Land Acknowledgement
We acknowledge that Western University is located on the traditional lands of the Anishinaabek, Haudenosaunee,
Lūnaapéewak, and Chonnonton Nations, on lands connected with the London Township and Sombra Treaties of
1796 and the Dish with One Spoon Covenant Wampum. With this, we respect the longstanding relationships that
Indigenous Nations have to this land, as they are the original caretakers. We acknowledge historical and ongoing
injustices that Indigenous Peoples (First Nations,
Métis and Inuit) endure in Canada, and we
accept responsibility as members of a public
institution to contribute toward revealing and
correcting miseducation as well as renewing
respectful relationships with Indigenous
communities through our teaching, research,
community service, and employment
endeavors.
COMMMGT 9330A
Session 9
Project Risk Management
COMMMGT 9330A
PROJECT RISK MANAGEMENT
Risk (Proactive)
A risk is an uncertain event or condition. If it occurs, it will have a positive (good)
or negative (bad) effect on the project or a project objective.
We call positive risks opportunities and negative risks threats.
4 years 14 years
e.g., Faster regulatory approvals e.g., Project timeline and financial resources
PROJECT RISK MANAGEMENT
Issue (Reactive)
An issue is a risk that has occurred. It is no longer a potential threat or opportunity, but a
reality that must be managed. Issues are typically documented in the project Issue Log.
PROJECT RISK MANAGEMENT
Process of conducting risk management planning, identification, analysis,
response planning, response implementation, and monitoring risk on a project
PROJECT RISK MANAGEMENT | OBJECTIVES
Managing Overall Project Risk
Goal: Keep project risk within an increase
decrease
acceptable range.
probability probability
Strategies: and/or impact of Optimize chances of
and/or impact of project success
positive risk negative risk
• Reduce negative risks. (opportunity) (threat)
• Promote positive
opportunities.
• Maximize chances of
achieving project goals.
THE RISK EVENT GRAPH
The Managerial Process Seventh Edition - Erik W. Larson & Clifford F. Gray Chapter 7, Figure 7.1, page 209
KEY CONCEPTS
• Risk exists at two levels within every project:
INDIVIDUAL RISKS OVERALL PROJECT RISK
affect achievement of arises from combination of individual project
project objectives risks and other sources of uncertainty
LEVELS OF RISK IN PROJECTS
Individual Project Risk: Overall Project Risk:
• Definition: An uncertain event or Definition: Effect of uncertainty on the project,
condition that can positively or arising from all sources of uncertainty, including
negatively impact project objectives. individual risks.
• Approach: Impact: Represents stakeholders' exposure to
variations in project outcomes.
• Opportunities: Exploit/enhance for
benefits (reduced time, cost, improved Nature: Can be positive or negative.
performance, reputation)
Management:
• Threats: Avoid/mitigate to prevent • Reduce drivers of negative variance.
issues (delays, cost overruns, performance • Promote positive variations.
shortfalls, reputation loss). • Maximize probability of achieving project
objectives.
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK® Guide) – Sixth Edition, Project Management Institute, Inc., 2017. Page 397
TAILORING CONSIDERATIONS
•Project Size: Adjust risk management based on
budget, duration, scope, and team size.
•Project Complexity: Use a robust approach for
complex projects with high innovation or
dependencies.
•Project Importance: Tailor risk processes for
strategically important projects with high
stakes.
•Development Approach: Adapt risk
management to fit waterfall or agile
methodologies.
THE RISK MANAGEMENT PROCESS | PLAN FOR RISK
Risk Strategy
Outlines the overall approach to managing risks throughout
the project lifecycle.
Funding
For e.g.: "Our companies risk strategy involves proactive identification and
Identifies the financial resources required for risk
mitigation of potential risks to ensure project success."
management activities and outlines any contingency and
Methodology management reserves.
Specifies particular methods, tools, and data sources that will For e.g.: "A budget of $50,000 is allocated for risk management, with an
be utilized for managing risk in the project. additional 10% contingency reserve for unforeseen risks."
For e.g.: "We will use qualitative risk analysis, expected monetary value Timing
(EMV), and historical data from similar projects to manage risks effectively."
Specifies schedule for performing risk management
Roles and Responsibilities processes and includes these activities in the project
Individuals or teams responsible for each risk management timeline.
activity outlined in the plan. For e.g.: "Risk assessments will be conducted at the start of each project
For e.g.: "The project manager will oversee risk identification, while the phase and reviewed weekly during team meetings."
assigned risk owner will handle risk assessment and mitigation planning."
RISK BREAKDOWN STRUCTURE (RBS)
John was planning moving into his new house and he
needed the help of his friends Dion and Carlita. In John’s
move, John makes a list of things that might go wrong
with his project and uses his work breakdown structure
as a guide. A partial list for the planning portion of the
RBS is shown
hierarchical representation of potential sources of risk
Partial Risk Profile for Product Development Project
PMI, PMBOK, PMP, and CAPM are registered marks of
Project Management Institute, Inc.
RISK IDENTIFICATION TOOLS: Data Gathering
Structured review of project documentation (plans,
assumptions, previous project files, contracts).
•Indicators of Risk: Quality and consistency of plans
with project requirements and assumptions.
•Techniques:
• Root Cause Analysis
• Assumption and Constraint Analysis
• SWOT Analysis
• Document Analysis
PERFORM QUALITATIVE RISK ANALYSIS
• Prioritizing individual project risks for • Effect based
further analysis or action • Time
• Subjective analysis • Cost
• All risks cannot be addressed: • Scope
• Too Expensive & Time Consuming • Quality
• Resources
• Qualitative Risk Analysis involves
creating a short list of previously
identified risks • Source based
• Probability and Impact of each risk • Internal to project
occurring • External to project
• Technical
• Ordinal scale -> low, medium, high,
• Non-technical
very high (L,M,H,VH)
• Industry-specific
• Cardinal scale ->1 to 10 • Generic
The Managerial Process Seventh Edition - Erik W. Larson & Clifford F. Gray Chapter 7, Pages 212-215 PMI, PMBOK, PMP, and CAPM are registered marks of Project Management Institute, Inc.
PROBABILITY AND IMPACT
PERFORM QUANTITATIVE RISK ANALYSIS
Description of Risk Management Activities Participants:
•Project Manager: Oversees risk management activities
•Risk Officer: Conducts risk assessments and mitigation planning
•Team Members: Participate in risk identification and response planning
Deliverable Outcome: Comprehensive risk register with prioritized risks and mitigation strategies.
ID Description of Risk/Opportunity IP (1-5) IS (1-5) AD (1-5) RPN (IP × IS × AD) Potential Responses Owner
001 Delay in supply chain delivery 4 5 3 60 Develop alternative suppliers John Doe
002 Key team member illness 3 4 2 24 Cross-train team members Jane Smith
003 Regulatory changes 2 5 1 10 Monitor regulatory updates Mark Lee
•Impact Probability (IP) (1-5): Likelihood of a risk event occurring, from 1 (very unlikely) to 5 (very likely).
•Impact Severity (IS) (1-5): Potential consequences of a risk event, from 1 (negligible impact) to 5 (catastrophic impact).
•Likelihood of Advance Discovery (AD) (1-5): Probability of identifying a risk before it occurs, from 1 (very unlikely) to 5 (very likely).
RPNs are same, prioritize based on impact severity first, followed by impact probability, and then the likelihood of advance
discovery. Additionally, leverage expert judgment and consider the strategic importance.
PERFORM QUANTITATIVE RISK ANALYSIS
Risk
Risk
ID Risk Category Risk Description Probability Impact Response Risk Response Plan Date Reported Date Closed
Priority
Tactic
Project delay due to late delivery of critical Change the supplier to one with a proven
1 Schedule H H H Avoid 2024-01-10 2024-02-15
components track record of on-time delivery.
Purchase price insurance to cover
2 Financial Cost overrun due to fluctuating material prices M H H Transfer 2024-01-12 2024-02-20
potential cost increases.
Implement rigorous testing and quality
3 Technical System failure due to software bugs H M H Mitigate 2024-01-15 2024-03-01
assurance processes before deployment.
Project disruption due to adverse weather Develop a contingency plan to manage
4 Environmental M M M Accept 2024-01-18 2024-03-05
conditions project activities during adverse weather.
Risk Response Tactics Risk Priority
When prioritizing risk response tactics for the same risk priority score, the general order of preference is as follows: •H = H Prob/H Impact
•H = H Prob/M Impact
Avoid: Eliminating a specific threat by changing the project plan to eliminate the cause. •H = M Prob/H Impact
Mitigate: Reducing the probability and/or impact of the risk to an acceptable level. •M = H Prob/L Impact
Transfer: Shifting the responsibility for the risk to another party via contract, insurance, or other means. •M = M Prob/M Impact
Accept: Preparing for and dealing with the consequences of the risk event without taking action to reduce its effects. •M = L Prob/H Impact
•L = M Prob/L Impact
•L = L Prob/L Impact
•L = L Prob/M Impact
PERFORM RISK RESPONSE | POSITIVE vs. NEGATIVE
AGILE ENVRONMENTS
•High Variability: More uncertainty and risk.
•Adaptive Approaches:
• Frequent reviews of incremental work products.
• Cross-functional teams for knowledge sharing.
•Risk Management:
• Consider risk when selecting iteration content.
• Identify, analyze, and manage (IAM) risks during each
iteration.
•Living Document: Requirements updated regularly.
•Reprioritization: Adjust work based on current risk exposure.
REFERENCES
• Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK® Guide)–Sixth Edition,
Project Management Institute, Inc., 2017.
• Project Management: The Managerial Process by Erik W. Larson & Clifford F. Gray 8th Edition
• Managing Project Quality by Kloppenborg & Petrick, 2002 edition.
• Principles of Project Management by John R. Adams
• Project Management Processes, Methodologies, and Economics, 3E by Avraham Shtub & Moshe Rosenwein
• Successful Project Management seventh Edition by Jack Gido, James P. Clements & Rose M. Baker
• Understanding the Project Environment, A Practical Guide, Second Edition by Dave C. Barrett
• Project Management by Adrienne Watt