Project Management Exam BUSG 2002-2 Final Review PDF

College of Business – BUSG 2002-2 PROJECT SCHEDULE MANAGEMENT-...

College of Business – BUSG 2002-2 PROJECT SCHEDULE MANAGEMENT- PROJECT MANAGEMENT UNIT 5-1 1 PROJECT TIME MANAGEMENT PROJECT TIME MANAGEMENT AIMS TO ANSWER THESE QUESTIONS: ▪ How long will it take to complete the project and meet the overall objective? ▪ What project activities are dependent on other project activities and what order do they need to be done in? ▪ What resources are needed to complete an activity? ▪ What are the milestones that will track progress in the schedule? ▪ How is the project progressing and will the initial timeline be met? 2 PMBOK – NO. 6 – PROJECT TIME (SCHEDULE) MANAGEMENT Text 3 WBS VS. PROJECT SCHEDULE  WBS the difference between WBS and project schedule  Does not have a time component or sequence WBS  It is based on deliverables VS  Project Schedule PROJECT SCHEDULE  Defines what is happening when and with what resources.  Shows the sequence of work so that all deliverables in the WBS are completed 4  PROJECT SCHEDULE MANAGEMENT PROCESSES 1. Plan Schedule Management HOW WILL YOU MANAGE THE SCHEDULE IDENTIFY ACTIVITIES THAT MUST BE PERFORMED TO 2. Define Activities PRODUCE DELIVERABLES 3. Sequence Activities IDENTIFY THE ORDER OF PROJECT ACTIVITIES 4. Estimate Resources ESTIMATE THE RESOURCES REQUIRED 5. Estimate Durations ESTIMATE THE TIME NEEDED FOR EACH ACTIVITY 6. Develop Schedule CREATE PROJECT SCHEDULE 5 STEP 2 – SEQUENCE THE ACTIVITIES understanding of the terminaology Precedence Diagramming Method (PDM) CREATE NETWORK DIAGRAM that outlines the activities (represented in boxes) and arrows representing the relationships between them. Dependency Determination MANDATORY PREDECESSOR: The kind that have to exist before the next step i.e., decorate a cookie after it is baked DISCRETIONARY: Not a necessity but a matter of preference or best practice i.e., do most of the interior room painting prior to finishing or installing the flooring. EXTERNAL DEPENDENCIES i.e., can’t let passengers get in a plane until it is cleaned. Applying Leads and Lags: LAG = Time that has to pass before the next task can start LEAD = Task doesn’t have to wait until the predecessor is totally finished before you can start 6 STEP 2 – SEQUENCE THE ACTIVITIES – SIMPLE NETWORK DIAGRAM OF ACTIVITIES 7 STEP 4 – ESTIMATE THE ACTIVITY DURATION WITH THE RESOURCES YOU HAVE, HOW LONG WILL EACH ACTIVITY TAKE TO COMPLETE? how to complete a critical path 8  CRITICAL PATH METHOD (CPM) - EXAMPLE 1 3 7 B A C Start 3 Finish 4 D E The duration of the Critical Path is 11 days The duration of the next longest path is 7 days The difference is 4 days. That means that Activities D & E have a floats of 4 days. D or E can be delayed by 4 days without impacting the project timeline 9 CRITICAL PATH METHOD (CPM) – GOLDEN RULES ✓ Tell us the earliest time that the project can be The key to complete each task completed ✓ There can be multiple critical paths if two or more paths have same length EARLIEST DURATION EARLIEST START FINISH ✓ Slack or float is the amount of time an activity can be TASK A delayed without delaying project finish date LATEST FLOAT/LAG LATEST START FINISH ✓ The critical path is a path through the network diagram that has no slack or float 10  PRACTICE EXAMPLE 1 NETWORK DIAGRAM Activity Depend Duration A Start 2 B Start 4 C A 5 D B,A 7 E D 3 Finish C,E 11 PRACTICE EXAMPLE 1 CONTINUED Activity Depend Duration A Start 2 B Start 4 C A 5 D B,A 7 E D 3 Finish C,E Activities are step by step tasks within the project process. In order for each activity to be consistent and in sequence, they are dependent on each other and follow in sequence. Each activity has a timeframe. In this example we will use the duration of DAYS. Before creating your network diagram, calculate the length of time you are given to complete the project. In this example, you are given 21 days. 12  STEP BY STEP PROCESS FOR THE NETWORK DIAGRAM 1. Create your network diagram with the durations for each task 2. Determine the number of paths in your network diagram. 3. Determine the timeframe for each path by adding the durations of each path. 4. The path with the longest timeframe will be your critical path. 13 KEY POINTS WHEN CALCULATING EACH TASK Description of each key component The key to complete each task: Earliest Start (ES): Earliest time the task can start EARLIEST DURATION EARLIEST Duration: Timeframe (no of days/weeks/months) for each task to complete START FINISH Earliest Finish (EF): Earliest time the task can finish TASK A Latest Start (LS): Latest time the task can start LATEST FLOAT/LAG LATEST Latest Finish (LF): Latest time the task can finish START FINISH Float is the difference between the ES & LS, EF & LF definition The float also signifies days left or delayed from the task Activity Depend Duration A Start 2 When starting with Day 1: B Start 4 The Forward pass: ES + D - 1 = EF (When calculating forward) C A 5 The Backward pass: LF - D +1 = LS (When calculating backward) D B,A 7 E D 3 Finish C,E 14 2 5 0 DETERMINE THE NUMBER OF PATH AND THE CRITICAL PATH A C FIN 4 7 3 B D E it will always start with 1 ES D EF 2 5 0 A C FIN ACTIVITY NAME 4 7 3 LS TF LF B D E 1. Duration given = 21 days Activity Depend Duration 2. The no of paths = 3 paths A Start 2 - Path A - C - FIN = 7 days B Start 4 - Path A - D - E - FIN = 12 days C A 5 - Path B - D - E - FIN = 14 days (longest timeframe is the critical path) D B,A 7 3. In order to prove that the path is the critical path, we need to ensure that the float/lag for E D 3 each task in this path is 0. This path must have no float or lag time. Finish C,E 15 CALCULATING THE FORWARD PASS WE WILL START WITH THE FORWARD PASS IN SEQUENCE AND WITH 0 DEPENDENTS: ES +D = EF Moving Forward Activity Depend Duration A Start 2 0 2 2 2 5 7 14 0 14 A C FIN B Start 4 C A 5 0 4 4 4 7 11 11 3 14 D B,A 7 B D E E D 3 Finish C,E SINCE A & B STARTS FROM 0 WITH NO DEPENDENCIES, THEY WILL START ES D EF SEPARATELY AT THE SAME TIME. ACTIVITY NAME THE EARLIEST FINISH OF 1 ACTIVITY IS THE EARLIEST START OF THE NEXT ACTIVITY IN THE ABOVE SCENARIO. LS TF LF 16  CALCULATING THE BACKWARD PASS ONCE WE COMPLETE THE FORWARD PASS, WE START COMPLETING EACH ACTIVITY BY MOVING BACKWARDS IN SEQUENCE : LF - D = LS Activity Depend Duration A Start 2 Moving Forward B Start 4 C A 5 0 2 2 2 5 7 14 0 14 D B,A 7 A C FIN 2 4 9 14 14 14 E D 3 0 4 4 4 7 11 11 3 14 Finish C,E B D E 0 4 4 11 11 14 ES D EF ACTIVITY NAME Moving Backward LS TF LF 17 NETWORK DIAGRAM EXAMPLE (START WITH DAY 1 OF PROJECT) ES D EF ACTIVITY NAME LS TF LF Add 1 day to Task C, since C starts 1 day later (after A) There are 5 paths in this network diagram. The total duration = 42 days for all activities The longest path = 36 days which is the critical path 24  FORWARD PASS (ES + D – 1 = EF) There are 5 paths in this network diagram. THE EARLIEST START OF THE DEPENDENT TASK (NEXT TASK) ALWAYS STARTS THE NEXT DAY! The total duration = 42 days for all activities The longest path = 36 days which is the critical path ES D EF ACTIVITY NAME LS TF LF 27 BACKWARD PASS (LF - D + 1 = LS) ES D EF ACTIVITY NAME LS TF LF Activity C’s latest start is Day 22 27  DETERMINE THE FLOAT AND THE CRITICAL PATH ES D EF ACTIVITY NAME LS TF LF THE OTHER PATHS HAVE FLOATS SO CANNOT BE CRITICAL PATHS 27 NOW, BUILD YOUR PROJECT GANTT CHARTS SCHEDULE https://www.youtube.com/watch?v=zC22yPmc6Kw 22  A GANTT CHART EXAMPLE Create a GANTT CHART for any practice exercise 23 SCHEDULE BASELINE SCHEDULE BASELINE ▪ Version of project schedule that is accepted and approved ▪ Used for comparison Planned Actual Variance Start Date Oct. 23 Oct. 24 1 day Part of Monitoring Finish Date Nov. 13 Nov. 29 12 days Duration 16 days 27 days 11 days 24  PROJECT SCHEDULE MANAGEMENT PROJECT SCHEDULE PROCESSMANAGEMENT PROCESSES MONITORING & CONTROLLING MONITORING & CONTROLLING 25 MONITORING AND CONTROLLING OUTPUT ▪ There are 3 key reports that should be reviewed by the Project Governing Bodies, Stakeholders, and the Project Team. Reforecast Project Variance Progress Reports Schedule Analysis What is the Where is the forecast of the Why is the project at and project project is it on the schedule schedule planned based on the progress is scheduled? performance different than to date? planned? 26 College of Business – BUSG 2002-2 PROJECT COST MANAGEMENT- PROJECT MANAGEMENT UNIT 6 1 PROJECT COST MANAGEMENT IN PMBOK PROJECT MANAGEMENT 2  PLANNING & ESTIMATING THE COST COST AGGREGATION (COLLECTION/COMBINATION) This is a process used in PM and financial planning to collect and sum up costs from various sources or activities to create a comprehensive total cost. This process is essential for understanding the overall budget requirements, tracking expenditures, and ensuring that a project stays within its financial constraints. 3 KEY ELEMENTS OF COST AGGREGATION (COLLECTION/COMBINATION) 1. Cost Identification: Direct Costs: Costs that can be directly attributed to a specific project or activity, such as labor, materials, and equipment. Indirect Costs: Costs that are not directly linked to a single project but are necessary for overall operations, such as administrative expenses, utilities, and rent. 2. Data Collection: Gathering cost data from various departments, teams, or sources within the organization. Ensuring the data is accurate, up-to-date, and categorized correctly. 3. Cost Categorization: Grouping costs into categories such as labor, materials, overhead, and other relevant classifications. This helps in analyzing which areas are consuming the most resources. 4 KEY ELEMENTS OF COST AGGREGATION (COLLECTION/COMBINATION) 4. Summing Costs: Combining the costs by summing up all the individual costs within each category and across all categories to get a total cost. This can be done manually or using a project management software. 5. Analysis and Reporting: Analyzing the combined costs to identify trends, cost overruns, or areas where savings can be made. Generating reports for stakeholders to provide transparency and support decision-making. 5 IN THE END YOU WANT TO BE ABLE TO….. ▪ See your total costs per category ▪ See your total cost per key deliverable ▪ See your expected spending through the schedule of the project. = CREATING AN ACCURATE PROJECT BUDGET AND FORECAST = ASSIST IN TRACKING PROJECT SPENDING AGAINST THE BUDGET = FINANCIAL CONTROL PROJECT COST 6  ESTIMATING COSTS - METHODS 1. Expert Judgement: ask somebody that has done a project like this before 2. Analogous Estimating (Top-Down): look at a similar project's cost estimations/historical data. 3. Parametric Estimating: use a statistical relationship with historical data. Example would be standard dinner costs/guest for an ESTIMATING COSTS - METHODS event. 4. Bottom-Up Estimating – Breaking down the project into smaller work packages or tasks typically detailed in the WBS 5. Three-Point Estimating (Triangular Distribution) – average between high, low and likely cost 6. Beta Distribution Pert (Project Evaluation Review Technique) 7 7. Data Analysis 11 3-POINT ESTIMATING (TRIANGULAR DISTRIBUTION) MOST LIKELY ESTIMATE (M) 1. Most Likely Estimate (M): The most likely estimate/average amount of work the task might take if the team member performed the task 100x. This is the estimate you see as the most realistic given information you have. 2. Optimistic Estimate (O): The best-case scenario estimate. The amount of work the task might take if all goes well. 3. Pessimistic Estimate (P): The amount of work the task might take if all goes wrong. 8 11  3-POINT ESTIMATING (TRIANGULAR DISTRIBUTION) MOST LIKELY ESTIMATE (M) Example: Let's say you are tasked with estimating the time it will take to complete a software development project. You have gathered historical data and have a good understanding of the task at hand. - (O): Best-case scenario: Suppose the task takes 2 weeks without any constraints. - (M): Most realistic given the information you receive. Suppose the task takes 3 weeks under normal conditions. - (P): Worst –case scenario. The task might take 5 weeks due to possible risks and unexpected delays. 9 11 3-POINT ESTIMATING (TRIANGULAR DISTRIBUTION) MOST LIKELY ESTIMATE (M) Triangular Distribution Formula: The most likely estimate (M) for completing the software M = (0 +M +P)/3 development project is approximately 3.3 weeks M = (2 + 3 + 5)/3 This is the estimate you would use M = 10/3 as your best guess for planning and managing your project, while considering the (O) & (P) view M = 3.3 WEEKS 10 11 BETA DISTRIBUTION PERT (PROJECT EVALUATION REVIEW TECHNIQUE) 1. Most Likely Estimate (M): The most likely estimate/average amount of work the task might take if the team member performed the task 100x. This is the estimate you see as the most realistic given information you have. 2. Optimistic Estimate (O): The best-case scenario estimate. The amount of work the task might take if all goes well. 3. Pessimistic Estimate (P): The amount of work the task might take if all goes wrong. 4. Beta Distribution (PERT): A weighted average in which more weight is given to the most likely estimate. It increases the accuracy of the estimate which determines the level of certainty. 11 11 BETA DISTRIBUTION PERT (PROJECT EVALUATION REVIEW TECHNIQUE) Example: Let's say you are tasked with estimating the time it will take to complete a software development project. You have gathered historical data and have a good understanding of the task at hand. - (O): Best-case scenario: Suppose the task takes 2 weeks without any constraints. - (M): Most realistic given the information you receive. Suppose the task takes 3 weeks under normal conditions. - (P): Worst –case scenario. The task might take 5 weeks due to possible risks and unexpected delays. 12 11 BETA DISTRIBUTION PERT (PROJECT EVALUATION REVIEW TECHNIQUE) The most likely estimate (M) for BETA Distribution (PERT)Formula: completing the software development project is M = (0 +4M +P)/6 approximately 3.17 weeks M = (2 + 4(3) + 5)/6 This is the estimate you would use as the most accurate estimate for M = (2 + 12 + 5)/6 planning and managing your project, while considering the (O) & M = 19/6 = 3.17 WEEKS (P) view 13 11 CONTROL COSTS The process of monitoring the status project. How are the actual costs compared to the planned costs? Updating the project costs. Are the cost assumptions made during planning still hold true? Do they need to be updated and the project costs reforecasted? Manage changes to the cost baseline. Are there changes in the schedule or scope that impact costs and how must do they impact the costs. 14  EARNED VALUE MANAGEMENT (EVM) ▪ Project performance measurement baseline that joins scope, time, and cost ▪ Determine how well project is meeting its’ goals relative to original baseline (original plan plus approved changes) ▪ Many international organizations use EVM to help control project costs 1 EARNED VALUE MANAGEMENT FORMULAS Name Description Formula Interpretations BAC Budget At Completion Approved budget for all work GIVEN How much you are expected to spend BAC x Planned % work How much is the value of the work that was planned to have been What you should have delivered so far as PV Planned Value of work that should completed by a specific time per the plan you set. have been completed AC Actual Cost Actual cost of money spent to date actual expense What the team has actually spent BAC x actual % of work How much work has the team actually EV Earned Value Work completed to date and budget that was planned for that work complete managed to complete (+) = under budget, (-) = over budget, 0 =on CV Cost Variance Cost exception report may document large differences EV – AC budget Described in monetary terms. This is the difference between the value of (+) = ahead of schedule, (-) = behind SV Schedule Variance the work actually done (EV) and the value of the work that SHOULD EV – PV schedule, 0 =on schedule have been done (PV) How much money are we losing/gaining for every QAR spent? I.e. For >1.0 = under budget, 1.0 = ahead of schedule, SPI Schedule Performance Index how much worth of work did we do vs. how much were we planning on EV / PV BAC = over budget > 1 = Project needs to be more efficient than it has been up to Determines whether EAC is reasonable. I.e. Is it now to meet the budget. Higher TCPI = Project must achieve a TCPI To Complete Performance Index BAC-EV/BAC-AC reasonable enough to have met the BAC. higher cost performance moving forward. =1 = Maintain same cost efficiency. < 1 = Project can be less efficient 2  EVM EXAMPLE – PROJECT BETA ▪ Estimated time: 10 days ▪ Materials cost: QAR 4,000 ▪ Labor cost: QAR 800 per day After four days, work is 3/4 done (75%) by hiring additional labor for QAR 4,000 (customer signed-off on and all is paid on day 4) ▪ BAC (Budget @ completion) = QAR 4,000 + 800 x 10 = QAR 12,000 ▪ PV (Planned Value = BAC x planned work that should have been completed (%)) = QAR 12,000(BAC) x 40% (4/10 days)= QAR 4,800 (Monetary value of work that should have been completed after 4 days) ▪ AC (Actual cost spent to date (Day 4)) = QAR 4,000 + (800 x 4) + 4,000 (Additional labor cost) = QAR 11,200 ▪ EV (Earned Value: actual work completed to date compared to the budget assigned to the project = BAC x actual % of work completed = QAR 12,000 (BAC) x 75% = QAR 9,000 (Value of work that has actually been completed up to a certain point (Day 4)) ▪ Days left to complete with regular labor: 100% - 75% = 25% of the work is still remaining Estimated time to complete 100% of the work was set at 10 days 25% of 10 days = 2.5 days left 100% of the work should be completed in a total of 6.5 days 3 EVM ANALYSIS CV (Cost Variance) = EV – AC = 9,000 – 11,200 = – QAR 2,200 (Over budget) BAC (Budget @ completion) SV (Schedule Variance) = EV – PV = 9,000 – 4,800 = QAR 12,000 = QAR 4,200 (ahead of schedule) CPI (Cost Performance Index = How much are we losing/gaining for every QAR spent) PV (Planned value) = QAR 4,800 = EV/AC = 0.80 (Over budget) SPI (Schedule Perf. Index) = EV/PV = 1.87 (Ahead of Schedule) AC (Actual cost) = QAR 11,200 EAC (Estimate @ Completion) = BAC/CPI = 12,000/0.80 = 15,000 = Over Budget EV (Earned Value) = QAR 9,000 TCPI (To Complete Perf. Index) = BAC-EV/BAC-AC = (12k-9k)/(12k-11.2k) = QAR 3,000/QAR 800= 3.75 (To determine if BAC is reasonable) = BAC is far from reasonable = need to be more cost efficient moving forward 4 College of Business – BUSG 2002-2 PROJECT STAKEHOLDER & COMMUNICATIONS MANAGEMENT - UNIT 7 1 STAKEHOLDER & COMM. MGMT TIED TOGETHER STAKEHOLDERS: Give Information about the project PM needs to understand their expectations of the project PM needs to understand their role PM needs to understand how they can influence and get involved in the project. COMMUNICATIONS MANAGEMENT: Core messages need to be distributed to the proper channels Need information & involvement from different Stakeholders Resolve Issues Create project advocates Manage project challengers 2  GETTING PROJECT SUPPORT FROM YOUR STAKEHOLDERS PM needs to understand who the project stakeholders are and their potential impact. What isPM theneeds Goaltoofengage the right stakeholders in project decisions and execution Stakeholder Management? PM needs to develop a good working relationship with the stakeholders. PM needs to manage the highest impact, highest influence stakeholders. Issues get resolved in timely manner. 3 STAKEHOLDER MANAGEMENT PROCESS IN PMBOK 4  PROJECT STAKEHOLDER MANAGEMENT PROCESSES Who are the stakeholders and what is the relationship 1. Identify Stakeholders they have with the project 2. Plan Stakeholder How and when are stakeholders going to be involved based on their needs, expectations, interests and Engagement potential impact on the project Process of communicating and working with stakeholders 3. Manage Stakeholders to meet their needs and expectations, address issues, and create appropriate stakeholder involvement 4. Monitor Stakeholder Monitoring your stakeholder relationships – ensuring that all is as per the set plan and amend as per the Engagement need 5 IDENTIFY THE STAKEHOLDERS A STAKEHOLDER A person or organization that is actively involved in the project, or whose interests may be positively or negatively affected by the execution or completion of the project Creating a Stakeholder Profiles Register is the 1st step in creating the Stakeholder Register 1. Who is the stakeholder? Can they be STAKEHOLDER PROFILE grouped with other stakeholders? Name: Fatima Ahmad Group: Almeera Customer 2. What is their responsibility on the project? Responsibilities: None Goals: Improve shopping experience by increasing variety of available goods 3. What do they want to get out from the Expectations: Being able to access shop when needed project? Concerns: Not being able to easily park for shopping, not being able to purchase all the regular items in weekly grocery shop 4. What do they expect will happen? 5. What are their concerns? 6  ANALYZING THE STAKEHOLDERS When analyzing your Stakeholders, you want to answer the following questions: Which stakeholders can significantly impact the project, either positively or negatively. What level of participation does the project need from each of them What are the stakeholder groupings and what are their main goals, expectations, and concerns related to the project. 7 STAKEHOLDER ANALYSIS “You can please some of the people all of the time, you can please all of the people some of the time, but you can’t please all of the people all of the time”. John Lydgate Stakeholder Analysis aims at understanding, categorizing the project’s stakeholders so that efforts in project communication are efficient and have the greatest impact. This is what you need to know about your stakeholders: How much power do they have in impacting project outcomes? How interested are they in project outcomes? How involved are they in the project, what is there influence level? 8  ANALYSIS TECHNIQUES – POWER/INTEREST GRID 1. THE PLAYERS High High Power/High Interest Significant Stakeholders that deserve sustained 2. 1. management attention. Keep Manage Satisfied Closely 2. THE CONTEXT SETTERS High Power/Low Interest Can influence future context. Management should Power seek to raise awareness and develop a +ve interest 3. 3. THE SUBJECTS 4. Keep Low Power/High Interest Monitor Informed Management should encourage conditions to increase their power and convert them to Players or neutralize their –ve impact Low Low Interest High 4. THE CROWD Low Power/Low Interest Management should encourage conditions to increase their power and convert them to Players or neutralize their –ve impact 9 MANAGE STAKEHOLDER EXPECTATIONS – TOOLS & TECHNIQUES Effectively following the Communication Plan. Interpersonal Skills: Building Trust Resolving Conflict Active Listening Overcoming resistance to change Management Skills Presentation skills Negotiating Writing skills Public speaking 10 MANAGE STAKEHOLDER EXPECTATIONS OUTPUTS Review, Analyze, and Update: What are we learning, is the communication plan working? If not…update it. Do we need to change the scope to meet Stakeholder Expectations? Update Change Requests. Issues log update. Stakeholder Management strategy update. 11 Communication Management 12  PROJECT COMMUNICATION MANAGEMENT PROCESS 1. Plan The Communication What communication is required and how will it happen. The timely and appropriate collection, creation, distribution, 2. Manage The storage, retrieval, management, monitoring and disposition Communication of project information 3. Monitor & Control the Communicating and working with stakeholders on their Communication concerns as they happen 13 EFFECTIVE & EFFICIENT COMMUNICATION Effective Communication = Information provided in the right format at the right time to the right people with the right impact (desired result) Efficient Communication: Only when the information is needed 14  THE GOAL OF COMMUNICATIONS MANAGEMENT KEEPING STAKEHOLDERS ON THE SAME PAGE: 1. Project goals and objectives understood and clear. 2. Expectations are managed. 3. There is clarity on project roles & responsibilities. 4. Issues get resolved in a timely manner 15 THE ANATOMY OF COMMUNICATION – Managing the comm. The Communication Plan A basic communication plan includes what message, to whom, by whom, how will it be delivered, how frequently, and what response or result is desired. A comprehensive communication plan includes everything the basic plan has and: level of formality, push, pull, or interactive, and any sensitivities or cultural context that is important. 16  MONITORING & CONTROLLING THE COMMUNICATIONS This process ensures that the information needs of the project and its stakeholders are met. The benefit of this process is the optimal information flow as defined in the communications management plan and the stakeholder engagement plan. This process is an ongoing process throughout the project. 17 College of Business – BUSG 2002-2 PROJECT RISK MANAGEMENT - UNIT 8 1  PROJECT RISK MANAGEMENT What is a risk? What is risk management? How are risks identified? What can be done to prepare for risks? 2 REALITY CHECK there are always risks in projects: deliveries are late, people get sick, accidents happen, machinery breaksdown, etc. Risks if they occur will impact projects. Risk management is the process in which risks are identified and their potential impact is planned for. 3  WHAT IS PROJECT RISK? An uncertain event or condition that if it occurs will impact at least one project objective: scope, schedule, cost, quality. It is always in the future. It may have more than one causes, which can be a requirement, an assumption, a constraint, a condition. They create the possibility of a negative or positive outcome. 4 TYPES OF RISK KNOWN RISK Identified & analyzed with a planned response UNKNOWN Cannot be proactively managed, have a contingency plan RISK POSITIVE RISK Aim to maximize opportunities where good things happen NEGATIVE RISK Minimize threats that are potential project problems RISK THAT HAS Is no longer a risk but a project issue HAPPENED 5  RISK EXAMPLES RISK EXAMPLE CAUSE PROJECT IMPACT +IVE OR -IVE A project Negative if permit is not granted in the time Environmental Permit Impact the timeline requirement required. Limited expertise available to do Positive if there is no limit on the expertise A project assumption Impact the timeline a particular project task. needed or could be negative if there is. Negative if the organization has too many Company has multiple projects going Impact timeline, demands on it and cannot respond as needed A project condition on at once budget, and/or quality by the project. Positive if projects can share resources effectively. Negative if external company does not deliver Require external company to provide Impact budget and A project constraint on time. Positive if external company delivers deliverable on the critical path timeline ahead of time. 6 PMBOK RISK MANAGEMENT PROCESSES 7  PMBOK RISK MANAGEMENT PROCESSES 1. Plan Risk Management How to perform project risk management 2. Identify Risks Document which risks may affect project 3. Perform Qualitative Risk Analysis Prioritize risks for further analysis 4. Perform Quantitative Risk Analysis Numerical models of risk analysis 5. Plan Risk Responses Options, actions & contingency plans 6. Monitor and Control Risks Start and manage risk plan 8 1 - PLAN RISK MANAGEMENT PROCESSES Risk Categories What are the broad categories of risk the project is vulnerable to. Risk Breakdown Structure Takes the categories and breaks them down into specific components related to the project. (see next slide) Guidelines for determining the potential impact Define different impact levels for time and budget that will be used when analyzing risks. I.e. is 2 day impact a major or minor impact? Probability Scale Define probability levels that will be used when analyzing risks.  1 - RBS - RISK BREAKDOWN SCHEDULE A RBS defines the risk categories for the plan. It is very similar to a WBS, in that the major risk areas of the project are defined and then detailed out Once the project risks are identified, they can be categorized by one of these categories. This categorization will help understand the risk level and the way it should be dealt with. 10 3 & 4 – PERFORM QUALITATIVE & QUANTITATIVE ANALYSIS WHAT IS THE LIKELIHOOD OF A RISK HAPPENING? WHAT IS THE IMPACT THE RISK COULD HAVE TO THE PROJECT AND PROJECT BUDGET?  QUALITATIVE ANALYSIS Applying the Project Impact Scale created the Risk Register = PRIORITY & URGENCY Risk Risk Risk Probability Impact Potential Root Risk # (Project (1,2,3,4,5) Owner Name Description Category Response Causes Impact Scale) QUALITATIVE ANALYSIS THIS HELPS IDENTIFY: high impact high probability risks that will need to be proactively Low impact low probability risks that can be put at a very low management priority  QUANTITATIVE ANALYSIS Gather Analyze Update GATHER THE ANALYZE THE UPDATE THE RISK INFORMATION INFORMATION REGISTER Talk to the people that know about the risks and get them to give three-point cost estimates Sensitivity Analysis on their impact. Expected Monetary Value (EMV) Probability distribution – using Modeling and Simulation statistics. Expert Judgement. EMV = EXPECTED MONETARY VALUE – A WAY TO QUANTIFY RISK  EMV = EXPECTED MONETARY VALUE – A WAY TO QUANTIFY RISH EMV Applied on Camping Trip Project 1. Start with your probability and Impact of each risk: RISK PROBABILITY IMPACT High Winds 35% cost $300 to replace equipment Mudslide 5% cost $750 in damage Wind generator is usable 20% save $800 in petrol costs RV rental unavailable 5% cost $550 for last-minute rental 2. Calculate the EMV for each risk RISK PROB X IMPACT EMV High Winds 35% X $300 = - $105.00 Mudslide 5% X $750 = - $37.50 Wind generator is usable 20% X $800 = + $160.00 RV rental unavailable 7% X $550 = - $38.50 APPLYING EMV IN 2 WAYS 1. What is the EMV for all the Risks? -$105.00 + -$37.50 + $160.00 + -$38.50 = -$21.00 Adding $21.00 to the budget should account for all these risks 2. What is the monetary value of a decision? High Winds 35% 35% X -300 = -105 -$700 -$300 Yes The risk mitigation 65% Low Winds Rent a bigger -$20 65% X -20 = -13 decision to rent a heavier RV heavier RV makes No 35% High Winds sense -1400 35% X -1400 = -490 -$330 65% Low Winds 65% X -50 = -39 -60 Compare the 2 branches: Heavier RV = -$ 700 +-$ 105+-$ 13 = -$ 818 Lighter RV = -$ 330+-$ 490+-$ 39 = -$ 859 17  5 – PLAN RISK RESPONSE WHAT IS PLANNED RESPONSE OR TACTIC TO DEAL WITH THE RISK? 4 WAYS NEGATIVE RISK IS DEALT WITH AVOID MITIGATE TRANSFER ACCEPT Prevent it from Taking action Pay someone If you cannot happening that will cause else to accept avoid, mitigate it to do as little it from you. or transfer the damage as i.e. insurance, risk, you possible extra warranty accept it. 19  4 WAYS POSITIVE RISK IS DEALT WITH EXPLOIT SHARE ENHANCE ACCEPT Ensure it happens Allocate the Increase the Be willing to take responsibility to a probability and/or advantage of it, if it third party that is the positive impact comes along best to capture the of the opportunity opportunity 20 6 – MONITOR RISK WHAT ARE NEW RISKS, WHAT ARE RISKS THAT HAVE NOT HAPPENED, WHAT HAS BEEN THE IMPACT OF RISKS HAPPENING?  MONITOR & CONTROL RISKS The process of monitoring the implementation of agreed-upon risk response plans, tracking identified risks, identifying and analyzing new risks, and evaluating risk process effectiveness throughout the project. The key benefit of this process is that it enables project decisions to be based on current information about overall project risk exposure and individual project risks. This process is performed throughout the project. 22 TOOLS & TECHNIQUES USED TO MONITOR AND CONTROL RISKS Risk Variance and Risk audits Reassessment trend analysis Technical Reserve Status Performance analysis meetings measurement 23