage projects. Project Perfect sell “Project Administrator” software, which is a tool to assist organisations better manage project risks, issues, budgets, scope, documentation planning and scheduling. They also created a technique for gathering requirements called “Method H” , and sell software to support the technique. For more information on Project tools or Project Management visit www. projectperfect. com. au