The Risky Business of. Risk Management

Transcription

1 The Risky Business of Risk Management 1

2 About Me: Jan Holt, PMP Project Management Professional (PMP) since 2005 Project Management Institute (PMI) Michiana Chapter President PMP Prep Class Instructor Butler University, B.A. Psychology Current Position: Project Manager/McKesson Corp. 15+ Years Project Management Healthcare (Software Implementations & Upgrades) Hospitals & Physician Practices 2

3 Agenda Benefits of Risk Management Risk Approaches/High Level Methods Practical ways to present Risk Management Risk Questions/Concerns 3

4 Opening Quote If you don t invest in Risk Management, it doesn t matter what business your in, it s a Risky Business. (Gary Cohn) 4

5 MAKING A DIFFERENCE How can we as Project Managers make a difference for our CUSTOMERS? 5

6 Why Worry About Risk?? Does anyone really care about Risk Identification and Management? Does anyone benefit from Risk Management? YES & YES 6

7 Characteristics of Risk 1) Is an UNCERTAIN event 2) May be good or bad.not always bad 3) Always in the FUTURE 4) May have one or more causes 5) May have one or more impacts 7

8 Risk Management Process Should be used on ALL projects Involves Reviewing: Potential for unwanted negative consequences of an Event to occur Reducing the likelihood of an Event Reducing the negative impact of an Event 8

9 NORMAL RISK MANAGEMENT Normally LIVE WITH IT mentality. RISK RATINGS are not normally well thought out. Hands off approach Peace, Love, Tranquility 9

10 Risk Management 10

11 Benefits of Risk Management Risk Management can Increase Customer Satisfaction Assist with keeping the Project on Track Decrease Budget Costs due to project delays and/or additional resources Improve Methodology/Standards for future projects and/or project teams 11

12 Benefits of Risk Management Risk Management allows for Risks and responses to be documented as a historic record for future reference Contingency Planning Increased confidence in investment and management decisions Fewer shocks and unwelcome surprises 12

13 Risk Tolerance Organizations & Stakeholders - Willing to accept varying degrees of risk Risks - May be accepted if they are within tolerance with the rewards that may be gained by taking the risk 13

14 Risk Attitude Individuals & Groups - Attitudes toward risk influence the way they respond Driven by perception, tolerances & other biases 14

15 Risk Responses Reflect an organization s perceived balance between risk-taking and risk avoidance Example: Fast tracking a project 15

16 Risk Management 16

17 Project Management Processes How does Risk Management Fit into the overall Project Management process? Project Management Institute (PMI) Standard Addresses the UNCERTAINTY in a project A risk or opportunity is an uncertainty May or may not happen Integral to the Project Management (PM) Process e.g. Schedule or Cost Management Ongoing throughout the project 17

18 Risk Management in PM Process How does Risk Management Fit into the overall Project Management process? DOES affect Cost, Schedule, Quality, Human Resources, Communcation, etc. It is PROACTIVE Takes a Don t wait & see what Risks are going to occur Approach Seeks to IDENTIFY, PRIORITIZE, PLAN for all Risks 18

19 Risk Management & Customers Making Risk Management Real for Customers Using everyday examples Risks become relatable Rewards vs Risks 19

20 Real-Life Risk Management ANSWERING A QUESTION Assess Risk of answering Risk vs. Reward 20

21 Project Risk Management SPEEDING»Assessing Risk»Risk vs. Rewards 21

22 Project Risk Management YELLOWSTONE VACATION PLANNING Lodging Availability Number of Yearly Visitor Deaths Risk vs. Rewards 22

23 Making a Difference Small Steps / BIG Impact Educating our PM s on Risk Management Process Educating our Project Teams on the benefits of Risk Management Educating our customers on Risk Management and how it can benefit not only Project, but Organization 23

24 PROJECT RISKS PROJECT RISK An uncertain event or condition that, if it occurs, has a positive or negative effect on one or more project objectives (e.g. Scope, Schedule, Cost or Quality). May have one or more causes May have one or more impacts 24

25 The Uncertainty Spectrum No Information (Unknown unknowns) Partial Information (Known unknowns) Complete Information (Knowns) TOTAL UNCERTAINTY GENERAL UNCERTAINTY SPECIFIC UNCERTAINTY TOTAL CERTAINTY SCOPE OF PROJECT RISK MANAGEMENT Management must acknowledge & allow for potential for risks that cannot be known NOT a risk this is a certainty and needs to be addressed in project planning 25

26 MANAGING RISK The Project Manager can manage risk with **** KNOWLEDGE**** = 26

27 Six (6) Risk Management Processes Plan Risk Management Identify Risks Perform Qualitative Risk Analysis Perform Quantitative Risk Analysis Plan Risk Responses Control Risks 27

28 Project Risk Management Initiating Plan Risk Management Planning Identify Risks Perform Qualitative Risk Analysis Perform Quantitative Risk Analysis Plan Risk Responses Executing Monitoring & Controlling Control Risks Closing 28

29 PRIMARY OUTPUT What is the PRIMARY output in Risk Management? 29

30 PRIMARY OUTPUT RISK REGISTER 30

31 RISK REGISTER Document in which the results of Risk Analysis & Response Planning are recorded List of Identified Risks List of Potential Responses 31

32 Risk Register/Matrix 32

33 Risk Register/Matrix 33

34 Risk Register/Matrix 34

35 PLAN RISK MANAGEMENT 35

36 IDENTIFY RISKS 36

37 IDENTIFY RISKS Who participates in Risk Identification? Is Risk Identification conducted once, twice or multiple times in the Project?

38 Perform Qualitative Risk Analysis 38

39 Perform Qualitative Analysis WHAT IS IT: Assessing & combining the probability of occurrence & impact. Examples = Brainstorming, Interviewing, Delphi Technique, Historical Data, SWOT Analysis KEY BENEFIT: Enables Project Managers to reduce the level of uncertainty & to focus on high-priority risks 39

40 Perform Qualitative Risk Analysis Risk Probability & Impact Assessment Investigates the likelihood that each specific risk will occur. For each risk, assign a probability (higher number is more likely to occur) and an impact (higher number has greater impact on project) Multiply Probability and Impact = Risk Score Probability & Impact Matrix: Place each risk on grid (matrix) based on score. Zones on grid will be High, Medium and Low Risk Probability Threats Impact:

41 Perform Qualitative Analysis 41

42 Perform Qualitative Risk 42

43 PERFORM QUANTITATIVE RISK ANALYSIS 43

44 PERFORM QUANTITATIVE RISK ANALYSIS WHAT IS IT?: PROCESS OF NUMERICALLY ANALYZING THE EFFECT OF IDENTIFIED RISKS ON OVERALL PROJECT OBJECTIVES. Examples = Interviewing, Sensitivity Analysis (Tornado Diagram), Decision Tree Analysis BENEFIT: PRODUCES QUANTITATIVE RISK INFORMATION TO SUPPORT DECISION MAKING IN ORDER TO REDUCE PROJECT UNCERTAINTY. 44

45 Perform Quantitative Risk Analysis Quantitative Risk Analysis & Modeling Techniques: Sensitivity Analysis: Help determine which risks have the most potential impact. (Example = Tornado Diagram) Expected Monetary Value (EMV): Statistical concept that calculates the average outcome when the future includes scenarios that may or may not happen (Used in Decision Trees) Modeling and Simulation: Example = Monte Carlo Simulation 45

46 Perform Quantitative Risk 46

47 Perform Quantitative Risk Decision Tree Analysis 47

48 Decision Trees Risk Management Take Risk Mgt Action Risk Management Decision will cost $1,000 to implement. Is it worth it? Take No Action Successful Project Expected Value = $? Average Project Problem Project Successful Project Expected Value = $? 70% $20,000 25% $5,000 5% $-15,000 50% $20,000 Average Project Problem Project 20% $5,000 30% $-15,000 48

49 Decision Trees Take Risk Mgt Action Successful Project 70% $20,000 = $14,000 Expected Value = $13,500 ($14,500 - $1,000) Risk Management Risk Management Decision will cost $1,000 to implement. Is it worth it? Yes $13.5K>$6.5K Take No Action Average Project Problem Project Successful Project Expected Value = $6,500 25% $5,000 5% $-15,000 50% $20,000 = $1,250 = -$750 = $14,500 = $10,000 Average Project Problem Project 20% $5,000 30% $-15,000 = $1,000 = -$4,500 = $6,500 49

50 PERFORM QUANTITATIVE RISK ANALYSIS 50

51 PLAN RISK RESPONSES 51

52 PLAN RISK RESPONSES WHAT IS IT? PROCESS OF DEVELOPING OPTIONS & ACTIONS TO ENHANCE OPPORTUNITIES & TO REDUCE THREATS TO PROJECT OBJECTIVES. KEY BENEFIT ADDRESSES THE RISKS BY THEIR PRIORITY, INSERTING RESOURCES & ACTIVITIES INTO THE BUDGET, SCHEDULE & PROJECT MANAGEMENT PLAN AS NEEDED. 52

53 CONTROL RISKS 53

54 WHAT IS IT? CONTROL RISKS PROCESS OF IMPLEMENTING RISK RESPONSE PLAN TRACKING IDENTIFIED RISKS IDENTIFYING NEW RISKS EVALUATING RISK PROCESS EFFECTIVENESS THROUGHOUT THE PROJECT KEY BENEFIT IMPROVES EFFICIENCY OF THE RISK APPROACH TO OPTIMIZE RISK RESPONSES. 54

55 Project Risk Management Summary Recognize the Risk Investigate the Risk Risk Management Planning Risk Identification Qualitative Risk Analysis Quantitative Risk Analysis Seek to deal with the Risk Risk Response Planning Keep track of the Risk Risk Monitoring & Control Adapted from: Customer Driven Project Management by Bruce T. Barkley & James Saylor 55

56 Closing Quote The first step in the Risk Management process is to acknowledge the reality of risk. Denial is a common tactic that substitutes deliberate ignorance for thoughtful planning. (Charles Tremper) 56

57 Making a Difference WE CAN MAKE A POSITIVE difference for our CUSTOMERS 57

58 SPEEDING EXAMPLE WILL REVIEW SPEEDING EXAMPLE, IF TIME ALLOWS. 58

59 Questions?? 59