Project Risk
Possibility or probability that the project will
not turn out as planned or desired
Project Risk
Risk includes potential benefits
(opportunities) as well as hazards
Our focus: risk of serious problems or failure,
i.e.,
Project not meeting performance
requirements, schedule, or budget
Failure
Not meeting time, cost, or performance
targets by a predefined margin
Project Risk
Risk of involves two concepts:
The likelihood that some event will occur.
The impact of the event if it does occur.
It is a joint function of the two
Risk = f (likelihood, impact)
Project Risk Management Process
1.
2.
3.
4.
Identify risks
Assess the risks
Develop appropriate responses to risks
Track and control the risks
The risk management process repeats
throughout every phase of the project from
Conception through Close-out
Risk Management Elements and Process
1. Identify Risks: Sources of Risk
Environment
External
Internal
Project
Internal
Needs and Definition Risk
Failure to correctly identify and define current or
changing customer needs and requirements
1. Identify Risks: Sources of Risk
Environment
Internal
Project
Technical Risk
Failure of the end item. Risk due to nature of
the end item or the process to create it:
High complexity
Low maturity
Low reliability, produciblity, or testability
High concurrency (overlap of project work)
1. Identify Risks: Sources of Risk
Environment
External
Project
Risks in the project environment
Market conditions
Government mandate
Physical environment (weather, geography, etc.)
Labor and other resource availability
Project priorities
Customer/supplier relationships
Exchange rates
1. Identify Risks
Analogy
Experience and documentation
Checklists
Experience and post-mortem reviews
Example, next slide
WBS and work packages
Process flow charts
Risk Checklist
Likelihood
(H, M or L)
Element
Ref.
Project
Management
/authority
Project Manager's lack of Project Management experience
Difficulty in securing full funding.
(e.g. if the funding is coming from more than one source there may be a greater risk
in securing it at the same time)
Lack of understanding of project management standards by everyone in the
project team.
Innovation or the introduction of new features.
The project is likely to need a large number of workdays.
(e.g. low number of workdays = low risk, anything over six months =high risk)
Non-negotiable completion date.
11
The project team is inexperienced or lacking appropriate skills for the project.
12
The project team will be expected to support end-users after project
completion.
( ongoing support = low risk, no support project beyond closure = high risk)
16
Customer support expected to be part of the project.
17
The project will affect current operations.
Project
Nature
Project
Staff
The
Customer
Risk
18
The customer requirements will not be well documented.
(e.g. poor documentation increases risk of delivered product being unsatisfactory)
Third Parties
/External bodies
22
Third party suppliers are not well known to UEA.
Impact
(H, M
or L)
1. Identify Risks
Analogy
Checklists
Experience and documentation
Experience and post-mortem reviews
WBS and work packages
Example, next slide
Process flow charts
WBS and work packages with assessed level of risk
1. Identify Risks
Analogy
Checklists
Experience and documentation
Experience and post-mortem reviews
WBS and work packages
Process flow charts
Example, next slide
SCALED,
SORT BY
POSTAGE
IBD ALL FOREIGN
QC- QUALITY CONTROL
AIR MAIL 1
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SORT TO SIZE
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OFFICE
US MESSENGER PICK
UP
1. Identify risks
Brainstorming
Delphi Technique
Cause-Effect analysis
Causes
Risk sources
and hazards
Example, next slide
Effect
Outcomes,
Consequences
Cause and Effect Diagram
HARDWARE
PEOPLE
Bought-in items may be
delivered late
Welding may be
defective
Key staff may be out of
action
Material may be offspec
Manufacture may not
correspond with design
Staff productivity may
be lower than planned
External agencies may
delay
Procurement procedures may
be ineffective
Design may have to be reengineered
Design specs may be
changed
Design may not meet
standards
FUNCTIONS
Import taxes may
be raised
Fabricator may go
bankrupt
Cash flow may not be
sufficient to pay bills
MONEY
PRODUCT
DELIVERED
LATE
2. Assess the Risk
Assess RC (the risk consequence or
exposure)
RC = (Probability) x (Impact)
2. Assess the Risk
Probability, expressed as
numerical estimate, 0-1.0
or nominal rating, e.g, VH, H, M, L,VL
or interval rating, e.g., 1-5
Impact, expressed as
physical impact on time (weeks), cost ($) or,
performance
or nominal rating, e.g. VH, H, M, L, VL,
or interval rating, e.g., 1-5
2. Assess the Risk
Combing several independent risk sources
Composite likelihood factor,
CLF = (W1) MH + (W2) CH + (W3) MS + (W4) CS + (W5)D
where
MH , MS , CH , CS , and D are failure likelihoods due to
immaturity of hardware and software, complexity in
hardware and software,and dependency on external
factors, respectively; each has value 0 to 1.0
W1, W2, W3, W4, and W5 each has value 0 through 1.0
and together total 1.0.
2. Assess the Risk
Combing several independent risk sources
Composite impact factor,
CIF = (W1)TI + (W2)CI + (W3)SI
where
TI, CI, and SI are impacts due to failure in technical
performance, cost, and schedule, respectively; each has
value 0 to 1.0
W1, W2, and W3 each has value 0 through 1.0 and
together total 1.0.
2. Assess the Risk
Risk Consequence
RC = probability x impact
Example
RC = 0.75 x 5 = 3.75
2. Assess the Risk
Risk Consequence
When probability and impact are expressed
as nominal values (e.g., VH, H, M, L,VL; next
three slides),
RC = f(probability,impact)
Likelihood
(H, M or L)
Element
Ref.
Project
Management
/authority
Project Manager's lack of Project Management experience
Difficulty in securing full funding.
(e.g. if the funding is coming from more than one source there may be a greater risk in
securing it at the same time)
Project
Nature
Project
Staff
The
Customer
Third Parties
/External bodies
Risk
Lack of understanding of project management standards by everyone in the
project team.
Innovation or the introduction of new features.
The project is likely to need a large number of workdays.
(e.g. low number of workdays = low risk, anything over six months =high risk)
Non-negotiable completion date.
11
The project team is inexperienced or lacking appropriate skills for the project.
12
The project team will be expected to support end-users after project completion.
( ongoing support = low risk, no support project beyond closure = high risk)
16
Customer support expected to be part of the project.
17
The project will affect current operations.
18
The customer requirements will not be well documented.
(e.g. poor documentation increases the risk of the delivered product being
unsatisfactory)
22
Third party suppliers are not well known to UEA.
Impact
(H, M or
L)
2. Assess the Risk
Example
Probability
VH
H
M
L
VL
Impact
VL
M
L
L
L
L
L
M
M
L
L
L
M
H
M
M
L
L
H
H
H
M
M
L
VH
H
H
H
M
M
RC = L x H = M (according to table)
2. Assess the Risk
3. Decide Risk Response Strategies
(Ways of Handling Risks)
Transfer risk
Insurance
Property damage or personal injury suffered as a
consequence of the project
Damage to materials while in transit or in storage
Breakdown or damage of equipment
Theft of equipment and materials
Sickness or injury of workers, managers, and staff
Forward cover: insure against exchange rate
fluctuations.
3. Decide Risk Response Strategies
(Ways of Handling Risks)
Transfer risk (contd)
Contracts
Fixed-price versus cost-plus
Fixed price contractor assumes all risk
Fixed price with incentive-contractor 60%
Cost plus incentive fee- contractor 40%
Cost plus fixed fee- customer assumes all risk
3. Decide Risk Response Strategies
(Ways of Handling Risks)
Avoid risk
Eliminate sources of risk
Micromanage
3. Decide Risk Response Strategies
(Ways of Handling Risks)
Reduce risk
Employ best workers
Use known and tested technology and tools
Use parallel efforts
Employ strong worker incentives
Increase frequency and severity of reviews and tests
Reduce system complexity
Use design margins
3. Decide Risk Response Strategies
(contd)
Contingency Plan
Study possible what-if scenarios and
develop a plan for each
Accept risk (do nothing)
4. Risk Tracking and Response
Create a risk log or risk register; risks are
rank ordered, greatest risk consequence first.
Risk log and mitigation plan
Example, next slide
Continuously monitor project for trigger
symptoms of previously identified risks, and
for symptoms of risks newly emerging and
not previously identified.
Probability
Exposure
Functional
area
impacted
Effect:
Consequences if
risk occurs
Preventive
action to reduce
risk
11
Progeni solutions cant perform up
to expectations.
Application
Development
75%
375
Schedule delays. Cost of
hiring a replacement vendor.
Analyze pilot results and
create documents that will
standardize the process.
Unknowns in migration project will
occurs.
Technical
Infrastructure
90%
360
Scheduling delays and
possible re-engineering.
Redundant system costs.
Build plan and tracking
mechanism to manage
schedule and resources
28
Client impact during migration
phase.
Technical
Infrastructure
70%
350
Dissatisfaction of client base
with service levels.
Solid test process during
System and Client Beta
test. Focus from Business
Development staff.
22
Programs/WFL run ineffectively in a
muti-Usercode environment on a
single system.
Application
Development
75%
300
Increased S&P support and
service level issues.
WFL training and testing.
Technical support from
S&P.
Lift & Merge process wont meet
migration schedule, that calls for the
moving of remaining clients, during the
migration of the first V/Series site
Application
Development
75%
300
Difficulty in establishing
remaining first site clients.
Would force a change in
migration strategy.
Utilize knowledge learned
from Purple system Lift &
Merge even scheduled for
May of 2000.
27
Excessive manual changes during postsyntran process.
Application
Development
70%
280
Schedule delays.
After receipt of pilot
determine extent of
excess work and readjust
resources.
10
Lift & Merge not kept up to date.
Application
Development
70%
280
Difficulty in establishing
remaining clients, on first site
chosen, on the ClearPath.
Create Plan to keep L&M
on track and current.
Conversion process of Jobflows to
WFL and applicational re-design
Application
Development
65%
260
If not handled properly, major
impact on quality of product
delivered to client base.
Training early in the
project. Extensive quality
assurance of process.
Dedicate proper staffing.
Item No.
Risk: Condition likely
to occur; inherent in
every project
Impact
Probability: 0-100%, Impact: 1-5: Exposure: (Probability) X (Impact), Scale 0-500
Set Risk Management Practices and
Policies
Risk Management Plan
Specifies methods to identify, profile, assess, monitor, and
handle risks
Names the risk officer
Contains a budget and schedule reserve
Example, next slide
Risk Profile
The likelihood, impact, trigger symptoms,
monitoring methods, and response strategy for
each identified risk
Risk Management Practices and Policies
Risk Officer
Person to oversee the identification, assessment,
monitoring, and handling of project risks
devils advocate
usually not the project manager
Risk Schedule and Budget Reserve
Time and dollar amount in schedule and budget to
cover risks
Risk Management Practices and Policies
Communicate Risks
Polices, procedures, and culture to ensure project
manager is always quickly informed about
problems and risks
Standards and procedures for documenting
the project
Good documentation (proposals, plans, work orders,
change requests, reviews, and post-project summary
reports) provides information necessary for identifying
risks in future projects.
Helps to identify risks on current project and predict
risks on future projects
Columbia Space Shuttle
Photos: [Link]
Photo released by Time Magazine,
Tiles on space shuttle
Photo by John Nicholas
Criticality Index =
f{P(tiles lost from debris or weak bonding),
P(adjacent tiles lost),
P(burn-through given tiles lost),
P(failure of subsystems given burn-through),
P(LOV/C given failure of subsystem)}
ORGANIZATIONAL AND MANAGEMENT FACTORS
Number and
Allocation of
Inspectors
NASAs
Management of
Contracts
Technical Pay
Scale
Hiring, Training and
Retention of Tile
Technicians
High
Visibility
Illusion of Routine
and Low Risk
Degree of
Cooperation
among
Contractors
NASA funding
Mechanism
Schedule
Pressures
NASAs Fragmentation
and Competition among
Centers
In Flight Tile Fixing
Capability
Management of
Launch Operations
Nondestructive Bond
Testing
Management of ET
and SRBs
Priorities in Tile
Maintenance
DECISIONS AND ACTIONS INFLUENCING ACCIDENT SCENARIOS
Quality of
Maintenance
Work
Inspection of
Technicians Work
Deciding Clearing
Of Launch
Pads
Design and
Application of
ET/SRBs Insulate
Quality of
Tile Bonding
Reentry
Maneuver
Fixing of
Tiles in
Orbit
Quality of Step
and Gap
Measurements
Modification
Of Current
Designs
RISK ANALYSIS MODEL
Debonding Caused
By Factors Other than
Debris
Debris Damage
Loss of tile
Reentry Heating
Loss of Additional Titles
Subsystem
Malfunction
Loss of Shuttle