Project Risk Management Overview

Project Risk Management

• Project risk management is a process used to identify and plan for potential risks that could affect the project.
• Risks can positively or negatively impact a project's scope, schedule, cost, or quality.
• Risks are uncertain events or conditions that if realized, would affect at least one project objective.
• Risks always occur in the future.

Types of Risk

• Known Risk: risks are identified and analyzed, with a planned response.
• Unknown Risk: risks that cannot proactively be managed. Contingency plans are required.
• Positive Risk: aim to maximize opportunities where good things occur.
• Negative Risk: minimize potential project threats.
• Risk that has happened: a past risk that is no longer a risk, but a project issue.

Risk Examples

• Environmental Permit: negative if the permit isn't granted on time; positive if the project is granted the permit on the time.
• Limited expertise: positive if there is no limit on the expertise needed, negative if there is.
• Multiple Projects: negative if the organization has many demands on it and cannot respond as needed by the projects, positive if projects can share resources effectively.
• External Company: negative if the company does not deliver on time, positive if the company delivers ahead of time.

Project Risk Management Processes

• Plan Risk Management: how to perform project risk management, document which risks may affect the project, and prioritize risks for further analysis.
• Identify Risks: document which risks may affect a project.
• Perform Qualitative Risk Analysis: numerical models of risk analysis.
• Perform Quantitative Risk Analysis: options, actions, and contingency plans.
• Plan Risk Responses: start and manage the risk plan.
• Monitor and Control Risks: start and manage the risk plan.

1 - Plan Risk Management

• Risk Categories: broad categories of risk the project involves.
• Risk Breakdown Structure: breaks down risk categories into more specific and relevant project components.
• Guidelines for determining the potential impact: defines different impact levels for time and budget, example: 2-day impact is a major or minor impact.
• Probability scale: Defines probability levels, used for analysing risks.

1 - RBS - Risk Breakdown Schedule

• RBS is similar to Work Breakdown Structure (WBS)
• This defines risk categories for the project. and details out major risk areas.
• Categories include: Technical, External, Organizational, Project management, Estimating, Planning, Controlling, and Communication.

3 & 4 - Perform Qualitative & Quantitative Analysis

• Qualitative Analysis: determine the likelihood of a risk and the impact it could have on the project budget.
• Quantitative Analysis: Gather information, analyze information (sensitivity analysis, expected monetary value, modeling, and simulation), Update the risk register.

EMV (Expected Monetary Value)

• A way to quantify risk.
• This defines and calculates the monetary value of a decision, through the use of probability, impact, and multiple decision nodes and paths.

EMV Applied on Camping Trip Project

• Steps to apply EMV on a project: Start with probability and impact of each risk, Calculate the EMV for each risk.

Applying EMV in 2 Ways

• Find the EMV value for all risks.
• Find the monetary value of a decision and compare the two decisions.

5 - Plan Risk Response

• What planned responses or tactics can be used to deal with risks.

4 Ways Negative Risk is Dealt With

• Avoid: prevent the risk from happening.
• Mitigate: take action to minimize or reduce the potential damage.
• Transfer: transfer the risk to another party (e.g., insurance).
• Accept: accept the risk if it cannot be avoided, mitigated, or transferred.

4 Ways Positive Risk is Dealt With

• Exploit: ensure risk happens.
• Share: allocate the responsibility to a third party that is best to capture the opportunity.
• Enhance: increase the probability and/or the positive impact of the opportunity.
• Accept: be willing to take advantage of it if it comes along.

6 - Monitor Risk

• What new risks have happened?
• What risks have not happened?
• What has been the impact of risks happening?

Monitor & Control Risks

• The process of tracking, identifying, and analyzing risk response plans.
• Enables project decisions to be based on current information about risk exposure.

Tools & Techniques Used to Monitor and Control Risks

• Risk reassessment: revisiting previously identified risks.
• Risk audits.
• Variance and trend analysis: comparing actual results against planned projections.
• Technical performance measurement.
• Reserve analysis: evaluating resources.
• Status meetings: communicating progress and concerns.