Project Management

Week 9: Project Risk

Management

Tran Van Ly
Industrial Engineering & Management
International University
22/03/05 Email: tvly@[Link] 1
Room A2-504
Recall previous section

2
Learning Objectives

• Processes in risk
management
• Example
• Risk vs. Project
characteristics

3
Project Risk Management Process
Project Risk Management

Start

Plan Risk
Management

Identify Risks
Monitor and
Control Risk
Qualitative
Analyze Risks
Quantitative

Respond
to Risks

Finish
Sample Risk Register
Project Risk Management
 INTRODUCTION

• Project Risk Management includes the processes of conducting

risk management planning, identification, analysis, response
planning, and monitoring and control on a project.
• The objectives of Project Risk Management:
– increase the probability and impact of positive events,
– decrease the probability and impact of negative events in the project.
• Risk is an uncertain event or condition that, if it occurs, has an
effect on at least one project objective.
• A risk may have one or more causes and, if it occurs, it may
have one or more impacts.
 INTRODUCTION

• Project risk has its origins in the uncertainty present in all

projects:
– Known risks are those that have been identified and analyzed, making
it possible to plan responses for those risks.
– Specific unknown risks cannot be managed proactively, which
suggests that the project team should create a contingency plan.
• Risk tolerance: the degree of risk that organizations and
stakeholders are willing to accept.
• Risks that are threats to the project may be accepted if the
risks are within tolerances and are in balance with the
rewards that may be gained by taking the risks.
 INTRODUCTION

• A consistent approach to risk should be developed for each

project, and communication about risk and its handling
should be open and honest.
• To be successful, the organization should be committed to
address risk management proactively and consistently
throughout the project.
 PLAN RISK MANAGEMENT

• Plan Risk Management is the process of defining how to

conduct risk management activities for a project.
• Planning risk management processes is important to ensure that
the degree, type, and visibility of Risk Management are
commensurate with both the risks and the importance of the
project to the organization.
• Planning is also important to provide sufficient resources and
time for risk management activities, and to establish an agreed-
upon basis for evaluating risks.
• The Plan Risk Management process should begin as a project is
conceived and should be completed early during project
planning.
PLAN RISK MANAGEMENT
 PLAN RISK MANAGEMENT: INPUTS

• Project scope statement:

– provides a clear sense of the range of possibilities associated with the
project and its deliverables.
– establishes the framework for how significant the risk management
effort may ultimately become.
• Cost management plan:
– Defines how risk budgets, contingencies, and management reserves
will be reported and accessed.
• Schedule management plan:
– defines how schedule contingencies will be reported and assessed.
 PLAN RISK MANAGEMENT: INPUTS
• Communications management plan:
– Defines the interactions that will occur on the project.
– Determines who will be available to share information on various risks
and responses at different times (and locations).
• Enterprise environmental factors:
– The enterprise environmental factors include, but are not limited to,
risk attitudes and tolerances that describe the degree of risk that an
organization will withstand.
• Organizational process assets:
– Risk categories
– Common definitions of concepts and terms
– Risk statement formats
– Standard templates
– Roles and responsibilities
– Authority levels for decision-making
– Stakeholder registers
 PLAN RISK MANAGEMENT:
TOOLS & TECHNIQUES
• Planning Meetings and Analysis:
– Project teams hold planning meetings to develop the risk
management plan.
– High-level plans for conducting the risk management activities are
defined in these meetings.
– Risk management cost elements and schedule activities will be
developed for inclusion in the project budget and schedule,
respectively.
– Risk contingency reserve application approaches may be established
or reviewed.
– General organizational templates for risk categories and definitions
will be tailored to the specific project.
 PLAN RISK MANAGEMENT: OUTPUTS
• Risk management plan:
– The risk management plan describes how risk management will be
structured and performed on the project.
– The risk management plan includes the following:
• Methodology to perform risk management.
• Roles and responsibilities of members of project team.
• Budgeting for risk management activities.
• Timing: the time to perform risk management process.
• Risk categories.
• Definitions of risk probability and impact.
• Probability and impact matrix.
• Revised stakeholders’ tolerances.
• Reporting formats.
• Tracking: documents how risk activities will be recorded, lessons learned,
how risk management processes will be audited.
Example of Risk Breakdown
Project
– Structure (RBS)
Risk Management
 Risk probability
Chapter 11
and impact
Project Risk Management
 IDENTIFY RISKS

• Identify Risks is the process of determining which risks may

affect the project and documenting their characteristics.
• Participants in risk identification activities can include the
following:
– Project manager
– Project team members
– Risk management team (if assigned)
– Customers
– Subject matter experts from outside the project team,
– End users,
– Other project managers,
– Stakeholders,
– Risk management experts.
 IDENTIFY RISKS: INPUTS

• Risk management plan:

– assignments of roles and responsibilities
– provision for risk management activities in the budget and schedule
– categories of risk
• Activity cost estimates:
– provide a quantitative assessment of the likely cost to complete
scheduled activities
– ideally are expressed as a range
– the width of the range indicating the degree(s) of risk.
• Activity duration estimates:
– useful in identifying risks related to the time allowances for the
activities or project as a whole.
 IDENTIFY RISKS: INPUTS

• Scope baseline:
– Project assumptions
– WBS
• Stakeholder register:
– Information about the stakeholders will be useful in soliciting inputs
for identifying risks
• Cost management plan:
– The risk identification process requires an understanding of the cost
management plans found in the project management plan.
– The project-specific approach to cost management may generate or
alleviate risk by its nature or structure.
 IDENTIFY RISKS: INPUTS

• Schedule management plan:

– The risk identification process also requires an understanding of the
schedule management plan found in the project management plan.
– The project-specific approach to schedule management may generate
or alleviate risk by its nature or structure.
• Quality management plan:
– The risk identification process also requires an understanding of the
quality management plan found in the project management plan.
– The project-specific approach to quality management may generate or
alleviate risk by its nature or structure.
 IDENTIFY RISKS: INPUTS
• Project documents:
– Assumptions log
– Work performance reports
– Earned value reports
– Network diagrams
– Baselines
– Other project information proven to be valuable in identifying risks
• Enterprise environmental factors:
– Published information, including commercial databases
– Academic studies
– Published checklists
– Benchmarking
– Industry studies
– Risk attitudes
 IDENTIFY RISKS: INPUTS

• Organizational process assets:

– Project files, including actual data
– Organizational and project process controls
– Risk statement templates
– Lessons learned
 IDENTIFY RISKS:
TOOLS & TECHNIQUES
• Documentation Reviews
– Structurally review on project documentation, including plans,
assumptions, previous project files, contracts, and other information.
• Information gathering Techniques
– Brainstorming
– Delphi technique
– Interviewing
– Root cause analysis
 IDENTIFY RISKS:
TOOLS & TECHNIQUES
• Checklist Analysis
– Risk identification checklists can be developed based on historical
information and knowledge that has been accumulated from
previous similar projects and from other sources of information.
• Assumptions Analysis:
– Assumptions analysis explores the validity of assumptions as they
apply to the project.
– It identifies risks to the project from inaccuracy, instability,
inconsistency, or incompleteness of assumptions.
 IDENTIFY RISKS:
TOOLS & TECHNIQUES
• Diagramming Techniques:
– Cause and effect diagrams: are useful for identifying causes of risks.
• Start with the problem that is being analyzed on the right side of the diagram
• List the possible causes of that problem at the end of each primary branch.
These are given conditions about which there is nothing we can do.
• Add secondary branches with risk events within the cause area
• Add tertiary branches: more detailed risk events that have as effect the risk
event on the secondary branch
• Continue developing new, more detailed risk events until you have reached
the level of detail where risk events are specific, measurable and controllable.
 IDENTIFY RISKS:
TOOLS & TECHNIQUES
• Diagramming Techniques:
– Cause and effect diagrams
 IDENTIFY RISKS:
TOOLS & TECHNIQUES
• Diagramming Techniques:
– System or process flow charts: These show how various elements of a
system interrelate, and the mechanism of causation.
 IDENTIFY RISKS:
TOOLS & TECHNIQUES
• Diagramming Techniques:
– Influence diagrams: These are graphical representations of situations showing
causal influences, time ordering of events, and other relationships among variables
and outcomes.
 IDENTIFY RISKS:
TOOLS & TECHNIQUES
• SWOT analysis:
– examines the project from each of the SWOT (strengths, weaknesses,
opportunities, and threats) perspectives to increase the breadth of
identified risks by including internally generated risks.
– SWOT analysis also examines the degree to which organizational
strengths offset threats and opportunities that may serve to overcome
weaknesses
• Expert judgment:
– Risks can be identified directly by experts with relevant experience of
similar projects or business areas.
 Project Risk Management
Identify Risks: Tools and Techniques
 IDENTIFY RISKS: OUTPUTS

• Risk Register
– List of identified risks
– List of potential responses
 PERFORM QUALITATIVE RISK ANALYSIS

• Perform Qualitative Risk Analysis is the process of prioritizing

risks for further analysis or action by assessing and combining
their probability of occurrence and impact.
• Perform Qualitative Risk Analysis assesses the priority of
identified risks using
– their relative probability or likelihood of occurrence,
– the corresponding impact on project objectives if the risks occur,
– other factors such as the time frame for response and the
organization’s risk tolerance associated with the project constraints of
cost, schedule, scope, and quality.
PERFORM QUALITATIVE RISK ANALYSIS
 PERFORM QUALITATIVE RISK ANALYSIS:
INPUTS
• Risk register.
• Risk management plan.
– roles and responsibilities for conducting risk management
– budgets, schedule activities for risk management
– risk categories
– definitions of probability and impact
– the probability and impact matrix
– revised stakeholders’ risk tolerances
• Project scope statement.
• Organizational Process Assets.
– Information on prior, similar completed projects
– Studies of similar projects by risk specialists
– Risk databases that may be available from industry or proprietary
sources
 PERFORM QUALITATIVE RISK
ANALYSIS: TOOLS & TECHNIQUES
• Risk probability and impact assessment:
– Risk probability assessment investigates the likelihood that each
specific risk will occur.
– Risk impact assessment investigates the potential effect on a project
objective such as schedule, cost, quality, or performance.
– Risks can be assessed in interviews or meetings with participants
selected for their familiarity with the risk categories on the agenda.
– The level of probability for each risk and its impact on each objective
is evaluated during the interview or meeting.
– Risks with low ratings of probability and impact will be included on a
watch list for future monitoring.
 PERFORM QUALITATIVE RISK
ANALYSIS: TOOLS & TECHNIQUES
• Probability and Impact Matrix:
– The probability and impact matrix specifies combinations of probability
and impact that lead to rating the risks as low, moderate, or high
priority.
– An organization can rate a risk separately for each objective (e.g., cost,
time, and scope).
– An organization can also develop ways to determine one overall rating
for each risk.
 PERFORM QUALITATIVE RISK
ANALYSIS: TOOLS & TECHNIQUES
• Probability and Impact Matrix:
 PERFORM QUALITATIVE RISK
ANALYSIS: TOOLS & TECHNIQUES
• Risk data quality assessment:
– Analysis of the quality of risk data is a technique to evaluate the
degree to which the data about risks are useful for risk management.
– It involves examining the degree to which the risk is understood and
the accuracy, quality, reliability, and integrity of the data regarding
the risk.
– Requires accurate and unbiased data.
• Risk categorization
– sources of risk
– the area of the project affected
– others to determine areas of the project most exposed to the effects
of uncertainty
 PERFORM QUALITATIVE RISK
ANALYSIS: TOOLS & TECHNIQUES
• Risk urgency assessment:
– Risks requiring near-term responses may be considered more urgent
to address.
– Indicators of priority can include time to affect a risk response,
symptoms and warning signs, and the risk rating.
– the assessment of risk urgency can be combined with the risk ranking
determined from the probability and impact matrix to give a final risk
severity rating.
• Expert judgment
– Expert judgment is required to assess the probability and impact of
each risk to determine its location in the probability and impact
matrix.
– Securing expert judgment is often accomplished with the use of risk
facilitation workshops or interviews.
 PERFORM QUALITATIVE RISK
ANALYSIS: OUTPUTS
• Risk register updates.
– Relative ranking or priority list of project risks.
– Risks grouped by categories.
– Causes of risk or project areas requiring particular attention.
– List of risks requiring response in the near-term.
– List of risks for additional analysis and response.
– Watch lists of low-priority risks.
– Trends in qualitative risk analysis results.
 PERFORM QUANTITATIVE RISK
ANALYSIS
• Perform Quantitative Risk Analysis is the process of numerically
analyzing the effect of identified risks on overall project
objectives.
• Perform Quantitative Risk Analysis analyzes the effect of risks
that have been prioritized by the Perform Qualitative Risk
Analysis process as potentially and substantially impacting the
project’s competing demands.
• It may be used to assign a numerical rating to those risks
individually or to evaluate the aggregate effect of all risks
affecting the project.
PERFORM QUANTITATIVE RISK
ANALYSIS
 PERFORM QUANTITATIVE RISK ANALYSIS:
INPUTS

• Risk Register
• Risk Management Plan
• Cost Management Plan
– sets the format and establishes criteria for planning, structuring,
estimating, budgeting, and controlling project costs.
– Those controls may help determine the structure and/or application
approach for quantitative analysis of the budget or cost plan.
• Schedule Management Plan
– sets the format and establishes criteria for developing and controlling
the project schedule.
– Those controls and the nature of the schedule itself may help determine
the structure and/or application approach for quantitative analysis of
the schedule.
• Organizational Process Assets
 PERFORM QUANTITATIVE RISK ANALYSIS:
TOOLS & TECHNIQUES

• Data gathering and Representation Techniques

– Interviewing:
• draw on experience and historical data to quantify the probability and
impact of risks on project objectives.
• Documenting the rationale of the risk ranges and the assumptions behind
them are important components of the risk interview because they can
provide insight on the reliability and credibility of the analysis.
– Probability distributions
• Continuous probability distributions represent the uncertainty in values
such as durations of schedule activities and costs of project components.
• Discrete distributions can be used to represent uncertain events such as
the outcome of a test or a possible scenario in a decision tree.
 Project
Decision
– Tree Risk Management
Diagram
 Project
Cost Risk
– Risk
Simulation Management
Results
 PERFORM QUANTITATIVE RISK ANALYSIS:
TOOLS & TECHNIQUES

• Quantitative Risk Analysis and Modeling Techniques:

– Sensitivity analysis
– Expected monetary value (EMV) analysis
– Modeling and simulation: Monte Carlo simulation
 SENSITIVITY ANALYSIS

• Helps to determine which risks have the most potential

impact on the project.
• Tornado diagram:
– a special type of Bar chart, where the data categories are listed
vertically instead of the standard horizontal presentation.
– the categories are ordered so that the largest bar appears at the top
of the chart, the second largest appears second from the top, and so
on.
– The longer the bar, the greater the sensitivity of the project objective
to the factor.
 EMV ANALYSIS

• Calculates the average outcome when the future includes

scenarios that may or may not happen.
• EMV for a project is calculated by multiplying the value of
each possible outcome by its probability of occurrence and
adding the products together.
• Decision tree analysis.
 EMV ANALYSIS EXAMPLE
• Suppose your organization is using a legacy software. Three scenarios:
– Build the new software: To build the new software, the associated
cost is $500,000.
– Buy the new software: To buy the new software, the associated cost
is $750,000.
– Stay with the legacy software: If the company decides to stay with
the legacy software, the associated cost is mainly maintenance and
will amount to $100,000.
• The Buy the New Software and Build the New Software options will lead
to either a successful deployment or an unsuccessful one.
– If successful, the impact is 0.
– If unsuccessful, the impact is $2 million.
• The Stay with the Legacy Software option will lead to only one impact,
which is $2 million, because the legacy software is not currently meeting
the needs of the company.
 EMV ANALYSIS EXAMPLE
Successful,
Impact
$0

Build, Unsuccessful,
Impact
Cost $500000 $2,000,000
40%

Successful,
Impact
$0
Stay, Buy,
Buy, Cost $750000 Unsuccessful,
Build 5% Impact
$2,000,000

100%
Stay, Impact
$2,000,000
Cost $100000
 EMV ANALYSIS EXAMPLE

• Calculate the expected impact:

– Build the new software: $2,000,000 * 0.4 = $800,000
– Buy the new software: $2,000,000 * 0.05 = $100,000
– Staying with the legacy software: $2,000,000 * 1 = $2,000,000
• Calculate the EMV by adding initial cost to expected impact:
– Build the new software: $500,000 + $800,000 = $1,300,000
– Buy the new software: $750,000 + $100,000 = $850,000
– Staying with the legacy software: $100,000 + $2,000,000 =
$2,100,000
 decision: Buy the new software
 MONTE CARLO SIMULATION

• A technique used to understand the impact of risk and

uncertainty in financial, project management, cost, and other
forecasting models.
• The key feature of a Monte Carlo simulation is that it can tell
you – based on how you create the ranges of estimates – how
likely the resulting outcomes are.
• Performing Monte Carlo simulation:
– Generate a random value for each of the tasks, based on the range of
estimates.
– Calculate the model based on these random values.
– Record the result of the model.
– Repeat the process until the number of desired replications is
reached.
 PERFORM QUANTITATIVE RISK
ANALYSIS: OUTPUTS

• Risk Register Updates:

– Probabilistic analysis of the project.
– Probability of achieving cost and time objectives.
– Prioritized list of quantified risks.
– Trends in quantitative risk analysis results.
 PLAN RISK RESPONSES

• Plan Risk Responses is the process of developing options and

actions to enhance opportunities and to reduce threats to
project objectives.
• It includes the identification and assignment of one person
(the “risk response owner”) to take responsibility for each
agreed-to and funded risk response.
• Plan Risk Responses addresses the risks by their priority,
inserting resources and activities into the budget, schedule
and project management plan as needed.
 PLAN RISK RESPONSES

• Planned risk responses must be:

– appropriate to the significance of the risk
– cost effective in meeting the challenge
– realistic within the project context
– agreed upon by all parties involved
– owned by a responsible person
– timely
PLAN RISK RESPONSES
 PLAN RISK RESPONSE: INPUTS

• Risk Register:
– Identified risks
– Root causes of risks
– Lists of potential responses
– Risk owners,
– Symptoms and warning signs
– The relative rating or priority list of project risks
– A list of risks requiring response in the near term
– A list of risks for additional analysis and response
– Trends in qualitative analysis results
– A watch list of low-priority risks
 PLAN RISK RESPONSE: INPUTS

• Risk Management Plan

– roles and responsibilities
– risk analysis definitions
– timing for reviews (and for eliminating risks from review)
– risk thresholds for low, moderate, and high risks
 PLAN RISK RESPONSE:
TOOLS & TECHNIQUES
• Strategies for Negative Risks or Threats:
– Avoid:
• change the project management plan to eliminate the threat
entirely.
• the project manager may also isolate the project objectives from the
risk’s impact or change the objective that is in jeopardy.
• the most radical avoidance strategy is to shut down the project
entirely.
– Transfer.
• shift some or all of the negative impact of a threat, along with
ownership of the response, to a third party.
• transferring the risk simply gives another party responsibility for its
management—it does not eliminate it.
• most effective in dealing with financial risk exposure
 PLAN RISK RESPONSE:
TOOLS & TECHNIQUES
• Strategies for Negative Risks or Threats:
– Mitigate:
• reduce the probability and/or impact of an adverse risk event to
be within acceptable threshold limits.
• examples of mitigation actions: adopting less complex processes,
conducting more tests, or choosing a more stable supplier.
– Accept:
• indicate that the project team has decided not to change the
project management plan to deal with a risk, or is unable to
identify any other suitable response strategy.
• can be either passive or active:
– Passive acceptance requires no action except to document the strategy,
leaving the project team to deal with the risks as they occur.
– The most common active acceptance strategy is to establish a contingency
reserve, including amounts of time, money, or resources to handle the risks.
 PLAN RISK RESPONSE:
TOOLS & TECHNIQUES
• Strategies for Positive Risks or Opportunities:
– Exploit:
• may be selected for risks with positive impacts where the
organization wishes to ensure that the opportunity is realized.
• seek to eliminate the uncertainty associated with a particular
upside risk by ensuring the opportunity definitely happens.
– Share:
• involves allocating some or all of the ownership of the opportunity
to a third party who is best able to capture the opportunity for the
benefit of the project.
 PLAN RISK RESPONSE:
TOOLS & TECHNIQUES
• Strategies for Positive Risks or Opportunities:
– Enhance.
• Increase the probability and/or the positive impacts of an
opportunity.
• Identify and maximize key drivers of these positive-impact risks.
– Accept.
• Accepting an opportunity is being willing to take advantage of it if
it comes along, but not actively pursuing it.
 PLAN RISK RESPONSE:
TOOLS & TECHNIQUES
• Contingent Response strategies
– Some responses are designed for use only if certain events occur.
– Events that trigger the contingency response, such as missing
intermediate milestones or gaining higher priority with a supplier,
should be defined and tracked.
 PLAN RISK RESPONSE: OUTPUTS
• Risk Register Updates:
– Identified risks, their descriptions, area(s) of the project (e.g., WBS element) affected, their
causes (e.g., RBS element), and how they may affect project objectives.
– Risk owners and assigned responsibilities
– Outputs from the Perform Qualitative Analysis process, including prioritized lists of project
risks
– Agreed-upon response strategies
– Specific actions to implement the chosen response strategy
– Triggers, symptoms, and warning signs of risks’ occurrence
– Budget and schedule activities required to implement the chosen responses
– Contingency plans and triggers that call for their execution
– Fallback plans for use as a reaction to a risk that has occurred and the primary response
proves to be inadequate
– Residual risks that are expected to remain after planned responses have been taken, as well
as those that have been deliberately accepted
– Secondary risks that arise as a direct outcome of implementing a risk response
– Contingency reserves that are calculated based on the quantitative risk analysis of the
project and the organization’s risk thresholds.
 PLAN RISK RESPONSE: OUTPUTS

• Risk-Related Contract Decisions

– Decisions to transfer risk, such as agreements for insurance, services,
and other items as appropriate are selected in this process.
– The contract type selected also provides a mechanism for sharing the
risks
– These decisions are inputs to the Plan Procurements process.
 PLAN RISK RESPONSE: OUTPUTS

• Project Management Plan Updates

– Schedule management plan.
– Cost management plan.
– Quality management plan.
– Procurement management plan.
– Human resource management plan.
– Work breakdown structure.
– Schedule baseline.
– Cost performance baseline.
 PLAN RISK RESPONSE: OUTPUTS

• Project Document Updates

– Assumptions log updates.
– Technical documentation updates.
 MONITOR & CONTROL RISKS

• Monitor and Control Risks is the process of implementing risk

response plans, tracking identified risks, monitoring residual
risks, identifying new risks, and evaluating risk process
effectiveness throughout the project.
• Other purposes of the Monitor and Control Risks process are
to determine if:
– Project assumptions are still valid.
– Analysis shows an assessed risk has changed or can be retired.
– Risk management policies and procedures are being followed.
– Contingency reserves of cost or schedule should be modified in
alignment with the current risk assessment.
 MONITOR & CONTROL RISKS

• Monitor and Control Risks can involve choosing alternative

strategies, executing a contingency or fallback plan, taking
corrective action, and modifying the project management
plan.
• Monitor and Control Risks also includes updating the
organizational process assets, including project lessons
learned databases and risk management templates, for the
benefit of future projects.
MONITOR & CONTROL RISKS
 MONITOR & CONTROL RISKS: INPUTS

• Risk Register
– Identified risks and risk owners,
– agreed-upon risk responses,
– Specific implementation actions,
– Symptoms and warning signs of risk,
– Residual and secondary risks,
– a watch list of low-priority risks,
– the time and cost contingency reserves.
• Project Management Plan
– Contains the risk management plan, which includes risk tolerances,
protocols and the assignment of people (including the risk owners),
time, and other resources to project risk management.
 MONITOR & CONTROL RISKS:
INPUTS
• Work Performance Information
– Deliverable status
– Schedule progress
– Costs incurred
• Performance Reports
– Performance reports take information from performance
measurements and analyze it to provide project work performance
information including variance analysis, earned value data, and
forecasting data.
 MONITOR & CONTROL RISKS:
TOOLS & TECHNIQUES
• Risk Reassessment
– Project risk reassessments should be regularly scheduled.
– The appropriate amount and detail of repetition depends on how the
project progresses relative to its objectives.
• Risk Audits
– Examine and document the effectiveness of risk responses in dealing
with identified risks and their root causes, as well as the effectiveness
of the risk management process.
– The project manager is responsible for ensuring that risk audits are
performed at an appropriate frequency, as defined in the project’s risk
management plan.
– The format for the audit and its objectives should be clearly defined
before the audit is conducted.
 MONITOR & CONTROL RISKS:
TOOLS & TECHNIQUES
• Variance and Trend Analysis
– Compare the planned results to the actual results.
– Trends in the project’s execution should be reviewed using
performance information.
– Deviation from the baseline plan may indicate the potential impact of
threats or opportunities.
• Technical Performance Measurement
– Compares technical accomplishments during project execution to the
project management plan’s schedule of technical achievement.
– requires definition of objective quantifiable measures of technical
performance which can be used to compare actual results against
targets.
– Deviation can help to forecast the degree of success in achieving the
project’s scope, and it may expose the degree of technical risk faced
by the project.
 MONITOR & CONTROL RISKS:
TOOLS & TECHNIQUES
• Reserve Analysis
– Reserve analysis compares the amount of the contingency reserves
remaining to the amount of risk remaining at any time in the project
in order to determine if the remaining reserve is adequate.
• Status Meetings
– Project risk management should be an agenda item at periodic status
meetings.
– Frequent discussions about risk makes it more likely that people will
identify risks and opportunities.
 MONITOR & CONTROL RISKS:
OUTPUTS
• Risk Register Updates
– Outcomes of risk reassessments, risk audits, and periodic risk reviews.
– Actual outcomes of the project’s risks and of the risk responses.
• Organizational Process Assets Updates
– Templates for the risk management plan, including the probability and
impact matrix, and risk register.
– Risk breakdown structure.
– Lessons learned from the project risk management activities.
 MONITOR & CONTROL RISKS:
OUTPUTS
• Change Requests
– Recommended corrective actions
– Recommended preventive actions
• Project Management Plan Updates
– If the approved change requests have an effect on the risk
management processes, the corresponding component documents of
the project management plan are revised and reissued to reflect the
approved changes.
• Project Document Updates
 Risk Management
Review Project Characteristics
1) Uniqueness: Project management is always the tool of choice when a “never done
this before” goal is taken on
2) One-time occurrence: Projects have a defined scope that includes a specific set of
desired end results
3) Finite duration: Projects are temporary endeavors. The performing organization
should complete the project’s work between the project’s start date and the project’s
termination date
4) Interdependencies: Projects interact with routine operations of the performing
organization as well as with other projects
5) Resources: Projects have constrained resources, particularly people, which require
careful management
6) Conflict: Conflict is a common theme in project management. Many of these arise
from the conflict between the limited resources (time, money, and people) available to
the project team and the seemingly unlimited requirements from the customer
 Home work
The Oil Company is considering making a bid for a shale oil development contract to be
awarded by the federal government. The company has decided to bid $110 million.
The company estimates that it has a 60% chance of winning the contract with this bid. If
the firm wins the contract, it can choose one of three methods for getting the oil from the
shale: It can develop a new method for oil extraction, use an existing (inefficient)
process, or subcontract the processing out to a number of smaller companies once the
shale has been excavated. The results from these alternatives are given as follows.

The cost of preparing the contract proposal

is $2,000,000. If the company does not
make a bid, it will invest in an alternative
venture with a guaranteed profit of $30
million.
Construct a sequential decision tree for this
decision situation and determine whether 82
the company should make a bid.