Project Management Certificate Program

Transcription

1 Project Management Certificate Program Risk Management Terry Skaggs ( Denver class) skaggst@centurytel.net Lee Varra-Nelson (Fort Collins class) lvarranelson@q.com or

2 Project Management Certificate Program Introduction In this Module we will cover: Overview of PMI processes Overview of PMI knowledge areas Risk management 2

3 Project Management Process Areas INITIATING PLANNING CONTROLLING EXECUTING CLOSING 3

4 PMI Process Groups to Knowledge Areas Map (PMBOK page 70) Knowledge Area Initiating Planning Execution Controlling Closing Integration 4.1, , Scope 5.1, 5.2, , 5.5 Time 6.1, 6.2, 6.3, 6.4, 6.5 Cost 7.1, Quality HR , Communications , 10.4 Risk 11.1, 11.2, 11.3, 11.4, Procurement 12.1, , * Notice Risk Management processes mostly all in planning process group 4

5 Risk Happens... We all take risks on a daily bases... Risk is in every thing we do, every action we take and every action we don t take. Risks comes from different sources Internal to the project or external to the project May be known or unknown (planned/unplanned) Not all are bad (opportunities vs threats)... Risk types: Business - risk of gain or loss Pure (insurable) risk - loss only (fire, theft, injury) 5

6 Risk Management. 6

7 Risk Management Risk management is the systematic process of identifying, analyzing and responding to project risk. 7

8 Risk Management Processes 11.1 Risk Management Planning 11.2 Risk Identification 11.3 Qualitative Risk Analysis 11.4 Quantitative Risk Analysis 11.5 Risk Response Planning 11.6 Risk Monitoring and Control 8

9 11.1 Risk Management Planning...is the process of deciding how to approach, plan, and execute the risk management activities for a project. 9

10 Risk Management Processes Real World - Think book ends - Planning & Monitoring [PwwwM] on the ends and www = (see below) and think www = world wide web for great sources of research of potential risks and lessons learned. Then Think 1) Which risks apply to our project? (identification) 2) Why do we care? (analysis - qualitative & quantitative) 3) What can we do about it? (response planning) 10

11 Risk Management Planning Inputs Enterprise Environmental Factors Organizational Process Assessment Project Scope Statement Project Management Plan 11

12 Risk Management Planning Tools & Techniques Planning Meetings and Analysis Outputs Risk Management Plan 12

13 Elements of a Risk Management Plan Methodology Roles & responsibilities Budgeting Timing Risk categories Definition of probability & impact Probability & impact matrix Revised stakeholders tolerances Reporting formats Tracking 13

14 Risk Management Planning Methodology Defines approach, tools and data sources that may be used to perform risk management on the project. Example: The project team will meet weekly to conduct a risk meeting. This meeting will determine new risks, analyze... 14

15 Risk Management Planning Roles and Responsibilities Defines the lead, support and risk management team membership for each type of activity in the risk management plan, assigns people to these roles, and clarifies their responsibilities. Example: The project manager will chair each risk meeting. Each core team member is responsible for... 15

16 Risk Management Planning Budgeting Assigns resources and estimates costs needed for risk management for inclusion in the project cost baseline. Example: The team has allocated 10% of the project budget or $10,000 toward the risk... 16

17 Risk Management Planning Timing Defines when and how often the risk management process will be performed throughout the project life cycle, and establishes risk management activities to be included in the project schedule. Example: The project team will meet weekly to conduct a risk meeting. In the middle of the project, the team will 17

18 Risk Management Planning Risk Categories Provides a structure that ensures a comprehensive process of systematically identifying risk to a consistent level of detail and contributes to the effectiveness and quality of Risk Identification. Example: The team shall use the RBS to identify risk categories and 18

19 Risk Management Planning Definition of Risk Probability and Impact The quality and credibility of the Qualitative Risk Analysis process requires that different levels of the risks probability and impact be defined. Example: The team shall use a High, Medium, Low scale for both probability and impact. 19

20 Risk Management Planning Probability & Impact Matrix Risks are prioritized according to their potential implications for meeting the project s objectives. Example: High B Med C Low A Low Med High (also see sample tables 5.1 Heldman book, p184 and p252 PMBOK) 20

21 Risk Management Planning Stakeholder Tolerance Stakeholders tolerances may be revised in the Risk Management Planning process, as they apply to the specific project. Example: Stakeholder wishes to hold schedule constant and sacrifice cost if risks occur 21

22 Risk Management Planning Reporting Formats Describes the content and format of the risk register as well as any other risk reports required. Defines how the outcomes of the risk management process will be documented, analyzed, and communicated. Basic Example: RISK DESCRIPTION OWNER RESPONSE BUDGET ETC. 22

23 Risk Management Planning Tracking Documents how all facets of risk activities will be recorded for the benefit of the current project, future needs, and lessons learned. Example: Risk audits will be performed once a month using a independent survey... 23

24 Risk Management Plan Exercise Pick a new project manager For each plan element, describe its use on the class project Create a risk management plan for your project Methodology Roles & responsibility Budgeting Timing Risk Categories Definition of risk probability & impact Probability & impact matrix Revised stakeholders tolerances Reporting format Tracking 24

25 11.2 Risk Identification determines which risks might affect the project and documents their characteristics. 25

26 Risk Identification INPUTS Enterprise Environmental Factors Organizational Process Assets Project Scope Statement Risk Management Plan Project Management Plan 26

27 Risk Identification Insurance risks (Pure Risk) a type of risk that has a chance for a loss. Business risks a chance for profit or loss within a business venture. 27

28 Risk Identification Risk Category Examples Risk sources External unpredictable External predictable Internal (non - Technical) Technical Legal From Max Wideman 28

29 Risk Identification External Risk Cause lies outside the project s control, but impacts the project direction. 29

30 Risk Identification External Risks External Unpredictable External Predictable Government/Regulatory Natural Hazards Vandalism Sabotage Political Unrest Etc. Market Risks Operational Environmental Impacts Inflation/Currency changes Taxation Etc. 30

31 Risk Identification Internal Non-Technical Risk Events within the control of project management which present uncertainty that may impact program/project direction. Management Schedule Cost Cash Flow Loss of Potential 31

32 Risk Identification Technical Risk Risks relating to evaluating/using state-of-the-art systems/processes/products that may impact project direction and support. Design Risks Changes in Technology Performance Design Size & Complexity of the Project 32

33 Risk Identification Legal Risks Licenses/Patent Rights Lawsuits Contractual failure Claims Outsider suit Insider suit Force majeure - uncontrollable event 33

34 Risk Identification Tools & Techniques Documentation Reviews Information Gathering Techniques Checklists Assumptions Analysis Diagramming Techniques 34

35 Risk Identification Information Gathering Techniques Brainstorming Delphi technique Interviewing Root Cause analysis Strengths, Weaknesses, Opportunities and Threats analysis (SWOT) 35

36 Risk Identification Diagramming Techniques Cause-and-effect Ishikawa or fishbone System or process flow charts Influence force field analysis, relationship, time order of events 36

37 Risk Identification Outputs Risk Register List of identified risks List of potential responses Root cause of risk Updated risk categories Triggers Inputs to other processes 37

38 Risk Identification Risk Identification & Trigger Exercise Create a list of risks for the class project. Identify at least 8 risks. Identify the Triggers 38

39 11.3 Qualitative Risk Analysis is the process of assessing the probability and impact of identified risks. probability likelihood chance possibility odds impact consequence effect outcome 39

40 Qualitative Risk Analysis Risk Management Planning Risk Identification Seldom, but sometimes Qualitative Risk Analysis Quantitative Risk Analysis Often Risk Response Planning Risk Monitoring & Control 40

41 Qualitative Risk Analysis Inputs Organizational Process Assets Project Scope Statement Risk Management Plan Risk Register 41

42 Qualitative Risk Analysis Tools & Techniques Risk Probability & Impact Assessment Probability & Impact Matrix Risk Data Quality Assessment Risk Categorization Risk Urgency Assessment 42

43 Qualitative Risk Analysis Outputs Risk Register (Updates) Relative ranking or priority list of project risks Risks grouped by categories List of risks requiring response in the near-term List of risks for additional analysis and response Watch lists of low priority risks Trends in qualitative risk analysis results 43

44 Qualitative Risk Analysis QUALITATIVE RISK ANALYSIS ASSESS PROBABILITY & IMPACT EXERCISE Assess the probability of the risk event happening. Assess the impact to the project of the event happening. Determine what criteria you will use to prioritize Prioritize your list 44

45 11.4 Quantitative Risk Analysis analyzes the effect of those [prioritized] risk events and assigns a numerical rating to those risks. It also presents a quantitative approach to making decisions in the presence of uncertainty. 45

46 Quantitative Risk Analysis Inputs Organizational Process Assets Project Scope Statement Risk Management Plan Risk Register Project Management Plan Project schedule management plan Project cost management plan 46

47 Quantitative Risk Analysis Tools & Techniques Data Gathering and Representation Techniques Interviewing Probability distributions Expert judgment Quantitative Risk Analysis & Modeling Techniques Sensitivity Analysis Expected monetary value analysis Decision tree analysis Modeling & simulation 47

48 Quantitative Risk Analysis Sample Decision Tree Analysis Question is, do we build a new prototype or not? Prototype Setup cost = $200,000 Failure: 35% probability and $120,000 impact Pass: no impact to project Prototypo Failure: 70% probability and $450,000 impact No prototype Setup cost = $0 Pass: no impact to project Prototype.35 x $120,000=$42,000 +$200,000= $242,000 Do not prototype.70 x $450,000 = $315,000 (costs more due to rework) Page 340 Rita Mulcahy book. Also see p258 PMBOK for additional example 48

49 Quantitative Risk Analysis Expected Monetary Value Maintain (0.95)(400)($100) Payoff $38,000 EMV Buy Acme or Buy Nadir Water Pumps Acme 400x$500=$200,000 Fail (0.05)(400)($150) Maintain (0.85)(400)($100) $3,000 $34,000 $241,000 Nadir 400x$485=$194,000 $240,000 Fail (0.15)(400)($200) $12,000 Buy Acme 400 trucks 5% fail rate $150 repair cost $100 maintenance cost Buy Nadir 400 trucks 15% fail rate $200 repair cost $100 maintenance cost 49

50 Quantitative Risk Analysis Monte Carlo The Monte Carlo method is a simulation by means of random numbers. The basic steps are: 1. Assess the range for the variables and determine the probability distribution. 2. Select a random value for each variable. 3. Run a deterministic analysis. 4. Repeat steps 2 and 3 a number of times to obtain probability distribution. 50

51 Quantitative Risk Analysis Outputs Risk Register (Updates) Probabilistic analysis of the project Probability of achieving cost and time objectives Prioritized list of quantifies risks Trends in quantitative risk analysis results 51

52 Quantitative Risk Analysis Quantitative Risk Analysis Exercise Assess the amount at stake with the possibility of the risk event happening for your top 2 risks 52

53 11.5 Risk Response Planning is the process of developing options and determining actions to enhance opportunities and reduce threats to the project s objectives. 53

54 Risk Response Planning Inputs Risk Management Plan Risk Register 54

55 Risk Response Planning Tools & Techniques Strategies for Negative Risks or Threats Avoidance Transference Mitigation 55

56 Risk Response Planning Avoidance I do not accept this option because of the potentially unfavorable results. Examples: Screening out contractors during source selections. Elimination approaches on parallel technology programs. 56

57 Risk Response Planning Transference I will attempt to share or deflect this risk with others. Examples: Warranties Insurance policies Contracting out / types of contract Bond - bid, performance, payment 57

58 Risk Response Planning Mitigation I will take the necessary measures required to control this risk by continually re-evaluating it and developing fall-back positions. Examples: Risk reduction milestones Reviews Risk budgeting Contingency planning 58

59 Risk Response Planning Tools & Techniques Strategies for Both Threats and Opportunities Acceptance 59

60 Risk Response Planning Acceptance I know the risk exists and am aware of the consequence. I will accept the consequence if it should occur. Examples: On schedule, on cost, etc. Most decisions to proceed with an action Contingency reserve 60

61 Risk Response Planning Tools & Techniques Contingency Response Strategy Plans recorded for the likelihood of the event Triggers identified/monitored Responsible individual to respond 61

62 Risk Response Planning Outputs Risk Register (Updates) Project Management Plan (Updates) Risk-Related contractual Agreements 62

63 Risk Response Planning Risk Response Plan Contents Identified risks Risk owner Qualitative/Quantitative analysis Response Triggers Actions to implement strategy Budget & times for responses Contingency & fall back plans Contingency Reserves Level of residual risk Secondary risks 63

64 Risk Response Planning Basic Example: Risk Response Plan RISK OWNER RESPONSE ACTIONS TO IMPLEMENT CONTINGENCY 64

65 Risk Response Planning Mitigation Versus Contingency Mitigation plans Forward looking Designed to prevent risk from occurring Contingency plans Designed to respond to risk once it occurs 65

66 Risk Response Planning Risk Reserves Management Reserve Project Contingency Reserve 66

67 Risk Response Planning Team Exercise (if time allows) Break into your teams Pick new PM (20 min. exercise) Identify top 5 risks on your project and create a risk response plan. PM to report results 67

68 11.6 Risk Monitoring & Control is the process of identifying, analyzing and planning for newly arising risks, keeping track of the identified risks and those on the watchlist, reanalyzing existing risks, monitoring trigger conditions for contingency plans, monitoring residual risks, and reviewing the execution of risk responses while evaluating their effectiveness. 68

69 Risk Monitoring & Control Inputs Risk Management Plan Risk Register Approved Change Requests Work Performance Information Performance Reports 69

70 Risk Monitoring & Control Tools & Techniques Risk Reassessment Risk Audits Variance & Trend Analysis Technical Performance Measurement Reserve Analysis Status Meetings 70

71 Risk Monitoring & Control Outputs Risk Register (Updates) Requested Changes Recommended Corrective Actions Recommended Preventive Actions Organizational Process Assets (Updates) Project Management Plan (Updates) 71

72 Risk Monitoring & Control Risk Monitoring & Control Exercise You have a new potential risk affecting your project. (Make it Shelve it) Step through the entire risk methodology for this new risk 72

73 Project Management Certificate Program Summation Risk Management is mostly a planning process Risk Management uses Progressive Elaboration Risk Management is often not done (but should be) Project complexity drives Risk Management effort Risk Management ownership: the client The Project Managers job is to provide motivation, focus and organization to risk management The Project Manager ensure Risk Management documentation 73

74 Project Management Certificate Program Assignment for Next Week Read PMBOK Chapter 12 (Procurement) Read page in Kim Heldman (black & white) book Read ONLY - Creating the contract exercise 9.1 (p ), Heldman book COMPLETE exercise 11.2 (p ) Closing a Project or Phase and review your answers on page 821 & 822 in Heldman book. 74

75 Project Management Certificate Program Congratulations!! 75