Project Management for the Professional Professional Part 3 - Risk Analysis Michael Bevis, JD CPPO, CPSM, PMP
What is a Risk? A risk is an uncertain event or condition that, if it occurs, has a positive or negative effect on one or more project objectives. Risk involves the notion of uncertainty Risk contains potential threats & opportunities Essentially risk management is the planning and and execution of efforts to avoid or minimize the impact of threats while inviting and maximizing opportunities.
Risk has 3 primary components: An event (an uncertain change) A probability of occurrence of that event Impact of that event (amount at stake)
Six Steps to Risk Management Plan Risk Management Identify Risks Perform Qualitative Risk Analysis Perform Quantitative Risk Analysis Plan Risk Responses Monitoring and Control Risks
Risk Management - Risk & Project Life Cycle The objectives of risk management is to increase probability and impact of positive events and decrease probability and impact of negative events.
Identify Risks Inputs: Enterprise Environmental Factors Organizational Process Assets Scope Baseline Project Documents Risk Management Plan Stakeholder Register
Identify Risks Type of Risk can be classified as follows: Known - an item or situation containing no uncertainty (ex: taxes) Unknowns - things that we know exist but do not know how they will effect us. A known-unknown is an identifiable uncertainty. (ex: taxes, electric bill) Unknown-unknown - is simply an item or situation whose existence we can t imagine. Thus, no example can exist. (e.g. SARS prior to its existence!)
Tools and Techniques Identify Risks Documentation Reviews Information gathering techniques Brainstorming Delphi Interviewing Root Cause identification SWOT
Tools and Techniques Checklist analysis Assumptions Analysis Diagramming techniques Cause and effect diagrams System or process flow charts Influence diagrams 13
Output: The Risk Register Identify Risks 1. List of identified risks 2. List of potential responses 3. Root causes of risk 4. Updated risk categories
Risk Analysis: Qualitative Risk Analysis Inputs: Organizational Process Assets Project Scope Statement Risk Management Plan Risk Register
Risk Analysis: Qualitative Risk Analysis Tools and Techniques: Risk Probability & Impact Assessment Probability and Impact Matrix Risk Data Quality Assessment Risk Categorization Risk Urgency Assessment
Risk Analysis: Qualitative Risk Analysis Categories of Risk (Classified according to their impact on the project) Technical, Quality or Performance risks Project-management Organizational risks Scope risks - risks associated with changes of scope, or the subsequent need for fixes to achieve technical deliverables Schedule risks - failure to complete tasks within the estimated time limits, or risk associated with dependency network logic Cost risks - failure to complete tasks within the estimated budget External risks Force majeure risks
Risk Analysis: Quantitative Risk Analysis Inputs: Organizational Process Assets Risk Management Plan Risk Register Cost & Schedule Management Plan
Risk Analysis: Quantitative Risk Analysis Tools and Techniques Data Gathering and Representation Techniques Interviewing Probability distributions Expert judgment 19
Risk Analysis: Quantitative Risk Analysis Tools and Techniques Quantitative risk analysis and modeling techniques: Sensitivity analysis Expected monetary value analysis Decision tree analysis Modeling and simulation 20
Risk Analysis Outputs: Qualitative and Quantitative Risk Analysis Outputs: Both Qualitative and Qualitative Risk Analysis have the same Outputs: Risk Register Updates Updates include Probabilistic analysis of the project Probability of achieving cost and time objectives Prioritized list of quantified risks Trends in quantitative risk analysis results 21
Acceptance Active Passive Planned Risk Responses Avoidance Transfer Contractor Third Party Mitigation 21
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Project Management for the Professional Professional Part 3 - Risk Analysis Michael Bevis, JD CPPO, CPSM, PMP