Project Risk Management PDF

Project Risk Management What is ? Hazard Risk What is a Project Risk  Risk is UNAVOIDABLE There is always at least some level of uncertainty in a Project’s outcome. Technological and Social Projects are particularly risky. Risks on Technological and Social Projects are signifi...

Project Risk Management What is ? Hazard Risk What is a Project Risk  Risk is UNAVOIDABLE There is always at least some level of uncertainty in a Project’s outcome. Technological and Social Projects are particularly risky. Risks on Technological and Social Projects are significant, and their numbers and severity increases.  Component of Project Risk This definition includes two key dimensions of risk:  uncertainty and  effect on a project’s objectives  Project Risk Management Project Risk Management includes the processes of conducting risk management planning, identification, analysis, response planning, and monitoring and control on a project.  Objectives of Project Risk Management The objectives of Project Risk Management are to increase the probability and impact of positive events, and decrease the probability and impact of negative events in the project.  Nature of Risk Risk is the product of these two factors: i. the expected consequences of the event and ii. the probability that the event might occur. Risk may be characterized in the aggregate for a large population of events ("macro-risk"), or it may be considered on an event-by-event basis ("micro-risk").  Threat & Opportunity There is a chance “P” that event “E” will occur during the “T” period, leading to “X” adverse consequences. This is called Threat And There is a chance “P” that, if opportunity “C” is exploited during the “T” period, benefit “B” be will be obtained  The Context of Risk Risk is contextual: a. It arises in the context of a person or organization. b. It arises in the context of a situation. c. It arises in the context of an objective, a task or a commitment. One person’s (organization's) risk threat may be another’s risk opportunity.  Uncertainty in “Risk” Risk is usually dynamic: For a risk event, the probability and impact elements of risk may change over the time element. Critical Success Factors For Project Risk Management  Individual Risks Individual risks are specific events or conditions that might affect project objectives. An individual risk may positively or negatively affect one or more of the project objectives, elements, or tasks.  Overall Project Risk Overall project risk represents the effect of uncertainty on the project as a whole. Overall project risk represents the exposure of stakeholders to the implications of variations in project outcome.  Stakeholder Risk Attitude The risk attitudes of the project stakeholders determine the extent to which an individual risk or overall project risk matters. A wide range of factors influence risk attitude. These include:  the scale of the project within the range of stakeholders’ overall activities,  the strength of public commitments made about the performance of the project, and  the stakeholders’ sensitivity to issues such as environmental impacts, industrial relations, and other factors.  Risk Management is Iterative Process It is the nature of projects that circumstances change as they are being planned and executed. The amount of information available about risks will usually increase as time goes on.  Risk Management is Iterative Process Some risks will occur while others will not, new risks will arise or be discovered, and the characteristics of those already identified may change. As a result, the Project Risk Management processes should be repeated and the corresponding plans progressively elaborated throughout the lifetime of the project. Risk Management is Iterative Process  Risk Management & Communication Project Risk Management cannot take place in isolation. Success relies heavily on communication throughout the process. Risk identification and analysis depend on comprehensive input from stakeholders in a project to ensure that nothing significant is overlooked and that risks are realistically assessed.  Risk Management & Responsibility It is important that management of project risk is not left to a few risk specialists. Since project risks can affect project objectives, anyone with an interest in achieving those objectives should play a role in Project Risk Management  Risk Management & PM Role The role of the project manager may include:  Encouraging senior management support for Project Risk Management activities.  Determining the acceptable levels of risk for the project in consultation with stakeholders.  Developing and approving the risk management plan.  Promoting the Project Risk Management process for the project.  Facilitating open and honest communication about risk within the project team and with management and other stakeholders.  Risk Management Processes Project Risk Management processes are as follows:  Plan Risk Management  Identify Risks  Perform Qualitative Risk Analysis  Perform Quantitative Risk Analysis  Plan Risk Responses  Monitor and Control Risks  Plan Risk Management Defines the scope and objectives of the Project Risk Management process, and ensures that the risk process is fully integrated into wider project management.  Plan Risk Management Risk management plan may include: Methodology Roles and Responsibility Budgeting Timing Definitions of Probability and Impact  Identify Risks A risk cannot be managed unless it is first identified. Consequently, after risk management planning has been completed, the first process in the iterative Project Risk Management process aims to identify all the knowable risks to project objectives. Identify Risks  Identify Risks Everybody should be involved Techniques: in risk identification Brainstorming It is primarily carried out in Delphi-technique initiation and planning phase Interviewing of the project. Rook Cause analysis PERFORM QUALITATIVE RISK ANALYSIS The Perform Qualitative Risk Analysis process assesses and evaluates characteristics of individually identified project risks and prioritizes risks based on agreed-upon characteristics.  PERFORM QUALITATIVE RISK ANALYSIS The probability and impact of each risk is determined using a standard scale such as Low, Medium, High or from 1 to 10. Which risk require immediate response, or to move further for quantitative analysis or which one to move to watch-list.  PERFORM QUANTITATIVE RISK ANALYSIS The Perform Quantitative Risk Analysis process provides a numerical estimate of the overall effect of risk on the objectives of the project, based on current plans and information, when considering risks simultaneously.  PERFORM QUANTITATIVE RISK ANALYSIS Techniques: Interviewing Delphi-technique Historical Information Expert Judgement Expected Monitory Value analysis EMV = P X I PLAN RISK RESPONSES The Plan Risk Responses process determines effective response actions that are appropriate to the priority of the individual risks and to the overall project risk.  PLAN RISK RESPONSES Risk Response Strategies: Avoid: Completely Eliminate Mitigate: Reduce the probability and impact Transfer: Allocate to some other party like bonds and insurances.  MONITOR AND CONTROL RISKS The effectiveness of Project Risk Management depends upon the way the approved plans are carried out. These plans should be executed correctly, reviewed, and updated regularly.  MONITOR AND CONTROL RISKS Monitoring and Controlling strategies: Workarounds: Unplanned responses Risk Audits: Reserve Analysis: Like checking balance in your bank account Status Meetings: Risk Reassessment: Qualitative, Quantitative, Risk Response Closing risk that are no longer applicable  End Note If the probability of success is not almost one, then it is damn near zero