Ch. 7 managing risk

Ch. 7 managing risk

1. Risk: an uncertain event or condition that if occurs has a + or - effect on project objectives.

   • Cause - Consequence
   • External sources (ie. inflation)
   • Mitigating Risk
     • Reduce Likelihood of occurance
     • Reduce Impact
   • Avoiding Risk
     • Change the plan to eliminate condition
   • Transferring Risk
     • Passing on to another party
     • Usually most costly (ie. insurance)
   • Accepting Risk
     • Some are so large there is no reducing / transferring that can happen
     • Project Manager assumes the risk because likelihood is slim
     • Risks identified in budget reserve can be absorbed if they occur
   • Schedule Risks
     • Funds set aside to expedite or crash project
   • Cost Risks
     • Evaluated by item
     • Funding cuts : scale back project plan
     • Document responsibility
   • Risk Register
     • backbone for risk control
     • details all risks

2. Managing Risk

   • Recognize and manage potential & unforseen trouble
   • Minimize Impact
   • manage responses (contingency plan)
     • Contingency Plan
       • Alternative plan
       • Will reduce or mitigate the - impact of the risk event
       • Include cost estimate
       • Identify funding source
       • Communicated to all members of team
   • Provides contingency funds
   • Risk Management Process
     • Step 1: Risk Identification
       • Analyze project to identify sources of risk.
     • Step 2: Risk Assessment
       • Severity of impact?
       • Likelihood?
       • Controllability
       • Not all risks deserve attn.
     • Step 3: Response Development
       • Develop Strategy to reduce possible damage
       • Develop contingency plans
     • Step 4: Response Control
       • Implement Risk Strategy
       • Monitor & adjust plan for new risks
       • Change Management

3. Risk Breakdown Structure (RBS)

   • Project
     • Technical
     • External
     • Organizational
     • Project Management
   • Used in conjunction with WBS
   • Focus on whole project

4. Risk Profile

   • List of qu's that address traditional areas of uncertainty on a project.
     • Qu's have been developed and refined from previous similar projects

5. Scenario Analysis

   • Assessment by team of:
     • Probability of event
     • Impact of event
   • Risk Assessment Matrix
     • Red Zone
       • Major Risk
     • Yellow Zone
       • Moderate Risk
     • Green Zone
       • inconsequential and ignored until status changes.
     • FEMA
       • Impact x Probability x Deduction = Risk Value
     • PERT (program evaluation and review technique
       • Assumes Statistical distribution
         • range btwn optimistic and pessimistic
       • Provides a list of potential critical paths & probability of occurance

6. Opportunity Management

   • Exploit
     • Eliminate uncertainty to ensure it happens
   • Share
     • Give some or all of opporuntity to another party who is best able to capture it
   • Enhance
     • Action is taken to increase probability or + impact
   • Accept
     • Being willing to take advantage if it occurs, but not persuing

7. Contingency Funds

   • Establish to cover risks
     • identified and unknown
   • Budget Reserves
     • Specific to work packages
   • Management Reserves
     • After Budget reserves are set out
     • Controlled by Project Manager / owner of project

8. Time Buffers

   • Absorb unplanned delays
   • Added to Activities w/ severe risk
   • Merge activities that are prone to delays
   • Non-critical activities to ensure they don't become critical
   • Activities that require scarce resources.