Project Management Critical Path Duration

Risk Management

• Risk management is an attempt to recognize and manage potential and unforeseen trouble spots that may occur when the project is implemented.
• It involves identifying what can go wrong (risk event), how to minimize the risk event's impact (consequences), what can be done before an event occurs (anticipation), and what to do when an event occurs (contingency plans).

Benefits of Risk Management

• A proactive rather than reactive approach
• Reduces surprises and negative consequences
• Prepares the project manager to take appropriate action
• Provides better control over the future
• Improves chances of reaching project objectives on time, within budget, and of meeting required performance

The Risk Management Process

• Step 1: Risk Identification
  • Generate a list of all the possible risks that could affect the project
  • Focus on the events that could produce consequences, not on project objectives
  • Use risk breakdown structure (RBS) in conjunction with work breakdown structure (WBS) to identify and analyze risks
  • Identify the macro risks first, then specific areas can be checked
  • Use risk profile (a list of questions) to address traditional areas of uncertainty on a project
• Step 2: Risk Assessment
  • Scenario analysis assesses the significance of each risk event in terms of probability and impact
  • Risk assessment form evaluates the severity, probability of risk events, and its detection difficulty
  • Risk severity matrix prioritizes which risks to address
  • Failure Mode and Effects Analysis (FMEA) extends the risk severity matrix by including ease of detection in the equation: Risk Value = Impact x Probability x Detection
  • Probability analysis uses statistical techniques in assessing project risk
• Step 3: Risk Response Development
  • Mitigating Risk: Reduce the likelihood that the event will occur or reduce the impact that the adverse event would have on the project
  • Avoiding Risk: Change the project plan to eliminate the risk or condition
  • Transferring Risk: Pass risk to another party
  • Escalating Risk: Notify the appropriate people within the organization of the threat
  • Retaining Risk: Make a conscious decision to accept the risk of an event occurring

Contingency Planning

• Contingency Plan Defined: An alternative plan that will be used if a possible foreseen risk event becomes a reality
• Identify proposed changes
• List expected effects of proposed change(s) on schedule and budget
• Review, evaluate, and approve or disapprove of changes formally
• Negotiate and resolve conflicts of change, condition, and cost
• Communicate changes to parties affected
• Assign responsibility for implementing change
• Adjust master schedule and budget
• Track all changes that are to be implemented

Change Control Process

• Identify proposed changes
• List expected effects of proposed change(s) on schedule and budget
• Review, evaluate, and approve or disapprove of changes formally
• Negotiate and resolve conflicts of change, condition, and cost
• Communicate changes to parties affected
• Assign responsibility for implementing change
• Adjust master schedule and budget
• Track all changes that are to be implemented

Benefits of Change Control Systems

• Inconsequential changes are discouraged by the formal process
• Costs of changes are maintained in a log
• Integrity of the WBS and performance measures is maintained
• Allocation and use of contingency and management reserves are tracked
• Responsibility for implementation is clarified
• Effect of changes is visible to all parties involved
• Implementation of change is monitored
• Scope changes will be quickly reflected in baseline and performance measures

PERT and PERT Simulation

• PERT assumes each activity duration has a range that statistically follows a beta distribution
• Uses three time estimates for each activity: optimistic, pessimistic, and a most likely time estimate to represent activity durations
• From these three time estimates, a weighted average time estimate and a variance is calculated
• Knowing the weighted average and variances for each activity allows the project planner to compute the probability of meeting different project durations