Project Risk Management
Outline
• Meaning of Risk
• Concept of project risk management
• Project risk management processes
• Risk identification and mitigation s
• Activity 9
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Meaning of Risk
• an uncertain event or condition that, if it occurs,
has an effect on at least one project
objective
– Objectives can include scope, schedule, cost, and
quality
– risk may have one or more causes and, if it occurs, it
may have one or more impacts
-A cause may be a requirement, assumption,
constraint, or
condition that creates the possibility of negative or
positive outcome.
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Project Risk Management
➢ Task of identifying and assessing risks, and then
planning and implementing risk responses.
➢ The scope of risk management for projects includes
:Business risks, market, industry, technology, economic
and financial factors,
Project risk: those risks that impact on the cost,
schedule or quality of the project.
➢ Operations and processing risks: impact the design,
procurement, construction, commissioning, operations
and maintenance, hazards and catastrophic events.
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Project Risk Management
Processes
➢ Plan risk management
➢ Identify risks
➢ Perform qualitative risk analysis
➢ Perform quantitative risk analysis
➢ Plan risk responses
➢ Monitor and control risks
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Plan Risk Management Process
➢ The process of defining how to conduct risk
management activities for a project.
➢ The project team should review project
documents and understand the organization’s
and the sponsor’s approach to risk and attitude
towards risks: Risk Averse, Neutral, Risk Seeking
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Plan Risk Management Process
Inputs
➢ Project management plan
➢ Project charter
➢ Stakeholder register
➢ Enterprise environmental factors
➢ Organizational process assets
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Plan Risk Management Process
Tools & Techniques
➢ Analytical techniques
➢ Expert judgment
➢ Meetings
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Plan Risk Management Process
Outputs
➢ Risk management plan
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Identify Risks Process
➢ Is when we determine which risks might affect
the project and document the characteristics of
those risks.
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Identify Risks Process
Inputs
➢ Risk management plan
➢ Cost management plan
➢ Schedule management plan
➢ Quality management plan
➢ Human resource management plan
➢ Activity cost estimates
➢ Activity duration estimates
➢ Stakeholder register
➢ Project documents
➢ Procurement documents
➢ Enterprise environmental factors
➢ Organizational process assets
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Identify Risks Process
Tools & Techniques
➢ Documentation reviews
➢ Information gathering techniques
➢ Checklist analysis
➢ Assumption analysis
➢ Diagramming techniques
➢ SWOT analysis
➢ Expert judgment
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Potential Risk Conditions Associated with Each
Knowledge Area (Internal)
Knowledge Area Risk Conditions
Integration Inadequate planning; poor resource allocation; poor integration
management; lack of post-project review
Scope Poor definition of scope or work packages; incomplete definition
of quality requirements; inadequate scope control
Time Errors in estimating time or resource availability; poor allocation
and management of float; early release of competitive products
Cost Estimating errors; inadequate productivity, cost, change, or
contingency control; poor maintenance, security, purchasing, etc.
Quality Poor attitude toward quality; substandard
design/materials/workmanship; inadequate quality assurance
program
Human Resources Poor conflict management; poor project organization and
definition of responsibilities; absence of leadership
Communications Carelessness in planning or communicating; lack of consultation
with key stakeholders
Risk Ignoring risk; unclear assignment of risk; poor insurance
management
Procurement Unenforceable conditions or contract clauses; adversarial relations
External..
• Market risk: Will the new product be useful to
the organization or marketable to others?
Will users accept and use the product or
service?
• Financial risk: Can the organization afford to
undertake the project? Is this project the best
way to use the company’s financial resources?
• Technology risk: Is the project technically
feasible? Could the technology be obsolete
before a useful product can be produced?
Identify Risks Process
Outputs :Risk register
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Perform Qualitative Risk Analysis
Process
➢ Qualitative methodologies concern themselves
with how management decisions
are actually made
➢ Placing decisions in the context of alternative
future environments permits the
opening up of discussions about threats and
opportunities.
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Perform Qualitative Risk Analysis
Process
Inputs
➢ Risk management plan
➢ Scope baseline
➢ Risk register
➢ Enterprise environmental factors
➢ Organizational process assets
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Perform Qualitative Risk Analysis
Process
Tools & Techniques
➢ Risk probability and impact assessment
➢ Probability and impact matrix
➢ Risk data quality assessment
➢ Risk categorization
➢ Risk urgency assessment
➢ Expert judgment
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Perform Qualitative Risk Analysis
Process
Outputs
➢ Project documents updates
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Perform Quantitative Risk Analysis
Process
➢ Process of numerically analyzing the effect of
identified risks on overall project objectives.
➢ Does not always have to be performed.
Founded on this assumption:
Risk = Probability of event X Magnitude
of loss/gain
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Perform Quantitative Risk Analysis
Process
Inputs
➢ Risk management plan
➢ Cost management plan
➢ Schedule management plan
➢ Risk register
➢ Enterprise environmental factors
➢ Organizational process assets
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Perform Quantitative Risk Analysis
Process
Tools & Techniques
➢ Data gathering and representation techniques
➢ Quantitative risk analysis and modeling
techniques
➢ Expert judgment
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Perform Quantitative Risk Analysis
Process
Outputs
➢ Project documents updates
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Plan Risk Responses Process
➢ A process used to develop options and actions to
enhance opportunities and to reduce threats to
the project objectives.
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Risk Response Planning
• After identifying and quantifying risks, you must
decide how to respond to them
• Four main strategies for negative risk
• :
– Risk avoidance: eliminating a specific threat or risk,
usually by eliminating its causes
– Risk acceptance: accepting the consequences should a
risk occur
– Risk transference: shifting the consequence of a risk
and responsibility for its management to a third party
– Risk mitigation: reducing the impact of a risk event by
reducing the probability of its occurrence
Strategies for positive risk/opportunity
• Exploit: Possibility of reducing completion
time by hiring more staff
• Share: forming a joint venture to tap
upcoming opportunities
• Enhance: convincing the customer to enlarge
the size of the project, adding more activities
to the scope, or repeating the project again to
gain cost reduction benefits organization.
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General Risk Mitigation Strategies for Technical,
Cost, and Schedule Risks
Risk Response, Monitoring & Control
• Risk response control involves executing the risk
management processes and the risk management
plan to respond to risk events
• Risks must be monitored based on defined
milestones and decisions made regarding risks
and mitigation strategies
• Sometimes workarounds or unplanned responses
to risk events are needed when there are no
contingency plans
Activity 9
Identify all possible risks that your project might
involve.
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