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RISK MANAGEMENT

Risk Management
A project risk is an uncertain event or condition that, if it occurs, has a positive or negative effect on at least one aspect of the project, that is, time, cost, scope or quality. Risk management identifies as many potential risks as possible, minimises their impact by doing whatever can be done before they occur to mitigate their effect, and makes contingency plans to deal with risks that actually occur, so that time and cost overruns on projects are avoided.
Project Management R.B. Khanna 2011 PHI Learning Pvt Ltd

Risks and Costs


High Cost of rectification

Chance of Risk
Occurrence

Low
Project Management R.B. Khanna 2011 PHI Learning Pvt Ltd

Time
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Risk Management Process


Step 1 Risk Identification

Identify sources of risk in the project


Step 2 Risk Analysis New Risks Analyse qualitatively and quantitatively the impact of the risk, its possibility of occurrence and its controllability Step 3 Risk Response Planning Develop a strategy to negate the ill effects of the risk and contingency plans to deal with it. Step 4 Risk Monitoring and Control Implement risk response strategy when risk events occur, revise plans to cater for new risks, and manage changes to the original plan.
Project Management R.B. Khanna 2011 PHI Learning Pvt Ltd

Risk Identification
Documentation Reviews.
Information Gathering Techniques Checklist Analysis Assumptions Analysis Diagramming Techniques

Project Management R.B. Khanna 2011 PHI Learning Pvt Ltd

Risk Assessment
Carry out qualitative analysis and prioritise risks. Carry out quantitative analysis of high priority risks.

Project Management R.B. Khanna 2011 PHI Learning Pvt Ltd

Scenario Analysis
The undesirable event All the outcomes of the events occurrence The chance or probability that the event will occur The magnitude of the impact of the event on the project When the event might occur in the project Its inter-relationship with other parts of this project or other projects being undertaken by the organisation The ability to detect the event before its occurrence

Project Management R.B. Khanna 2011 PHI Learning Pvt Ltd

Risk Assessment Form


Risk Event Interface problems Database failure Hardware failure User resistance Likelihood Impact 3 3 1 4 4 4 5 3 Detection Difficulty 4 5 5 3 When Conversion System testing Installation Post Implementation

Arbitrarily rated on a scale of 1 to 5, 1 being the least and 5 being the highest.
Project Management R.B. Khanna 2011 PHI Learning Pvt Ltd

Risk Response Strategies


Mitigating Avoiding Transferring Sharing Retaining

Contingency Plans
Project Management R.B. Khanna 2011 PHI Learning Pvt Ltd

Risk Handling Methods


Technical Risks
Make contingency plans to tackle such risks Quickly assess whether technical uncertainties can be resolved or not First identify high risk technical areas and then build models or design experiments to resolve the risk as quickly as possible.

Project Management R.B. Khanna 2011 PHI Learning Pvt Ltd

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Risk Handling Methods


Scheduling Risks
Manage slack Trade off between costs and times (crash activities if required)

Cost Risks

Project Management R.B. Khanna 2011 PHI Learning Pvt Ltd

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Contingency Funds
Established to cover project risks. Split into budget and management reserve. Budget reserve covers identified risks and is allocated to specific segments or deliverables of the project Management reserve is set up to cover unidentified risks and is allocated to risks associated with the total project Controlled at different levels
Project Management R.B. Khanna 2011 PHI Learning Pvt Ltd

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Time Buffers
Set up to absorb the delays that may take place Extra time assigned for:
Activities with severe risk of time overruns. Merge activities that are prone to delay as some preceding activity might get delayed. Activities that use scarce resources, as the resource may not be available when required. Non-critical activities which may become critical if slacks are used by earlier activities on the path.
Project Management R.B. Khanna 2011 PHI Learning Pvt Ltd

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Risk Monitoring and Control


It is the process of identifying, analysing, and planning for newly arising risks, keeping track of identified risks and those on the watch list, reanalysing existing risks, monitoring trigger conditions for contingency plans, monitoring residual risks, and reviewing the execution of risk responses and evaluating their effectiveness.

Project Management R.B. Khanna 2011 PHI Learning Pvt Ltd

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Managing Change
Goals of a change control system

Identify proposed changes. Identify effects of proposed change on budget and schedule. Review, evaluate and approve or disapprove changes formally. Negotiate and resolve conflicts arising from changes, especially in conditions and costs. Disseminate information to all concerned about the change. Assign responsibilities for implementing change. Adjust master schedule and budget. Track all changes that are to be implemented.

Project Management R.B. Khanna 2011 PHI Learning Pvt Ltd

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