Chapter # 11
• Project Risk Management
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Recap: Project Communications MANAGEMENT
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Risk Management: an overview
• Process of working on risk management planning, identifying,
analyzing, response planning and controlling of project risks
• Goal is it:
• Increase the likelihood of positive risks
• Decrease the likelihood of negative risks
• Project Manager has to be proactive here
• End of the day saves time and money
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Risk management knowledge area
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Implement Risk Responses Added in
Executing
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Risk management concepts
• Threats
• Opportunity
• Uncertainty
• Risk Attributes
• Probability
• Impact
• Range
• When
• How Often
• Risk Averse
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Planning Risk Management
• The main output of this process is a risk management plan—a
plan that documents the procedures for managing risk
throughout a project
• The project team should review project documents and
understand the organization’s and the sponsor’s approaches to
risk
• The level of detail will vary with the needs of the project
Information Technology Project Management, Seventh Edition
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Topics Addressed in a Risk Management Plan
• Methodology
• Roles and responsibilities
• Budget and schedule
• Risk categories
• Risk probability and impact
• Revised stakeholders’ tolerances
• Tracking
• Risk documentation
Information Technology Project Management, Seventh Edition
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Identifying Risks
• Identifying risks is the process of understanding what potential events
might hurt or enhance a particular project
• Another consideration is the likelihood of advanced discovery
• Risk identification tools and techniques include:
• Brainstorming
• The Delphi Technique
• Interviewing
• SWOT analysis
Information Technology Project Management, Seventh Edition
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Risk Register Contents
• An identification number for each risk event
• A rank for each risk event
• The name of each risk event
• A description of each risk event
• The category under which each risk event falls
• The root cause of each risk
• Triggers for each risk; triggers are indicators or symptoms of actual risk events
• Potential responses to each risk
• The risk owner or person who will own or take responsibility for each risk
• The probability and impact of each risk occurring.
• The status of each risk
Information Technology Project Management, Seventh Edition
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Sample Risk Register
• No.: R44
• Rank: 1
• Risk: New customer
• Description: We have never done a project for this organization before and don’t know too much about them. One of our
company’s strengths is building good customer relationships, which often leads to further projects with that customer. We
might have trouble working with this customer because they are new to us.
• Category: People risk
• Etc.
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Information Technology Project Management, Seventh Edition
Performing Qualitative Risk Analysis
• Assess the likelihood and impact of identified risks to determine their
magnitude and priority
• Risk quantification tools and techniques include:
• Probability/impact matrixes
• The Top Ten Risk Item Tracking
• Expert judgment
Information Technology Project Management, Seventh Edition
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Probability/Impact Matrix
• A probability/impact matrix or chart lists the relative probability of a risk
occurring on one side of a matrix or axis on a chart and the relative impact
of the risk occurring on the other
• List the risks and then label each one as high, medium, or low in terms of
its probability of occurrence and its impact if it did occur
• Can also calculate risk factors:
• Numbers that represent the overall risk of specific events based on their probability
of occurring and the consequences to the project if they do occur
Information Technology Project Management, Seventh Edition
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Risk PROBABILITY AND IMPACT
MATRIX
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Performing Quantitative Risk Analysis
• Often follows qualitative risk analysis, but both can be done
together
• Large, complex projects involving leading edge technologies often
require extensive quantitative risk analysis
• Main techniques include:
• Decision tree analysis
• Simulation
• Sensitivity analysis
Information Technology Project Management, Seventh Edition
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Decision Trees and Expected Monetary Value
(EMV)
• A decision tree is a diagramming analysis technique used to help select the
best course of action in situations in which future outcomes are uncertain
• Estimated monetary value (EMV) is the product of a risk event probability
and the risk event’s monetary value
• You can draw a decision tree to help find the EMV
Information Technology Project Management, Seventh Edition
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Decision tree analysis (example)
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Sensitivity Analysis
• Sensitivity analysis is a technique used to show the effects of changing one
or more variables on an outcome
• For example, many people use it to determine what the monthly payments
for a loan will be given different interest rates or periods of the loan, or for
determining break-even points based on different assumptions
• Spreadsheet software, such as Excel, is a common tool for performing
sensitivity analysis
Information Technology Project Management, Seventh Edition
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Simulation
• Simulation uses a representation or model of a system to analyze the
expected behavior or performance of the system
• Monte Carlo analysis simulates a model’s outcome many times to provide
a statistical distribution of the calculated results
• To use a Monte Carlo simulation, you must have three estimates (most
likely, pessimistic, and optimistic) plus an estimate of the likelihood of the
estimate being between the most likely and optimistic values
Information Technology Project Management, Seventh Edition
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Monte Carlo Output
Planning Risk Responses
• After identifying and quantifying risks, you must decide how to respond to them
• Four main response strategies for negative risks:
• Risk avoidance
• Risk acceptance
• Risk transference
• Risk mitigation
• Four main response strategies for positive risks:
• Exploit
• Enhance
• Share
• Accept
Information Technology Project Management, Seventh Edition
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Controlling Risks
• Involves executing the risk management process to respond to risk events and
ensuring that risk awareness is an ongoing activity performed by the entire
project team throughout the entire project
• Workarounds are unplanned responses to risk events that must be done when
there are no contingency plans
• Main outputs of risk control are:
• Work performance information
• change requests
• updates to the project management plan, other project documents, and organizational
process assets
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REFERENCES
• Kathy Schwalbe, Information Technology Project Management, Seventh Edition,
Course Technology – Cengage Learning, 2013.
• A Guide to the Project Management Body of Knowledge, Fifth Edition, Project
Management Institute, 2013. (PMBOK GUIDE)
• [Link]
• [Link]
• [Link]
• Project Academy
• [Link]
between-resource-loading-and-resource-leveling/
• [Link]
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QUESTIONS
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Sample Risk Breakdown Structure
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Information Technology Project Management, Seventh Edition