Project Management
Module 7
Managing Project Risk
Concept Of Project Risk Management
A risk is defined as a probability or threat of harm, loss, damage, liability,
or any other negative incidence, which is due to external or internal
weaknesses.
Project risk management is the process of identifying, evaluating and then
responding to risks that may occur during the life cycle of a project, so that
the project is completed on time, to budget, and within desired quality.
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Components of Project Risk Management
DEFINED IN ADVANCE
DIRECTION AND SUPPORT
ROBUSTNESS & SCALABILITY
3
Project Risk Management Processes
Likelihood of occurrence & Avoid, mitigate, transfer,
Impact on the project or accept risks
Monitoring and tracking defined risks
Identifying new risks
4
Sources of Project Risk
Schedule Scope
Resource Quality
Cost Customer
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Sources of Project Risk (continued)
Contractual Delivery
Project Material &
Management Equipment
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Sources of Project Risk (continued)
Political Environmental
Technical Financial Risks
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Project Risk Assessment
Analysis of Probability of occurrence and impact of potential risk (if
realized) is called as Project Risk Assessment.
In this process, the project manager will identify which potential risks
have the greatest likelihood of occurring and can have the maximum
negative impact on the project.
e.g. a project manager can develop a criterion that high-impact risks
are those which have 75% likelihood of occurring and which can
increase the project cost by 10%.
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Qualitative Risk Assessment
In qualitative risk assessment, each identified risk is ranked
according to its likelihood of occurrence and impact on a project.
“The process of prioritising risks for further analysis or action
by assessing and combining their probability of occurrence and
impact.”
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Inputs to Qualitative Risk Assessment
Risk
Scope
Management Risk Register
Baseline
Plan
Enterprise Organizational
Environmental Process
Factors Factors
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Tools & Techniques in Qualitative Risk Assessment
ORGANISES RISKS
Risk probability Probability and
Risk
and impact Impact Matrix
Categorisation
assessment (PIM)
Risk Data
Risk Urgency Expert
Quality
Assessment Judgement
Assessment
ANALYSES THE ACCURACY, NEAR-TERM RISKS
QUALITY, RELIABILITY, &
INTEGRITY
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Quantitative Risk Assessment
Quantitative risk assessment is a numeric method to analyse the
impact of identified risks on the project.
“The process of numerically analysing the effect of identified
risks on overall project objectives.”
Quantitative risk assessment is conducted only after risks are
prioritised during qualitative risk analysis.
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Inputs to Quantitative Risk Assessment
Risk Cost
Management Management Risk Register
Plan Plan
Enterprise Schedule
Organizational
Environmental Management
Assets
Factors Plan
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Tools & Techniques in Quantitative Risk Assessment
Sensitivity
Analysis
Monte Carlo
Data gathering and Simulation
Modelling
representation
Techniques
techniques Decision Tree
Analysis
Expected
Monetary Value
(EMV)
14
Risk Appraisal & Analysis
Risk appraisal and analysis is a method to proactively forecast risks
that can occur in a project so that the project team is better prepared
to avoid or mitigate them.
This method requires participation from all project stakeholders.
Risk appraisal and analysis should be conducted on a regular basis
throughout the Project Life Cycle
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Risk Appraisal & Analysis Process
Develop a Risk Management Plan
Identify global risks
Assess risks
Develop management strategies
Calculate cost-benefit ratio
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Risk Analysis Matrix
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Methods For Dealing With Risks
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