Week 1: Integrated Project Risk Management

Must integrated risk into project planning to assure tradeoffs between cost/risk and payoff/benefits Risk is inherent in business; competitive edge comes from overcoming risks better, faster, cheaper than competition Projects imply risk: deliverable is new value Project uniqueness implies risk and opportunity

Purpose of Integrated Project Risk Management

Planning and control tool Understand project complexity and value Identify key success or failure factors that will impact project success - early Assess and rank Quantify probability Mitigate (control) risks through risk management plan Monitor change in the nature and impact of

Risk and Decision Making

Why take risk? Difference between taking risks (implies lack of plan) and risk management Nature of business itself serving customers is risk management What will be gained if you control risk opportunities What could be lost if risk occurs, could jeopardize project success Chances of success and failure?

Risk Elements
Frequency of loss Information available Severity of loss Manageability of risk Potential for publicity Measure consequences Source of finances

Rewards of Taking Risks

Achieving project success with minimum cost and time Cost of risk management increases the later it is undertaken Advance state of the art make real contribution to field Enhanced profitability competitive edge Improve market position market share Ensuring customer satisfaction customer shares risk in financing project

Potential Project Risk Factors

Lack of top management commitment Failure to get user commitment Misunderstanding requirements Inadequate user involvement Changes in scope Lack of personal and professional skills New technology Staffing, conflicts Inadequate processes and procedures

PMI PMBOK: Project Management Body of Knowledge

PMBOK is a standard for approaching project risk management Process approach: describes project risk management as inputs/tools/outputs Course organization is consistent with PMBOK Note that PMBOK was updated in 2001to include a new risk management process risk planning Following are more details on each process

PMBOK Section 11: Risk Management Processes

1. Risk Management Planning 2. Risk Identification 3. Qualitative Risk Analysis 4. Quantitative Risk Analysis 5. Risk Response Planning 6. Risk Monitoring and Control

Risk Management Planning: Inputs

Decide how to approach and plan the risk management activities for a project Project charter Organizations risk management policies Defined roles and responsibilities Stakeholder risk tolerances Template for risk management plan

Risk Management Planning: Tools

Planning meetings Agendas Review Data Variances Special reports

Risk Management Planning: Outputs

Risk management plan Methodology Roles Budget Timing Scoring Thresholds Reporting and tracking

Risk Identification: Inputs

Risk management plan Project planning outputs Risk categories Historical information

Risk Identification: Tools

Documentation reviews Information gathering techniques Checklists Assumptions analysis Diagramming techniques

Risk Identification: Outputs

Risks Triggers Inputs to other processes

Qualitative Risk Analysis: Inputs

Risk management plan Identified risks Project status Project type Data precision Scales of probability and impact Assumptions

Qualitative Risk Analysis: Tools

Risk probability and impact Probability/impact risk rating matrix Project assumptions testing Data precision ranking

Qualitative Risk Analysis: Outputs

Overall risk ranking for project List of prioritized risks List of risks for additional analysis and management Trends in qualitative risk analysis results

Quantitative Risk Analysis: Inputs

Risk management plan Identified risks List of prioritized risks List risks for additional analysis and management Historical information Expert judgment Other planning outputs

Qualitative Risk Analysis: Tools

Interviewing Sensitivity analysis Decision tree analysis Simulation

Qualitative Risk Analysis: Outputs

Prioritized list of quantified risks Probabilistic analysis of project Probability of achieving the cost and time objectives Trends in quantitative risk analysis results

Risk Response Planning: Inputs

Risk management plan List of prioritized risks Risk ranking of project Probabilistic analysis of project Probability of achieving the cost and time objectives List of potential responses

Risk Response Planning: Inputs (continued)

Risk thresholds Risk owners Common risk causes Trends in qualitative and quantitative risk analysis results

Risk Response Planning: Tools

Avoidance Transference Mitigation Acceptance

Risk Response Planning: Outputs

Risk response plan Residual risks Secondary risks Contractual agreements Contingency reserve amounts needed Inputs to other processes Inputs to revised project plan

Risk Monitoring and Control: Inputs

Risk management plan Risk response plan Project communication Additional risk identification and analysis Scope changes

Risk Monitoring and Control: Tools

Project risk response audits Periodic project risk reviews Earned value analysis Technical performance measurement Additional risk response planning

Risk Monitoring and Control: Outputs

Workaround plans Corrective action Project change requests Updates to the risk response plan Risk database Updates to risk identification checklists