 Risk Response/Risk Treatment

 Treatment/response involves development and implementation of

measures to modify risk
 Addressing risk is to turn uncertainty to the organisation’s benefit
by constraining threats and taking advantage of opportunities

TTTT/ERIC/AACR
Terminate – Eliminate/Avoid (High Probability and High Impact)

- Certain risks will only be treatable, or containable to acceptable

levels, by terminating the activity.

- The option of termination of activities may be limited in

government when compared to the private sector
Tolerate – Retain/Accept (Low Probability and Low Impact)

- Risk tolerance is defined as the organisation’s readiness to bear

the risk in order to achieve its objectives

- An organisation may have to tolerate risks that have a current

level beyond its comfort zone and its risk appetite

- It is unusual for a risk to be accepted or tolerated before any risk

control measures

- A risk only becomes tolerable when all cost-effective control

measures have been put in place
Transfer – Insurance/Contract (Low Probability and High
Impact)

- For some risks the best response may be to transfer them

- This might be done by conventional insurance,

- It might be done by paying a third party to take the risk in

another way

- This option is particularly good for mitigating financial risks or

risks to assets
Treat – Control/Reduce (High Probability and Low Impact)

- The greater number of risks will be addressed in this way

- Action (control) is taken to constrain the risk to an acceptable

level

Conclusion
- When identifying suitable risk treatment options, the
organisation will need to look at the effect of the treatment on:

i) the likelihood of the risk occurring

ii) the impact of the risk should it occur
PROJECT RISK MONITORING AND CONTROL
Project risk control and risk monitoring is where you keep track of how risk responses are performing
against the plan as well as the place where new risks to the project are managed. It must be remembered that
risks can have negative and positive impacts. Positive risk is a risk taken by the project because its potential
benefits outweigh the threat and a negative risk is one that could negatively influence the cost of the project
or its schedule.
The purpose of project risk control is to:
- Identify the events that can have a direct effect on the project deliverables
- Assign qualitative and quantitative weight - the probability and consequences of those events that
might affect the project deliverables
- Produce alternate paths of execution for events that are out of control or cannot be mitigated
- Implement a continuous process for identifying, qualifying, quantifying, and responding to new risks
The main goals to risk monitoring and control:
- To confirm risk responses are implemented as planned
- To determine if risk responses are effective or if new responses are needed
- To determine the validity of the project assumptions
- To determine if risk exposure has changed, evolved, or declined due to trends in the project
progression
- To confirm policies and procedures happen as planned
- To monitor the project for new risks
- To monitor risk triggers
Risk triggers are those events that will cause the threat of a risk to become a reality. If one does not find a
way to solve this problem, the risk will become a reality. For each identified risk, there must be a response
plan. It is not much help to the project if the risk becomes a reality or issue and there is no an alternate
execution path or some other emergency plan.
Risk Control Techniques
1. Risk reassessment: Risk reassessments involve the following activities:
Identifying new risks
Evaluating current risks
Evaluating the risk management processes
Closing risks
2. Risk audit
Project teams may have defined risk responses. The question is—“Are the responses effective?”
Project managers facilitate risk audits to examine the effectiveness of the risk responses and to
determine whether changes are required. The team also examines the processes to identify, evaluate,
respond to, and control risks.
 3. Variance and trend analysis
As with many control processes, we now look for variances between the schedule and cost baselines
and the actual results. When we the variances are increasing, there is increased uncertainty and risk.
Watch the trends and respond before the situation gets out of hand.
4. Technical performance measurement
Imagine that you are working on a software development project and that the functional requirements
have been developed. You’ve planned to deliver functions at a point in time—at the end of the fourth
sprint, at the end of phase 1, or a milestone. The technical performance measurement is a
measurement of the technical accomplishments.
5. Reserve analysis
During the cost planning, the contingency and management reserves are added to the project budget
as needed. As risks occur, the reserves may decrease. Depending on how your organization handles
reserves and your risk management plan, project managers may request more reserves when
inadequate.
6. Meetings
Project managers should be deliberate risk managers. Engage your team members and appropriate
stakeholders in meetings to facilitate the risk management processes. For these meetings, be sure to:
- Distribute an agenda with a clearly stated purpose
- Invite the appropriate team members and stakeholders
- Use appropriate tools and techniques
- Distribute meeting minutes containing decisions, action items, issues, and risks
Main inputs to effectively monitor and control risks:
- Risk management plan
- Risk Register/Risk Tracker
- Risk response plan
- Project communications
- New risk identification
- Scope changes
Outputs of Risk Monitoring and Risk Control:
- Workaround plans
- Corrective/Preventive actions
- Change requests
- Risk response plan updates
- Risk database
- Checklist updates
Project Characteristics OR Project Specific Variables
Project Characteristics
Project Type Building
Civil Engineering – roads, bridges, airports etc.
Oil and Gas – reservoir/tanks, pipelines, oil rigs
Heavy Engineering – dams, power stations
Telecommunications

Building Type Commercial

Industrial
Public and community building
Residential building

Procurement Option Traditional

Design and Build
Direct Labour
Labour only

Client Type Private

Government/Government Agency
Corporate organisation

Project Location (1) North (NE, NC & NW)

South-West
South-South
South-East

Project Location (2) Onshore

Offshore

Project Duration 0 – 6 months

7 – 12 months
13 – 24 months
> 24 months

Project Size < N100 Million

N100 – 499 Million
N500 – 999 Million
N1 - 10 Billion
N11 - 20 Billion
˃ N20 Billion

Project Complexity Simple project

Slightly complex
Complex project

Nature of Project Refurbishment/Maintenance

Green Field/Fresh
Risk Management Strategies – Schedule and Cost
After identification of schedule and cost risk factors for a project, it is time to create strategies to avert these
risks. Schedule and cost slips and their risk factors are usually symptoms of the real problem: poor initial
strategies. Below are eight pre-emptive strategies and contingency plans to reduce or eliminate schedule and
cost risk.
- Get Upper Management "Buy In"
Optimistic Scheduling and costing are often risk factors when upper management is not fully behind the
plan. Management will try squeezing out any scheduled time and cost in favour of reaching the marketplace
quicker, and they may do this anytime during a project. Management often needs more information to make
decisions. You need to sell management on the project schedule and cost before kick-off, and get them to
agree not to meddle during the project. Write up a few line contract on a piece of paper and have them and
the team agree to it, or even sign it. That agreement makes the schedule and cost more tangible to everyone.
Upper management will better understand the consequences if they change their minds and the team can
focus on minimising scope changes.
- Reduce the Organisational "Always Behind Schedule or exceeding Cost Syndromes"
People inside companies get an "always behind schedule" attitude after three or four major schedule slips.
Courses of action are taken to get the schedule and cost back on track. To turn this "always behind"
perception around, you must take pre-emptive measures. One strategy is to acknowledge tasks that complete
on time to reinforce the idea that it does happen. Also, clearly communicate the consequences of being late
on a schedule or incurring extra cost. This lets people know that projects can be done on time and that late
projects have price.
- Get Leadership Training for the PM
Often people are promoted through the ranks to be Project Managers without any formal training. This lack
of proper training allows for many risk factors to surface, from "Optimistic Scheduling" to runaway
"Personal Agendas". A solid solution is to provide them Project Management training. University PG
programmes often have continuing education courses in Project Management, and they provide the tools
necessary to deal with many of these risk factors.
- Get Team Effectiveness Training
The biggest problems we have seen with project teams are "Poor Communication between Groups" and
"Parkinson’s Law". Communication is poor because people will tend to work on tasks and not on teamwork.
A task is tangible and measurable, while teamwork is more esoteric and subjective. Parkinson’s Law applies
because busy-looking people are usually left alone, and this adds to poor communications too. A strategy to
improve communications between groups is to send them to teamwork training. Some are called "ropes
courses" that allow the team to act out fun situations to improve their communication and build trust. A one
day course can pay for itself if the team learns how work more efficiently together.
- Have "Lessons Learned" Meetings
The definition of a fool is "someone who does the same thing over and over hoping the result will turn out
different". "Optimistic Scheduling", "Piling on People", and "Bleeding-edge Technology" are often used
project after project with the hope things will get better, but the schedule or cost continues to slip. A pre-
emptive strategy would be to review the "lessons learned" of a prior project and apply that knowledge
towards the next project. For example, people that used "Bleeding Edge Technology" for a prior failed
schedule could use older, more stable technology in their next project. Instead of "Piling on People" towards
the end of a project, at the beginning of the next project spend more time in the planning phase.
- Generate a Schedule or Cost Feedback Method
Often "New Tools, Technology, or Processes" introduce uncertainties into the schedule or cost. Sometimes
there are hidden problems and they can grow into projects themselves. During project planning you can
implement measuring systems to monitor the progress of the project. Specify a definite amount of time or
number of tasks to trigger your corrective actions. For example, if it takes more than three tasks to fix a new
technology, then change back to your older, known technology. Or if a new process delays milestones for a
week, then put more management attention on the details of that process until it snaps back to schedule.
- Look into Modern Project Management Methods
The old school of management taught cost accounting and Earned Value methods. They are thirty or forty
year old methods that measure schedule by dollar amounts. The US Military created many of these
techniques for large, long term projects. There is never a better time than now to study new Project
Management methods. New techniques, like Theory of Constraints, concentrate on the tasks of a project and
the critical path. They are a better fit for today’s time-to-market projects. A good book on the subject is
"Project Management in the Fast Lane: Applying the Theory of Constraints" by Robert Newbold (St. Lucie
Press, 1998).
- Reward Schedule Speed and Accuracy
Most rewards for a job well done are given at the end of a project when everything is completed. Without
some recognition during a project, people tend to hide in their cubes, communicate less, fill up their time
looking busy (Parkinson’s Law), and some even perform extra-curricular work outside of the project.
Recognition is a great motivating factor for people, and the two most important contributions to a project are
speed and accuracy. Those that do their work quickly and do it well are an asset. Rewarding these people
with a certificate, or announcing their good work in front of co-workers, or giving them a gift certificate for
dinner are nice, inexpensive techniques. It helps morale and lowers "Employee Turnover".
Emerging Concepts in the Risk Management Strategies
Piling on People - This could be called the "mythical man month" syndrome. Throw people at the project at
crisis points or near the drop-dead milestones. Evidence of it are that everyone works around the clock,
mandatory overtime, bodies milling around without direction, etc. There is no real plan to take into account
the lowering in productivity, required coordination among the new parties involved, or learning curve
requirements before the new parties are effective.
Risk Adverse Mentality (Resistance to Change that Affects Moral)
This factor looks like NIH, "Not invented here". There are arguments as to why process, tools, etc. can't
change. One hears statements like "At IBM, Intel, 3Com, etc. we did it differently and it always worked". If
the manager wants to make a change, the team will look for why it won't work, rather than adapt. Or always
point out its flaws. All of this resistance, of course, has a corresponding work slowdown, or worse, no one
speaks up to the PM or team to indicate that they can't or won't work with the change.
Parkinson's Law (Poor Utilization of Resources)
The work expands to fill the time available. It often involves poor planning. It can also involve the "Student
Project Syndrome" covered in the book "The Critical Chain" by Eliyahu Goldratt.
Parkinson’s Law is an axiom that states: “Work expands so as to fill the time available for its
completion.” In other words, tasks tend to take longer when more time is given to complete them
Personal Agendas within the Group (Extra Curricular Work Undermines Task Completion)
New tools, software, hardware, management approaches, etc. drain time away from real work. This is a
problem with highly skilled resources that are focused on goals other than those of the project. It sometimes
is a product of general, rather than closer, management or the higher technical skill of a project resource than
that of the manager.
"Unk-Unks" - Unknown Unknowns That Come Up
These are highly schedule adverse events that occur during the execution of the project. In this case, there
can be no planned response, since the event is unknown. There is no contingency plan in place to detect and
handle these events.