Project Risk
Management
Group Members:
Abebe Duguma-----GSE/9068/17
Benayas Edecha----GSE/2742/17
Diriba Gudina-------GSE/8662/17
Submitted To: Mengistu Bogale (Ph.D)
Learning Objectives
01 02
Understand risk and importance of project risk Discuss the elements of planning risk
management. management.
03 04
List common sources of risks on IT projects.
Describe the process of identifying risks
05 and create a risk register.
Explain quantitative risk analysis and how to 06
apply decision trees, simulation and sensitivity Provide examples of using different risk
analysis to quantify risks. response planning strategies to address both
07 negative and positive risks.
Describe how software can assist in project risk
management. 08
Discuss how to control risk.
The Importance of Project Risk Management
Project risk management is the art and Risk management is often overlooked in projects,
science of identifying, analyzing, and but it can help improve project success by helping
responding to risk throughout the life of a select good projects, determining project scope,
project and in the best interests of meeting
and developing realistic estimates
project objectives
Negative Risk
A dictionary definition of risk is “the possibility of loss or injury”
Negative risk involves understanding potential problems that might occur in the
project and how they might impede project success
Negative risk management is like a form of insurance; it is an investment
Risk Can Be Positive
Positive risks are risks that result in good things happening; sometimes called
opportunities.
A general definition of project risk is an uncertainty that can have a negative or positive
effect on meeting project objectives.
The goal of project risk management is to minimize potential negative risks while
maximizing potential positive risks.
Project Risk Management Processes
Planning risk management : Deciding how to approach and plan the risk management
activities for the project.
Identifying risks: Determining which risks are likely to affect a project and documenting
the characteristics of each.
Performing qualitative risk analysis: Prioritizing risks based on their probability and
impact of occurrence.
Performing quantitative risk analysis: Numerically estimating the effects of risks on
project objectives.
Planning risk responses: Taking steps to enhance opportunities and reduce threats to
meeting project objectives.
Controlling risk: Monitoring identified and residual risks, identifying new risks, carrying
out risk response plans, and evaluating the effectiveness of risk strategies throughout the
life of the project.
1-
Planning Risk Broad Categories of Risk
Management
The main output of this process is
a risk management plan—a plan
that documents the procedures for Market risk
managing risk throughout a Financial risk
project.
Technology risk
The project team should review People risk
project documents and understand Structure/process risk
the organization’s and the
sponsor’s approaches to risk.
The level of detail will vary with the
needs of the project.
Sample Risk Breakdown
Risk Breakdown Structure Structure
A risk breakdown structure is a
hierarchy of potential risk categories
for a project.
Similar to a work breakdown
structure but used to identify and
categorize risks.
2- Identifying Risks Brainstorming
is the process of understanding
what potential events might hurt or is a technique by which a group
enhance a particular project. attempts to generate ideas or find
a solution for a specific problem by
Risk identification tools and amassing ideas spontaneously and
techniques include: without judgment.
An experienced facilitator should run
Brainstorming the brainstorming session.
Be careful not to overuse or misuse
The Delphi Technique brainstorming.
Interviewing
SWOT analysis
Delphi Technique Interviewing
is used to derive a consensus among a
panel of experts who make predictions Interviewing is a fact-finding
about future developments. technique for collecting
information in face-to-face, phone,
Provides independent and anonymous e-mail, or instant-messaging
input regarding future events. discussions.
Uses repeated rounds of questioning Interviewing people with similar
and written responses and avoids the project experience is an important
biasing effects possible in oral tool for identifying potential risks
methods, such as brainstorming.
SWOT Analysis Risk Register
SWOT analysis (strengths, weaknesses,
opportunities, and threats) can also be A risk register is:
used during risk identification.
A document that contains the results of
various risk management processes and
Helps identify the broad negative and that is often displayed in a table or
positive risks that apply to a project spreadsheet format.
A tool for documenting potential risk
events and related information.
Risk events refer to specific, uncertain
events that may occur to the detriment
or enhancement of the project.
Performing Qualitative Risk
3- Analysis
Probability/Impact
Matrix
Assess the likelihood and impact of
identified risks to determine their List the risks and then label each one as
high, medium, or low in terms of its
magnitude and priority.
probability of occurrence and its impact
if it did occur.
Risk quantification tools and techniques
include: Can also calculate risk factors:
Numbers that represent the overall
Probability/impact matrixes risk of specific events based on their
probability of occurring and the
consequences to the project if they
The Top Ten Risk Item Tracking do occur.
Expert judgment
Sample Probability/Impact Matrix Chart Showing Risk Technologies
Top Ten Risk Item Tracking Watch List
Top Ten Risk Item Tracking is a
qualitative risk analysis tool that helps
to identify risks and maintain an
awareness of risks throughout the life A watch list is a list of risks that are low
of a project. priority, but are still identified as
potential risks.
Establish a periodic review of the top
ten project risk items. Qualitative analysis can also identify
risks that should be evaluated on a
quantitative basis.
List the current ranking, previous
ranking, number of times the risk
appears on the list over a period of
time, and a summary of progress made
in resolving the risk item.
Performing Quantitative
4- Risk Analysis
Decision Trees and Expected
Monetary Value (EMV)
Often follows qualitative risk analysis,
but both can be done together. A decision tree is a diagramming
Large, complex projects involving analysis technique used to help select
leading edge technologies often require the best course of action in situations
in which future outcomes are
extensive quantitative risk analysis.
uncertain.
Main techniques include:
Estimated monetary value (EMV) is
Decision tree analysis the product of a risk event probability
and the risk event’s monetary value.
Simulation
Sensitivity analysis
Simulation Sensitivity Analysis
Simulation uses a representation or Sensitivity analysis is a technique used
model of a system to analyze the to show the effects of changing one or
expected behavior or performance of more variables on an outcome.
the system.
Monte Carlo analysis simulates a For example, many people use it to
model’s outcome many times to provide determine what the monthly payments
for a loan will be given different
a statistical distribution of the
interest rates or periods of the loan, or
calculated results. for determining break-even points
To use a Monte Carlo simulation, you based on different assumptions.
must have three estimates (most likely,
pessimistic, and optimistic) plus an Spreadsheet software, such as Excel,
estimate of the likelihood of the is a common tool for performing
estimate being between the most likely sensitivity analysis.
and optimistic values.
Figure 9-5. Sample Sensitivity Analysis for Determining Break-
Even Point
5- Planning Risk Responses
Response Strategies for
Positive Risks
After identifying and quantifying risks,
you must decide how to respond to
Risk exploitation
them.
Four main response strategies for Risk sharing
negative risks:
Risk avoidance Risk enhancement
Risk acceptance Risk acceptance
Risk transference
Risk mitigation
Residual and Secondary Risks
Residual risks Secondary risks
are risks that remain after all of the are a direct result of implementing a
response strategies have been
risk response.
implemented.
6- Controlling Risks
Results of Good Project Risk
Management
Involves executing the risk management
process to respond to risk events and
ensuring that risk awareness is an ongoing Unlike crisis management, good
activity performed by the entire project project risk management often goes
team throughout the entire project. unnoticed.
Workarounds are unplanned responses to Well-run projects appear to be almost
risk events that must be done when there effortless, but a lot of work goes into
are no contingency plans. running a project well.
Main outputs of risk control are:
Work performance information. Project managers should strive to
change requests. make their jobs look easy to reflect
updates to the project management the results of well-run projects.
plan, other project documents, and
organizational process assets.
Software to Assist in Project Risk
Management
Risk registers can be created in a simple Word or
Excel file or as part of a database.
More sophisticated risk management software,
such as Monte Carlo simulation tools, help in
analyzing project risks.
You can purchase add-ons for Excel and Project
2010 to perform simulations.
Thank You!