PROJECT RISK

MANAGEMENT
 PLAN RISK
MANAGEMENT PLAN RISK RESPONSES

IDENTIFY RISK
7 PROCESSES IMPLEMENT RISK
RESPONSES
PERFORMANCE
QUALITATIVE RISK
ANALYSIS

MONITOR RISKS
PERFORM
QUANTITATIVE RISK
ANALYSIS
 WHAT IS “RISK”

Risk is an unplanned event

or condition that can have a
positive (OPPORTUNITY) or
negative (THREAT) effect on
a project objective.

RISK is uncertainty
 RISKS CATEGORIES
There are many ways to classify or categorize risk;

o External
Regulatory, environmental, government, market shifts
o Internal
Time, cost or scope changes; inexperience; poor planning; people;
staffing; materials; equipment
o Technical
Changes in technology
o Unforeseeable
Only a small portion of risks (about 10%) are actually unforeseeable
 TYPES OF RISKS

Pure (Insurable)
Business Risk
Risk
•Risk of a gain or •Only a risk of loss
loss (i.e., fire, theft,
personal injury,
etc.)
 TYPES OF RISKS
Operational
Strategic › Cost Overrun
› Operational Controls
› Demand Shortfall › Capacity management
› Customer retention › Supply Chain Issues
› Integration problems › Employee Issues incl. fraud
› Pricing pressure › Bribery and Corruption
› Industry downturn › Commodity prices
› JV or partner losses
Types of Risks
› Macroeconomic
› Political Issues
› Legal Issues › Debt and interest rates
› Terrorism › Financial management
› Natural disasters › Asset losses
› Goodwill and amortization
› Accounting problems
Hazard
Financial
 KEY CONCEPTS

INDIVIDUAL An uncertain event or condition that, if it occurs, has a

PROJECT RISK positive or negative effect on one or more project
objectives

The effect of uncertainty on the project as a whole,

arising from all sources of uncertainty including
OVERALL
individual risks, representing the exposure of
PROJECT RISK
stakeholders to the implications of variations in project
outcome both positive and negative
1. Project size
2. Project complexity
3. Project importance

4. Development approach

TAILORING CONSIDERATIONS
 PLAN RISK MANAGEMENT
The process of defining how to conduct risk management activities a project.

TOOLS
INPUTS & OUTPUTS
TECHNIQUES

1. Project Management Plan 1. Data Analysis 1. Risk Management Plan

2. Project Charter • Stakeholder Analysis

3. Project Documents 2. Expert Judgement
4. EEF 3. Meetings
5. OPA
RISK MANAGEMENT PLAN CONTENTS

METHODOLOGY

M E TROLES
H O &DRESPONSIBILITIES
OLOGY

M E T H O D OFUNDING
LOGY

TIMING
METHODOLOGY

RISK CATEGORIES
RISK MANAGEMENT PLAN CONTENTS

DEFINITIONS OF RISK PROBABILITY &

IMPACT

PROBABILITY & IMPACT MATRIX

STAKEHOLDERS’ RISK APPETITE

REPORTING FORMATS

TRACKING
 • IS THE CHANCE THAT SOMETHING IS LIKELY TO HAPPEN
PROBABILITY
• RANKED AS “VERY LIKELY” TO “ALMOST CERTAINTY”

• THE RESULTANT OF THE PROBABILITY EVENT IS MEASURED AS IMPACT , NEGATIVE FOR THREATS OR
POSITIVE OPPORTUNITIES
IMPACT • RANKED AS “VERY LOW”, “LOW”, “MODERATE”, “HIGH”, “VERY HIGH”

IMPACT

PROBABILITY
IDENTIFY RISKS
 RISK IDENTIFICATION

Time Cost
› Schedule overruns › Budget Exceeded
› Tasks omitted from Schedule › Unanticipated
› Opportunity to compress › Expenditure
Schedule

Resources
Communication Identify › Team is under-resourced
› Materials shortage
› Poor communication Risks › Machinery unavailable
(Stakeholder dissatisfaction) › Industrial Action
› Positive & timely › Skills gap
communications (positive
publicity)

Environmental
Scope
› Bad weather results in re-work
› Scope creep › Weather delays progress
› Scope poorly defined › Adverse effects occur
› Project changes poorly › Environmental approvals not
managed complied with
 IDENTIFY RISKS
THE PROCESS OF IDENTIFYING INDIVIDUAL PROJECT RISKS AS WELL AS SOURCES OF OVERALL PROJECT RISK, AND DOCUMENTING
THEIR CHARACTERISTICS.

TOOLS
INPUTS & OUTPUTS
TECHNIQUES

1. Project Management Plan 1. Data Gathering

1. Risk Register
• Risk Management Plan • Brainstorming
2. Risk Report
• Schedule Management Plan • Checklists
3. Project Documents updates
• Cost Management Plan • Interviews
• Quality Management Plan 2. Data Analysis
• Resource Management Plan • Root Cause Analysis
• Scope Baseline • Assumption/ Constraints Analysis
2. Project Documents • SWOT Analysis
• Cost & Duration Estimates • Document Analysis
• Resource Requirements 3. Interpersonal and Team Skills
• Stakeholder Register 4. Prompt Lists
3. Agreements 5. Expert Judgement & Meetings
4. Procurement Documents
5. EEF
6. OPA
 IDENTIFY RISKS
(T & t)

SWOT ANALYSIS ASSUMPTION & PROMT LISTS

CONSTRAINT ANALYSIS

This technique examines the project Assumption and Constraints Discover the underlying causes that
from each of the strengths, Analysis explores the validity of lead to a problem, and develop
weaknesses, opportunities, & threats assumptions and constraints to preventive action. It can be used to
(SWOT) perspectives. determine which pose a risk to the identify threats by starting with a
project. problem statement and exploring
Starts with the identification of which threats might result in that
strengths and weaknesses of the problem occurring.
organization, focusing on either the
project, organization or the business
area in general. Then identifies any Used to find opportunity by starting
opportunities that may arise from with a benefit statement & exploring
strengths, and any threats resulting which opportunities might result in
from weaknesses. that benefit being realized.
 SWOT ANALYSIS

STRENGTH WEAKNESS
Same day delivery within the city No monthly subscription option or scaled
1 hour delivery expectancy payment arrangement

S W
High-quality foods, 200+ Drivers Inaccessible to a larger consumer
Trusted & high products sales exposure audience,
Poorly optimized SEO

THREATS
Can operate at a loss to drive away competition T O OPPORTUNITIES
Optimize current mobile app for
Costly state laws to oversee grocery delivery & responsiveness and built-in feedback
accountability under review/evolution SEO focus can help drive a great amount of
traffic & improve online sales ranking
 IDENTIFY RISKS (OUTPUTS)

RISK REGISTER

RISK REPORT
The risk register is where most of the risk information is The risk report presents information on sources of
kept. Think of it as one document for the whole risk overall project risk, together with summary
management process that will be constantly updated with information on identified individual project risks.
information as Identified Risks and the later risk
management processes are completed.
It includes (as of this process):
 List of identified risks
 Potential risk owners
 Potential risk responses
 RISK REGISTER
Probability Impact
Type Description of Risk Response Risk
of Risk Risk H M L Perf. Cost Time
Strategy Owner

Lack of acceptance by Market observation, alternative

Design 50k-500k Investor
investor of design proposals designing solutions

Earlier diagnosis of the situation in local

Delays and difficulties in
Design 500k-2m authorities offices, organization of Investor
obtaining opinions and permits
meetings preceding designing process

Conflict among designing Response of a team leader to all forms

Design 50k-500k Designer Office
team members of conflicts – mediation in a team

Proposing for employees to work

Overly optimistic assessment
Design 50k-500k overtime or ordering of part of work to Designer Office
of employee workload
another designing team

Incorrect information from Application to investor for extension of

Design investors and lack of clear 2m-5m time to complete a design due to Investor
guidance additional circumstances

Employment of new employees or

Acceptance of unrealistic
Time 2m-5m ordering part of work to another party Designer Office
deadlines in contact
during a contract

Underestimation of Limiting scope of design to

Budget 2m-5m Investor
design budget necessary minimum.
 PERFORM QUALITATIVE
RISK ANALYSIS

 The process of prioritizing risk for further analysis or action by assessing

and combining their probability of occurrence and impact (Rank your
risks)

 Some risks can kills you and other barely scratch you.
 PERFORM  Qualitative Analysis is a subjective approach to
QUALITATIVE RISK prioritizing risks.

ANALYSIS  According to probability and potential impact,

identified risks are rated.

THE RANKED RISKS ARE CATEGORIZES INTO:

That require additional analysis (quantitative risk

analysis).
That may proceed directly to risk response planning
(plan risk response)
That are not critical ( watch list)
 PERFORM
QUALITATIVE RISK
ANALYSIS

INPUTS TOOLS & TECHNIQUES OUTPUTS

1. Project (Risk) Management Plan 1. Data Gathering 1. Project Documents updates

2. Project Documents 2. Data Analysis • Risk Register
• Assumption log • Risk Data Quality Assessment
• Risk register • Risk Report
• Stakeholder register • Risk Probability and impact
3. EEF assessment
4. OPA 3. Data Representation
• Probability and Impact Matrix
4. Risk Categorization
5. Interpersonal and Team Skills
6. Expert Judgement & Meeting
PROBABILITY & IMPACT ASSESSMENT/
PROBABILITY AND IMPACT MATRIX

1. WE ASSESS THE RISKS 2. WE RANK THE RISK USING

AS FOLLOWS: THE MATRIX
 TOOLS & TECHNIQUES
• Risk Probability and Impact Assessment

o Risk probability assessment investigates the likelihood that each specific risk will
occur.

o Risk impact assessment investigates the potential effect on a project objective such
as schedule, cost, quality, or performance, including both negative effects for threats
and positive effects for opportunities.

o Probability and impact are assessed for each identified risk. Risks can be assessed in
interviews or meetings with participants selected for their familiarity with the risk
categories on the agenda.
 TOOLS & TECHNIQUES

Manageability. The
ease with which the
Urgency. The period Proximity. The
Dormancy. The risk owner (or
of time within period of time
period of time that owning
which a response to before the risk
Assessment of may elapse after a organization) can
the risk is to be might have an
risk has occurred manage the
other Risk implemented in impact on one or
before its impact is occurrence or
Parameters order to be more project
discovered. A short impact of a risk.
effective. A short objectives. A short
period indicates low Where
period indicates period indicates
dormancy. management is
high urgency. high proximity.
easy, manageability
is high.
TOOLS & TECHNIQUES

Assessment of other Risk Parameters

Detectability. The ease with which the results of the risk occurring, or being about to occur, can be
detected and recognized. Where the risk occurrence can be detected easily, detectability is high.

Connectivity. The extent to which the risk is related to other individual project risks. Where a risk is
connected to many other risks, connectivity is high

Strategic impact. The potential for the risk to have a positive or negative effect on the organization’s
strategic goals. Where the risk has a major effect on strategic goals, strategic impact is high.

Propinquity. The degree to which a risk is perceived to matter by one or more stakeholders. Where a
risk is perceived as very significant, propinquity is high.
PROJECT DOCUMENTS UPDATES (OUTPUTS)

 R i s k report updates
 Assumptions log updates Updated R i s k

Register

 Relative ra n k i n g or priority list of r i s ks

R isks grouped by categories

• List of risks requiring responses i n the near term

• List of r i s ks for additional analysis and response Watc h - lists

of low priority judgment

 PERFORM QUANTITATIVE RISK ANALYSIS
• T h e process of n u m e r i c a l l y analyzing the combined effect of identified
individual project risks and other sources of uncertainty on overall
project objectives.
• W e calculate the r is k in terms of cost & time.

THE O B J E C T I V E S O F QUAN T ITAT IVE R I S K A N A LY S I S :

1. Ascertain the likelihood of project success

2. Determine the likely amount of contingency reserve needed
3. Determine the risks with largest impact on the project
4. Determine the ri sk exposure
 PERFORM QUANTITATIVE
RISK ANALYSIS

INPUTS TOOLS& OUTPUTS

TECHNIQUES
1. Project Management Plan
• Risk Management Plan 1. Data Gathering 1. Project Documents Updates
• Cost & Schedule Baseline • Interviews • Risk report
2. Project Documents 2. Interpersonal and Team Skills
• Basis of estimates • Facilitation
• Cost estimates 3. Representation of uncertainty
• Duration estimates 4. Expert judgement
• Risk register & Report 5. Data Analysis
3. EEF
4. OPA
 DATA ANALYSIS

SENSITIVITY ANALYSIS (TORNADO DIAGRAM)

Analyzing and compare potential

impacts of one risk.

Looking at the effect one variable

(assumption) might have if it could
be completely isolated. E.g.
windstorm (but no windstorm -
fire)
 DATA ANALYSIS

EXPECTED M O N ETARY VALUE AN ALYSIS

(DECISION T REE AN ALYSIS)

• Lets examine costs of all of the paths you might take through the
project (depending on which risks occur) and assign a monetary
value to each decision.
• Opportunities are expressed as positive values, while those of
threats are expressed as negative values.
 OUTPUTS OF PERFORM QUANTITATIVE
RISK ANALYSIS

PROJECT DOCUMENTS UPDATES

• Updated Risk Register

• Probabilistic Analysis of the Project
• Probability of Achieving Cost and Time
• Objectives
• Prioritized list of quantified risks
 IN PUTS
1. Project Mgmt. plan

PLAN RISK 2. Project documents

RESPON SES 3. E E F & OPA

TOOLS & TECHS
T h e process of developing 1. Strategies For -/+ Risks
options a n d actions to 2. Contingent Response Strategies
e n h a n c e opportunities a n d to 3. Data gathering & analysis
re d u c e threats to project 4. Expert Judgment & Meeting
objectives. It addresses the 5. Interpersonal and team skills
r i s k s by their priority, 6. Decision making
i nserti ng resources a n d
OUTPUTS
activities into the budget,
1. Change requests
s c h e d u l e a n d project
2. Project mg mt plan updates
m a n a g e m e n t pl a n as needed.
3. Project documents updates
 PLAN RISK RESPONSES (T&T)
S T R AT E G I E S F O R T H R E AT S

AVOID MITIGATE

ESCALATE

TRANSFER ACCEPT
 PLAN RISK RESPONSES (T&T)
S T R AT E G I E S F O R T H R E AT S

AVOID MITIGATE TRANSFER

El i m i nate the threat by Re d u c e the probability and/or M a ke another party responsible
el i m i nat i ng the cause, s u c h as the i m pact of a threat, thereby for the r i s k by p u rc h a s i n g
r e m o v i n g the w o r k package or m a k i n g it a s m al l er r i s k and i ns urance, per for m a nce bonds,
person. Avo i d i n g the threat possibly r e m o v i n g it f ro m the list warranties, or guarantees or by
m i g ht even involve expandi ng the of top r i s k s on the project. out s ourci ng the work.
scope of the project.
 PLAN RISK RESPONSES (T&T)
S T R AT E G I E S F O R O P P O R T U N I T I E S

EXPLOIT ENHANCE

ESCALATE

SHARE ACCEPT
 PLAN RISK RESPONSES (T&T)
S T R AT E G I E S F O R O P P O R T U N I T I E S

EXPLOIT ENHANCE SHARE

(the reve rs e of avoid) (the reve rs e of mitigate) (the reve rs e of Tra n s fe r )

Add work or change the project Increase the likelihood Fo r m i n g a partnership, team,
to m a ke sure the opportunity (probability) and/or or joint venture) that is best
occurs. positive impacts of the able to achieve the
ri sk event. opportunity
 ESCALATE
(FOR B O T H O P P O R T U N I T Y & T H R E AT S )

E s c a l a t i o n i s a p p ropr i ate w h e n the

proj e c t te a m o r t h e proj e c t s p o n s o r
a g re e s that a n o p p o r t u n i t y o r a thre at i s
o u t s i d e th e s c o p e of the proj e c t o r that
t he p ro p o s e d re s p o n s e w o u l d exc e e d the
proj e c t m a n a g e r ’s a uthor ity.
 ACCEPT
(FOR B O T H O P P O R T U N I T Y & T H R E AT S )

A c c e p t D o n o t h i n g a n d s ay, "If i t h a p p e n s , i t
happens." Tw o types of acceptance:

1- A c t i v e a c c e p t a n c e : m a y i n v o l v e t h e c r e a t i o n o f
c o n t i n g e n c y p l a n s to b e i m p l e m e n t e d i f t h e r i s k
occurs

2- P a s s i v e a c c e p t a n c e : l e a v e s a c t i o n s to b e
determined when r i s k occured (workarounds)
DATA ANALYSIS
Data analysis techniques that can be used to
select a preferred risk response strategy include
but are not limited to:

Alternatives A n a l ys i s
Comparisons of the characteristics of
alternative risk response options can lead to a
decision on
which response is most appropriate.

Cost-benefit A n a l ys i s

Comparing the cost the response to the benefit

achieved from implementing that response.
 CONTINGE NT RESPONS E STRATEGIES (T&T)

• S o m e r e s p o n s e s a r e d e s i g n e d f o r u s e o n l y i f c e r t a i n e v e n t s o c c u r. F o r
s o m e risks, it is appropriate for the project te a m to m a ke a re s p o n s e p l a n
that will o n l y be executed u n d e r c ertain p red efin ed con d ition s often
called contingency plans or fallback plans and include identified
t r i g g e r i n g e v e n t s t h a t s e t t h e p l a n s i n e ffe c t .

• C o n t i n g e n c y Plan: F i re fig hting syste m will operate w h e n the there is a

f i re .

• Fa l l b a c k plan: ( w h e n c o n t i n ge n c y p l a n fails), Evacuate the building.

 PLAN RIKS RESPONSES
(OUTPUTS)
1. Project management plan updates

2. Project documents updates

• Risk owners and assigned
responsibilities
• Agreed-upon response
strategies;
• Trigger conditions, symptoms, and
warning signs of a risk occurrence
• Residual risks that are expected to
remain after planned responses
have been taken, as well as those
that have been deliberately
accepted
 INPUTS
1. Project Mgmt. plan
IMPLEMENT RISK 2. Project documents
RESPONSES 3. OPA
TOOLS & TECHS
T he process of implementing agreed- 1. Expert judgment
upon risk response plans to address 2. Interpersonal and team skills
• Influencing
overall project risk exposure,
3. Project management
minimize individual project threats, information system
and maximize individual project
opportunities. OUTPUTS
1. Change requests
2. Project documents updates
 MONITOR RISKS

The process of implementing risk response

plans, tracking identified risks, monitoring
residual risks, identifying new risks, and
evaluating risk process effectiveness
throughout the project
 MONITOR RISKS

1. Project manag ement plan 2. R i s k register

INPUTS
3. W o r k performance data
4. W o r k performance reports

1. R i s k reassessment 2. R i s k audits
3. Variance and trend analysis

TOOLS & 4. T e c h n i c al performance mea surement

5. Reserve analysis

TECHNIQUES 6. Meetings

1. W o r k performance information 2. C h a n g e requests

3. Project manag ement plan updates 4. Project

OUTPUTS
document s updates
5. Organizational process assets updates
THAN K
YOU!