Risk Management Process

• The risk management process steps of risk identification, analysis, and response are integrated and performed iteratively, not sequentially.
• Teams analyze risks and determine responses as part of the risk evaluation process.
• Assessing project cost and schedule risks requires insight into individual risks.
• Risk responses are iterative and drive project planning iterations.
• The final risk assessment differs from the initial assessment due to risk response actions.
• Retaining older data is valuable for future reference, even if no longer directly applicable.
• Responses should balance risk-taking with risk avoidance and align with risk tolerance and objectives.

Planning Risk Responses

• Risk thresholds identify risks needing specific responses.
• General risk-response strategies exist for both threats and opportunities.
• Each response requires resources like time, people, and budget.
• Limited resources necessitate prioritization and trade-offs, potentially adjusting stakeholder risk tolerances.

Balancing Risk Tolerance, Response Costs, and Project Objectives

• Project plan approvals require understanding and acceptance of primary objectives like cost, scope, schedule, quality, and risk.
• Project managers iterate the plan to achieve an acceptable balance.
• The plan of record (POR) commitments must stay within budget, meet deadlines, and satisfy customer expectations relative to risks.
• Organizations establish risk thresholds dictating tolerable risk without commensurate cost and schedule reserves.
• Implementing risk responses involves cost considerations that must be factored.
• Approaches to balance include bottom-up (qualitative), holistic (quantitative), or a combination.

Bottom-Up Project Risk Balancing

• The overall project budget and schedule should include resources for scope, planned risk responses, contingencies, and resources to address unknown unknowns.
• Project risks should not exceed the risk threshold and should include contingency, residual risk set-asides, and items on a watch list.

Holistic Project Risk Balancing

• Quantitative project risk assessment processes determine the right balance between project risks and objectives.
• Risk tolerance is defined as a probability of meeting overall project cost and schedule objectives.

Combination of Bottom-Up and Holistic Project Risk Balancing

• Combining individual risk matrix approaches with overall project assessment can improve the project plan and balance.

Risk (Threats) and Opportunity Response Options

• Four response types address individual project risks, with another set for opportunities, each threat has a counterpart opportunity response:
  • Avoidance becomes exploitation.
  • Transfer becomes sharing.
  • Mitigation becomes enhancement.
  • Acceptance remains acceptance.
• Understanding the options aids in planning, monitoring, and controlling projects risks.

Risk (Threat) Response Options

• Project teams address risks intentionally or unintentionally during planning.
• The initial risk register is created during planning.
• Avoiding risks involves changing project objectives or plans to use proven technology, or by adjusting requirements.
• Risk avoidance is immediate in the project plan, when agreed upon by stakeholders.
• A risk avoidance strategy can lead to secondary risk.
• Transferring risk shifts the impact of a risk to a third party with control over the source.
• Transfer strategies have secondary risks, such as late deliveries.
• The agreement needs to be formalized via a contract to avoid the secondary risks.
• Mitigating risks involves actions to reduce the probability or impact, and give rise to secondary risks.
• Accepting risks involves acknowledging them overtly, these types of risks are added to the watchlist.

Opportunity Response Options

• Opportunities can lead to reserve savings and help exceed project performance objectives.
• The first three opportunity response categories are direct opposites of the threat responses.
• Exploiting opportunities involves acting upon them proactively during planning.
• Sharing opportunities requires collaboration with a third party.
• Enhancing opportunities is similar to risk mitigation
• Accepting opportunities involves tracking them on a watch list and acting on them when they turn into tangible benefits.

Concurrent Risk (Threat) and Opportunity Response Strategies

• Risk responses can establish new opportunities and risks.
• "Transfer” risk response can create a “share” opportunity.

Practical Questions for Determining Risk Responses

• Addressing project objectives requires project objectives, priorities, and requirements to be understood
• Project teams must use project plans.
• Open project risks need to be identified, and be used in the project plan.
• Knowledge from past projects should be used to prevent negative impact on benefits.
• Review pending corrective actions and how the response to individual risks help the project
• How can project management "best practice" tools and techniques that should be be used?
• What is the product development process to follow?
• Can any of the other technical product requirements be relaxed? What about product quality, reliability, safety, and regulatory
• Are there any expedite opportunities and what are the additional cost premiums and expected schedule improvements?
• Is the project at risk due to resource constraints and is there any way to reduce waste or eliminate unnecessary nonvalue-added work?
• Can we leverage other works to reduce the cost?

Managing Project Risks

• Balance Project Cost, Schedule, and Product Performance
• Proactively address project risks to ensure project changes and conflicts.
• Employ Project Management Tools and Techniques to monitor and control costs.
• The risk reassessment involves risk monitoring and controlling options.

Risk Reassessment

• Reassess the risk is an integral part of the project's iterative process.
• If no additional risks have been identified, the team continues executing existing plans.
• Plan, Do, Check, Act continues the project life cycle.

Project Management Tools, Risks, and Techniques

• Tools and techniques monitor and control the risks to yield a balanced plan.
• Chapter 12 is focused on using metrics that help monitor and control over time.
• Metrics include tracked requirements changes; actual performance; simulations; and sigma quality
• This is achieved via the project team (charter, membership, schedule, meeting, etc)

Periodic Stakeholder Reviews

• Stakeholder reviews help discuss, escalate, and obtain assistance for managing risks.
• Traffic light status is a common tool that can be standarized

Some practical Risk Management Tips to consider

• It is important to arm managers with practical risk management processes.
• These must be stated previously within the processes.
• It is prudent for the team to implement project planning to reduce the project risk via
  • Bounding production requirements
  • Prioritizing the must have needs
  • Constructing the work breakdown structure where possible
  • Dedicate enough time to justify laters costs
  • Plan for slow ramp up

Project Execution tips to reduce risk

• Start with a sense of urgency
• Obtain the project resources and do not allow it to fill from behind
• Do not relinquish the buffer
• Carefully setup your contractual agreements and set incentives
• Accommoddation should be appropriately communicated to the client
• Reassess risk whenever there is negative impact