Project Risk Management

Based on PMBOK 5th Edition

Waleed El-Naggar, MBA, PMP

https://www.facebook.com/waleed.naggar

Project Risk Management

The processes of conducting risk management

planning, identification, analysis, response

planning and monitoring and control on a project

Objectives are to increase the probability and

impact of positive events and decrease the

probability and impact of negative events In the

project
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11.1 Plan Risk Management

The process of defining how to conduct risk

management activities for a project

Important to provide sufficient resources and

time for risk management activities, and to establish an agreed upon basis for evaluating risk.
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Plan Risk Management: Inputs (1)

1. Project Management Plan
2. Project Charter 3. Stakeholder Register 4. Enterprise Environmental Factors

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Plan Risk Management: Inputs (2)

5. Organizational Process Assets, include but not
limited to: Risk Categories Common definitions of concepts and terms Risk statement formats

Standard templates
Roles and responsibilities Authority levels for decision making

Lessons learned
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Plan Risk Management: T & T

1. Analytical Techniques
2. Expert Judgment 3. Meetings

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Plan Risk Management: Outputs

1. Risk Management Plan
Methodology Roles and Responsibilities

Budgeting
Timing Risk Categories

Definition of probability and impact

Probability and Impact Matrix Revised stakeholders tolerance Reporting format Tracking
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Risk Categories

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Definition of Risk Probability and Impact

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Quiz
An uncommon state of nature, characterized by the

absence of any information related to a desired outcome,

is a common definition for:

A. An act of God
B. An amount at stake

C. Uncertainty
D. Risk aversion

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11.2 Identify Risks

Identify Risks is the process of determining

which risks may affect the project and

documenting their characteristics

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Identify Risks: Inputs (1)

1. Risk Management Plan
2. Cost management Plan

3. Schedule Management Plan

4. Quality Management Plan

5. Human Resource Management Plan

6. Scope Baseline
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Identify Risks: Inputs (2)

7. Activity Cost Estimates
8. Activity Duration Estimates

9. Stakeholder Register
10. Project Documents

11. Procurement Documents

12. Enterprise Environmental Factors 13. Organizational Process Assets
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Identify Risks: T & T (1)

1. Documentation Reviews
2. Information Gathering Techniques

Brainstorming
Delphi Technique Interviewing Root Cause Analysis

3. Checklist Analysis

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Identify Risks: T & T (2)

4. Assumptions Analysis
5. Diagramming Techniques

Cause-and-effect diagrams
System or process flow charts Influence diagrams

6. SWOT Analysis (Strength, Weakness, Opportunities, Threats) 7. Expert Judgment

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Influence Diagram

SWOT Analysis

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Identify Risks: Outputs

1. Risk Register

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Quiz
Risk tolerances are determined in order to help:
A. The team rank the project risks B. The project manager estimate the project C. The team schedule the project D. Management know how other managers will act to the project

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11.3 Perform Qualitative Risk Analysis

The process of prioritizing risks for further

analysis or action by assessing and combining

their probability of occurrence and impact

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Perform Qualitative Risk Analysis: Inputs

1. Risk Management Plan
2. Scope Baseline 3. Risk Register 4. Enterprise Environmental Factors 5. Organizational Process Assets

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Perform Qualitative Risk Analysis: Tools & Techniques

1. Probability and Impact Matrix

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Perform Qualitative Risk Analysis: T & T

2. Risk Probability and Impact Assessment
3. Risk Data Quality Assessment 4. Risk Categorization 5. Risk Urgency Assessment 6. Expert Judgment

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Perform Qualitative Risk Analysis: Outputs

1. 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
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11.4 Perform Quantitative Risk Analysis

The process of numerically analyzing the
effect of identified risks on overall project

objectives.
Quantitative analysis is performed on risks that have been prioritized by the qualitative risk analysis process as potentially and substantially impacting the project's competing demands.
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Perform Quantitative Risk Analysis: Inputs

1. Risk Management Plan
2. Cost Management Plan

3. Schedule Management Plan

4. Risk Register

5. Enterprise Environmental Factors

6. Organizational Process Assets
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Perform Quantitative Risk Analysis: Tools & Techniques (1)

1. Data Gathering and Representation

Techniques
Interviewing Probability

Distribution
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Range of Project Cost Estimates Collected During the Risk Interview

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Probability Distribution

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Perform Quantitative Risk

Analysis: Tools & Techniques (2)
2. Quantitative Risk Analysis and Modeling
Techniques
Sensitivity
Expected Modeling

analysis

monetary value analysis and Simulation

3. Expert Judgment
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Sample Sensitivity Analysis

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Expected monetary value analysis (Decision tree)

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Modeling And Simulation

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Perform Quantitative Risk Analysis: Outputs

1. Project Document Updates
Probabilistic
Probability Prioritized Trends

analysis of the project

of achieving cost and time objectives list of quantified risks

in quantitative risk analysis results

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Quiz
If a project has a 60% chance of a US $ 100,000 profit and a 40% chance of a US $ 100,000 loss, the expected monetary value for the project is : A. $ 100,000 profit B. $ 60,000 loss C. $ 20,000 profit D. $ 40,000 loss

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11.5 Plan Risk Responses

The process of developing options and actions to
enhance opportunities and to reduce threats to

project objectives.
The key benefit is to address the risks by their

priority, have strategies to handle the risks and

assigned resources & budget to handle those risks
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Plan Risk Responses: Inputs

1. Risk Management Plan

2. Risk Register

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Plan Risk Responses: Tools & Techniques (1)

1. Strategies for negative risks or threats

Avoid Transfer

Mitigate
Accept
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Response Strategies for Threats

Avoidance:

Risk prevention Changing the plan to eliminate a risk by avoiding the cause/source of risk Protect project from impact of risk Examples: Change the implementation strategy Do it ourselves (do not subcontract) Reduce scope to avoid high risk deliverables Adopt a familiar technology or product

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Response Strategies for Threats

Mitigation

Seeks to reduce the impact or probability of the risk event to an acceptable threshold Be proactive: Take early actions to reduce impact/probability and dont wait until the risk hits your project Examples: Staging - More testing - Prototype Redundancy planning Use more qualified resources

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Response Strategies for Threats

Transfer

Shift responsibility of risk consequence to another party Does NOT eliminate risk Most effective in dealing with financial exposure
Examples: Buy/subcontract: move liabilities Selecting type of Procurement contracts: Fixed Price Insurance: liabilities + bonds + Warranties
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Response Strategies for Threats

Acceptance

Used when project plan cannot be changed & other risk response strategy cannot be used Active Acceptance Develop a contingency plan to execute if the risk occur Contingency plan = be ready with Plan B Passive Acceptance Deal with the risks as they occur = No Plan B prepared Established amount of reserve (e.g.: time and/or money) to account for the identified known risks. Amount is decided based on probability and impact
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Contingency allowance/ reserve

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Plan Risk Responses: T & T (2)

2. Strategies for Positive Risks or Opportunities

Exploit: Ensure opportunity is realized

Ex: Assigning organization most talented resources to the project to reduce cost lower than originally planned.

Share: Allocating some or all of the ownership to third part best able to capture the opportunity

Ex: Joint ventures, special-purpose companies

Enhance: Increase the probability and/or the positive impact of the opportunity

Ex: Adding more resources to finish early

Accept: Welling to take advantage of opportunity if it comes, but not actively pursuing it.
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Plan Risk Responses: Tools &

Techniques (3)
3. Contingent Response Strategies
4. Expert Judgment

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Plan Risk Responses: Outputs (1)

1. Project management Plan Updates
Schedule Management Plan Cost Management Plan Quality Management Plan Procurement Management Plan Human Resource Management Plan Scope Baseline Schedule Baseline Cost Baseline
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Plan Risk Responses: Outputs (2)

2. Project Documents Updates
Assumptions log updates Technical Documentation Updates

Change Requests

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Quiz
Purchasing insurance is BEST considered an example of risk:
A. Mitigation B. Transfer C. Acceptance D. Avoidance

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11.6 Control Risks

The process of implementing risk response plans,

tracking identified risks, monitoring residual

risks, identifying new risks, and evaluating risk process effectiveness throughout the project.

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Monitor and Control Risks: Inputs

1. Risk Register
2. Project Management Plan 3. Work Performance Data 4. Work Performance Reports

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Monitor and Control Risks: Tools &

Techniques
1. Risk Reassessment 2. Risk Audits 3. Variance and Trend Analysis

4. Technical Performance Measurement

5. Reserve Analysis 6. Meetings
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Monitor and Control Risks: Outputs

1. Work Performance Information 2. Change Requests
Recommended corrective actions Recommended preventive actions

3. Project management Plan Updates

Outcome of risk reassessment, risk audits, and periodic risk reviews Actual outcome of the projects risks and the risks response

4. Project Document Updates 5. Organizational Process Assets Updates

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Quiz
What should be done with a non-critical Risk?
A. Document them for historical use on other projects B. Document them and revisit during project execution C. Document them & set them aside because they are already covered in your contingency plans D. Document them and give them to the customer

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Thank you

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