Risk Management For Projects

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Calvin Douglas
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1 Risk Management For Projects

2 Google Risk Management About 245,000,000 results (0.80 seconds) Chemical Engineering About 124,000,000 results (0.88 seconds)

3 Risk Management is Everywhere List some examples of risk management

4 Why Risk Management? Everyone plans for success Things happen because we didn t see them and plan for them, but what if we had? Risk management and timely response is what makes the difference between success and failure.

5 Risk Management l3si

6 Risks In Our Projects 1. Phase I - Risks to Our Project Schedule Risk - not delivering a report by April Quality Risk not delivering on objectives Cost Risk Assessed & Managed in our PP and execution 2. Phase I - Risks in Our Recommendations Assessed in our Reports, Managed by client

7 Software Projects Only 1/3 of projects deliver all their project objectives Standish Chaos 2015 report

8 Risk is Risks are the uncertainty in not delivering the project objectives Managing Risks is about scanning the future to see problems. Focus on the things that really matter

9 Risk = Probability x Consequences Must be uncertain Not an existing problem Not constraints, or requirements Not issues, or problems Must matter Which objective would be affected? How risky? How uncertain? How much will it matter?

10 Risk = Probability x Consequences Ethan has Uncertainty in Good and Bad Consequences

11 What Matters? CEO of BP oil in 2007 vowed to make safety a top priority Among the new rules he instituted were the requirements that all employees use lids on coffee cups while walking, and refrain from texting while driving. Harvard Business Review

12 What Matters Things that waste money Things that could hurt a person Things that destroy reputation Things that waste time Things that can help! embrace the ones that have positive effects It s not just the bad uncertainties that need to be managed.

13 What is the Cheese in Your Project? Risks can be opportunities or threats Take a minute discuss what Threats & Opportunities to your objectives might be present. For the project For yourself personally

14 Rigorous Approach: Risk Management Process Define Objectives: What are we trying to achieve? Define Uncertainties that would matter (+ / -) What could affect us achieving it? Prioritize: How uncertain, how much does it matter? Which are most important? Define Responses: What should I do about it? Do it! Did it work? What s Changed?

15 Identification How do we find all the risks? We can t. We can find the ones we know about. Brainstorming / workshops Checklists Assumption analysis Interviews, questionnaires Others But ask are these real risks?

16 What is not a risk? Issues Cause Fact We don t have enough people The project is hard The client hasn t signed the SOW Risk Uncertainty The reason we re late People may be slow replying to Us These are Risk Factors Effect Possible result We could be late

17 PMD Risk Factors Medical Risk Cause of a disease is the presence of a bacteria in your body. Risk Factors would be the things a person does, or situations that would expose them to the bacteria Eating food from a street vendor might introduce.. Drinking water that hasn t been treated could.. Effects dehydration, nausea,..

18 Causes/ Risks / Effects Causes: Are true today Risk: Uncertainty -> PMD calls these risk factors Effect: is why it matters to our project The project is in a 3 rd world country Interest rates might go down We could go over budget The weather might be unusual I m allergic to prawns We re using an unproven technique It might not work for some reason We don t have enough people We might be late cause risk effect risk cause cause effect cause effect

19 Cause/Risk/ Effect? The current hardware is not fast enough to support testing. This means that we may be unable to test performance until production hardware is used. A number of usability issues have been identified by the supplier who plans to raise change requests Extra work may be identified at the detailed design gateway as the full statement of work is not available at project start The team does not have a documented design for the XYZ function. Therefore there is chance that the architecture may not support the required functionality, resulting in the requirements not being met and/or a higher number of defects. The development team may not perform the tests in the order laid out in the schedule. This could result in the dates and quality of deliverable being unpredictable. One contractor left in week 36, another joined in week 37. The inevitable disruption is not catered for by contingency. Given the high number of builds to be carried out, test cycles may take longer than planned which will consume significant additional amounts of time and resources. Source: Managing Risk in Practice Workshop, time = 21:30

20 Every Risk Entry 3 elements 1. Existing Condition: Cause 2. Uncertain Event: Risk 3. Which would Lead to: Effect Try to describe your risks with these three parts

21 Your list of Opportunities Rewrite your list of Opportunities as: Objective Influenced Cause / Risk (Factors) / Effect

22 Risk Breakdown Structure (looks like a WBS!) Technical External Organizational Project Management Requirements Regulatory (JHA) Project authorities Estimating PREFIX With Technology Subcontractors/ supliers Governance Planning Uncertainty In Complexity an/or interfaces Market conditions Resources Controlling Performance Customers Dependencies Communications Reliability Weather Funding Quality Site restrictions

23 Can be used for reports, Software development or anything that fits a definition of a project. The following is an example for a report on a new business opportunity Research Hypothesis Report preparation Report delivery PREFIX With Uncertainty In Requirements Previous studies interviews Planning Designing Testing/ modeling Report drawings presentation presentation rehearsals Question Site visit estimate Printing/ binding delivery Economic modeling

24 Planning Risk Responses What should we do? Based on: Type & nature of risk Manageability Impact Resource availability Costs Who s going to do it?

25 Typical response strategies Strategy before Tactics Eliminate uncertainty avoid Transfer liability ownership avoid Reduce to acceptable reduce Control & Manage residual accept What about opportunities?

26 Opportunities Threat Avoid Eliminate Transfer - allocate Reduce - modify exposure Accept include in baseline Opportunity Exploit Share opportunity Enhance more likely and bigger impact Accept & see what happens

27 Example risk sheet PROJECT: Wellington RISK NAME: RISK # CATEGORY RISK OWNER: DATE REV # H DESCRIPTION: Objective Cause Risk Factors LIKELIHOOD M L L M H IMPACT Score 4 RANK risk K$/mo IMPACT RESERVE COST IMPACT SCHEDULE IMPACT 0 0 QUALITY IMPACT PUBLIC/POLITICAL IMPACT PAA RESPONSE # ACTION WHO WHEN Early on, Risks Can be a check of your objectives. CLOSURE

28 Summarize in Risk Register Tool used to capture the identified risks, their impacts and probability and the steps that need to be taken Used as an interactive tool to monitor progress of risk responses Assigns responsibility for risk actions

29 A Better Matrix Consequences Probability Square the Value to increase the prioritization!

30 Implement Responses You haven t done anything if all you ve done is to make a decision. Same with any project plan, or risk management plan. Move Risks to an issues/problems list

31 In addition.. Process Take Action to Manage not just analyse Periodic Risk Reviews New risks. Look at how risks have changed. Determine if risk responses have worked Additional risk responses Assess process as a whole and Improve

32 Implementing Responses Who and How?? Who should own risk? Person or part best able to manage it effectively Owner of objective that would be affected How to make it happen? Allocate Resource/budget/time for actions Add specific activities to project plan Monitor/report/review responses

33 People! Processes and computers do not manage risk People do, and they re complicated

34 People s emotional response Excited By Risk Start a new project, You have no experience, it s a new client, uncertain requirements, and, and Bring it On! Emotional response Scared By Risk Yikes! Where you should be depends on the situation. Sometimes: Must be risk adverse Must be adventurous Just deal with it Response By A Population

35 Key Learning Points Risk is uncertainty that matters Includes both threats and Ops Need to separate cause-risk-effect Structured descriptions are helpful Select appropriate Risk response strategy Turn strategy into actions Remember it s about people

36 Translate and Implementation Clearly we need a risk management plan/process as part of our project plan not a big one We need a Risk breakdown structure We need a risk register We need an issues list

Risk Management Plan for the <Project Name> Prepared by: Title: Address: Phone: Last revised:

Risk Management Plan for the <Project Name> Prepared by: Title: Address: Phone: Last revised: for the Prepared by: Title: Address: Phone: E-mail: Last revised: Document Information Project Name: Prepared By: Title: Reviewed By: Document Version No: Document Version Date: Review Date: