“Excellence through Knowledge”

Presenter: Dr. Earl S. Green, [Link]; PMP

Associate Professor – Electro-mechanical Engineering
 “Excellence through Knowledge”

Learning Objectives

At the end of this chapter, students should be able to:

– Define risk
– Identify and describe the 7 risk management processes
– Develop a risk register
 “Excellence through Knowledge”

 What is Risk ?
 Are you a risk taker or
risk averse ?

 Life is full of risks

 And projects are no different
 “Excellence through Knowledge”

Risk is an uncertain event or condition that, if it

occurs, has a positive or negative effect on one or
more project objectives.
PMBOK® Guide, Sixth Edition, Glossary
 “Excellence through Knowledge”

 Risks are “uncertainties’, but may be good (opportunities) or bad

(threats) for the project
 Uncertain events must be identified and analyzed before planning
how to manage them
 Plan project in view of the identified risks to avoid as many
problems as possible
 “Excellence through Knowledge”

 Take a chance! All life is a chance. The man who goes the furthest is generally
the one who is willing to do and dare. – Dale Carnegie
 Great love and great achievements involve great risk.
 If one has to jump a stream and knows how wide it is, he will likely not jump. If
he doesn't know how wide it is, he'll jump and six times out of ten he'll make it.
 Playing safe is probably the most unsafe thing in the world. You cannot stand
still. You must go forward.
- Robert Collier
 He who is not courageous enough to take risks will accomplish nothing in life. -
Mohammed Ali
 “Excellence through Knowledge”

 A project manager’s work should not focus on dealing with problems, it

should prevent them
 Studies show a 90% decrease in project problems through the use of risk
management
 Risk management focuses on proactively preventing things that can go
wrong and helping things to go right
 “Excellence through Knowledge”

 Failing to meet project objectives

 Missing opportunities
 Project team stress
 “Excellence through Knowledge”

Plan Risk Management is the process of

defining how to conduct risk management
activities for a project.
PMBOK® Guide, Sixth Edition, Glossary
 “Excellence through Knowledge”

Inputs Tools & Outputs

Techniques
• Project charter • .Expert judgment • Risk Management Plan
• Project management plan • .Data analysis
•All components • Stakeholder analysis
• Project documents • .Meetings
•Stakeholder register
• EEF
• OPA
 “Excellence through Knowledge”

Describes how risk management will be structured and performed

and includes:

 Methodology
 Roles and responsibilities
 Budgeting
 Timing
 Risk categories
 Definitions of risk probability and impact
 Probability and impact matrix
 Revised stakeholder tolerances for risk
 Reporting formats
 Tracking information
 hierarchical representation of
potential sources of risk
 helps the project team
consider the full range of
sources from which individual
project risks may arise
 useful when identifying risks
or when categorizing
identified risks.

Risk Category - Provide a

means for grouping individual
project risks.
 “Excellence through Knowledge”

Identify Risks is the process of determining

which risks may affect the project and
documenting their characteristics.
PMBOK® Guide, Sixth Edition, Glossary
 “Excellence through Knowledge”

Inputs Tools & Techniques Outputs

• Project management plan • Expert judgment • Risk Register

•Requirements management plan • Data gathering • Risk report
•Schedule management plan •Brainstorming • Project documents
•Cost management plan •Checklists updates
•Quality management plan •Interviews •Assumption log
•Resource management plan • Data analysis •Issue log
•Risk management plan •Root cause analysis •Lesson learned Register
•Scope baseline •Assumption and constraint
•Schedule baseline analysis
•Cost baseline •SWOT analysis
• Project documents •Document analysis
•Assumption log • Interpersonal and team
•Cost estimates skills
•Duration estimates •Facilitation
•Issue log • Prompt lists
•Lessons learned register
•Requirements documentation • Meetings
•Resource requirements
•Stakeholder register
•Agreements
• Procurement documentation
• EEF
• OPA
 RISK REGISTER

Risk Risk
ID Identified Project Risk Risk Category P I Score Rank Risk Response Strategy Risk Owner
001

002

003

004

005

006

007

008

009

010

011

012

013

014

015

016
 “Excellence through Knowledge”

Perform Qualitative Risk Analysis is the process of

prioritizing risks for further analysis or action by
assessing and combining their probability of occurrence
and impact.
PMBOK® Guide, Sixth Edition, Glossary
 “Excellence through Knowledge”

Inputs Tools & Outputs

Techniques
• Project management plan • Expert judgment
• Risk management plan • Data gathering • Project documents updates
• Project documents •Interviews •Assumption log
•Assumption log • Data analysis •Issue log
•Risk register •Risk data quality assessment •Risk register
•Stakeholder register •Risk probability and impact •Risk Report
• EEF assessment
• OPA •Assessment of other risk
parameters
• Interpersonal and team skills
•Facilitation
• Risk categorization
• Data representation
•Probability and impact matrix
•Hierarchical charts
• Meetings
 “Excellence through Knowledge”

 Risk probability
 The likelihood that a risk will occur
 Risk impact
 The effect on project objectives if the risk event occurs

 Risk Score = Probability * Impact

(RS = P*I)
 “Excellence through Knowledge”

 Assign values to terms indicating relative position (P):

 “Very unlikely” < or = 0.1
 “Somewhat unlikely” 0.3
 “50-50 possibility” 0.5
 “Somewhat likely” 0.7
 “Very likely” > or = 0.9
 Assign values that indicate their relative positions (I):
 “Very low” < or = 0.1
 “Somewhat low” 0.3
 “Moderate” 0.5
 “Somewhat high” 0.7
 “Very high” > or = 0.9
 “Excellence through Knowledge”

Perform Quantitative Risk Analysis is the

process of numerically analyzing the effect of
identified risks on overall project objectives.
PMBOK® Guide, Sixth Edition, Glossary
 “Excellence through Knowledge”

Inputs Tools & Outputs

Techniques
• Project management plan • Expert judgment • Project Documents Updates
•Risk management plan • Data gathering
•Scope baseline •Interviews
•Schedule baseline
• Interpersonal and team
•Cost baseline
skills
• Project documents •Facilitation
•Assumption log
•Basis of estimates
• Representations of
•Cost estimates
uncertainty
•Cost forecasts • Data analysis
•Duration estimates •Simulations
•Milestone list •Sensitivity analysis
•Resource requirements •Decision tree analysis
•Risk register •Influence diagrams
•Risk report
•Schedule forecasts
• EEF
• OPA
 “Excellence through Knowledge”

Plan Risk Responses is the process of

developing options and actions to enhance
opportunities and to reduce threats to project
objectives.
PMBOK® Guide, Sixth Edition, Glossary
 “Excellence through Knowledge”

Inputs Tools & Outputs

Techniques
• Project management plan • Expert judgment • Change requests
•Resource management plan • .Data gathering • Project management plan
•Risk management plan •Interviews updates
•Cost baseline • Interpersonal and team •Schedule management plan
• Project documents skills •Cost management plan
•Lessons learned register •Facilitation •Quality management plan
•Project schedule •Resource management plan
• Strategies for threats
•Project team assignments •Procurement management plan
•Resource calendars
• Strategies for •Scope baseline
•Risk register opportunities •Schedule baseline
•Risk report • Contingent response •Cost baseline
•Stakeholder register strategies • Project documents
• EEF • Strategies for overall updates
• OPA project risk •Assumption log
• Data analysis •Cost forecasts
• Alternatives analysis •Lessons learned register
•Project schedule
• Cost-benefit analysis
•Project team assignments
• Decision making •Risk register
• Multicriteria decision •Risk report
analysis
 Escalate - appropriate when the project team or the project sponsor
agrees that a threat is outside the scope of the project or that the
proposed response would exceed the project manager’s authority.
 Avoid - when the project team acts to eliminate the threat or protect
the project from its impact.
 Transfer - involves shifting ownership of a threat to a third party to
manage the risk and to bear the impact if the threat occurs.
 Mitigate - when action is taken to reduce the probability of
occurrence and/or impact of a threat.
 Accept - acknowledgement of the existence of a threat, but
no proactive action is taken.
 “Excellence through Knowledge”

Acceptance: allows the impact of the risk to occur.

 Active acceptance: defining a contingency plan and

allocating contingency reserves to deal with risks
 Passive acceptance: dealing with risk as it occurs
 Escalate - ibid slide 28
 Exploit (reverse of avoid) - selected for high-priority
opportunities where the organization wants to ensure that
the opportunity is realized.
 Share - involves transferring ownership of an opportunity
to a third party so that it shares some of the benefit if the
opportunity occurs.
 Enhance (reverse of mitigate) - used to increase the
probability and/or impact of an opportunity
 Accept - ibid slide 28
 “Excellence through Knowledge”

Management Reserve Contingency Reserve

“Unknown unknowns” “Known unknowns”
Used to counteract unforeseen events Used to plan for risk events
within defined scope

Not used for major events or changes in Not used to compensate for poor
scope planning

Authorized by senior management Authorized by the project manager

Not part of the project budget Part of the project budget

 “Excellence through Knowledge”

Implement Risk Responses is the process of

implementing agreed-upon risk response plans.
The key benefit of this process is that it ensures
that agreed-upon risk responses are executed as
planned in order to address overall project risk
exposure, minimize individual project threats, and
maximize individual project opportunities.
PMBOK® Guide, Sixth Edition, Glossary
 “Excellence through Knowledge”

Inputs Tools & Outputs

Techniques
• Project management plan • Change requests
• Expert judgment • Project documents updates
•Risk management plan
•Cost baseline
• Interpersonal and team •Issue log
skills •Lessons learned register
• Project documents
•Influencing •Project team assignments
•Lessons learned register
•Risk register
• Project management •Risk register
information system •Risk report
•Risk report
•Stakeholder register
• OPA
 “Excellence through Knowledge”

is the process of monitoring the

implementation of agreed-upon risk response
plans, tracking identified risks, identifying and
analyzing new risks, and evaluating risk process
effectiveness throughout the project.
PMBOK® Guide, Sixth Edition, Glossary
 “Excellence through Knowledge”

Inputs Tools & Outputs

Techniques
• Project management plan • Data analysis • Work performance
•Risk management plan •Technical performance analysis information
• Project documents •Reserve analysis • Change requests
•Issue log • Audits • Project management plan
•Lessons learned register
•Risk register
• Meetings updates
•Any component
•Risk report • Project documents
• Work performance data updates
• Work performance •Assumption log
reports •Issue log
•Lessons learned register
•Risk register
•Risk report
• Organizational process
assets updates
“Excellence through Knowledge”