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REV4
Risk Management
Introduction
2
Risk Management
Introduction
We shouldnt define
project schedule
/budget
without having the
risks
translated into
reserves.
There are two types;
* Contingency
reserves
- for known
unknowns
- calculated
- added to estimates
thetoproject cost baseline to form the Cost Budget. Their use is
form
the cost
approved
by the manager
baseline
(not
the PM!). Remember: reserves are not an additional cost to a
Types of Risks
Business risk = includes opportunities and threats = risk of gain
or loss.
Pure risk (insurable risks) = Only a risk of loss (fire, injury, theft).
Could be insured.
Risk Categories
There are many ways to sort and categorize risks. It is good to
keep historical records of identified risks to help categorize them in
future projects. Some risks (uncertainties) can impact more than
one project area and will surface out in various risk categories.
External (to the project) = regulatory, government,
environmental..
Internal (to the project) = time, cost or scope changes, staffing,
materials, equipment
Technical = changes in technology
Unforeseeable = those we cant predict. About 10% of all risks
2. Identify Risks
11
Late prototyping
Regulatory changes
Team "A" staffing
changes
Risk X
IMPACT
PXI
7.00
10.00
2.10
4.00
INDEX
2
1
0.20
5.00
1.00
Px
Ix
Px * Ix
Y
0.30
0.40
The results depend on the bias of those performing this task. The
matrix can help determine which risks warrant immediate
attention and which can go on the Watch List. Risk Index is also
known
as Composite
Risk Index.
Probability
and Impact
Matrix (Risk Exposure)
Descriptive form
What risk events warrant response ? What is our overall project risk ?
Can we quantify probability of meeting project objectives. Cost &
Schedule reserves ? Update estimated targets.
PROBABILIT
IMPACT ($)
Y
EXPECTED MONETARY
VALUE
Late prototyping
0.30
50,000
15,000.00
Regulatory changes
Team "A" capacity
change
Risk X
0.40
20,000
8,000.00
0.20
25,000
5,000.00
Px
Ix$
Px * Ix$
TIME FRAME
Immediate (w=5)
Short Term (w=3)
Medium Term
(w=2)
Long Term (w=1)
T1
Project Start
CRITERIA
The risk could occur at any time from now until (now + 10(%)) of
the project duration
The risk could occur 2 time resolution intervals form now (3.5-4
months on Vaughan)
The risk could occur 3-5 time resolutions from now (5.5 9 months
on Vaughan)
The risk could occur 6+ time resolutions from now (10+ months on
Vaughan)
T2
T3
RISK
Project End
RISK
DESCRIPTION
Late prototyping
Regulatory
changes
Team "A"
staffing
changes
Note
how
PROBABILI
IMPACT
TY
EXPOSUR
E
(P x I)
RISK
INDEX
0.30
7.00
2.10
0.40
10.00
4.00
0.20
5.00
1.00
TIME
RISK
PRIMARY
WEIGHT
SEVERITY
INDEX
FACTOR
(Exp * Tx)
5
(immediate
10.5
1
)
2 (med
8.0
2
term)
3 (short
3.0
3
term)
places
due to the time
Tx
Px * Ix * Tx
Subjective
(different people different risk
ratings)
Reviews / analyzes all the
identified risks