Post on 23-Feb-2016
description
Quick Recap
Monitoring and Controlling
Organizational Planning
• Involves identifying and documenting project roles, responsibilities, and reporting relationships.
• Outputs include:– Project organizational charts– Staffing management plans– Responsibility assignment matrixes– Resource histograms
Project Communication Management
InitiatingProcesses
PlanningProcesses
ControllingProcesses
ExecutingProcesses
ClosingProcesses
Communication Planning
Information Distribution
Performance Reporting
Administrative Closure
View Project Communication in the context of the five PM process groups.
• Lesson 7: Analyzing Risks and Planning Risk ResponsesTopic 7A: Examine a Risk Management Plan Topic 7B: Identify Project Risks and TriggersTopic 7C: Perform Qualitative Risk AnalysisTopic 7D: Perform Quantitative Risk AnalysisTopic 7E: Develop a Risk Response Plan
Project Risk Management
What is Risk?
Risk and uncertainty are equivalent
Three Definitions
• Risk– A possible future event which if it occurs
will lead to an undesirable outcome.• Project Risk
– The cumulative effect of the chances of an uncertain occurrence that will adversely affect project objectives.
• Risk Management– A systematic and explicit approach for
identifying, quantifying, and controlling project risk.
DEFINITION
Project risk management is the art and science of Identifying, assessing, and responding to projectRisk throughout the life of a project and in the Best interests of its objectives
Project risk is the cumulative effect of the chances of uncertain occurrences adversely affecting project objectives
RISK MANAGEMENT PURPOSE
Identify factors that are likely to impact the project objectives of scope, quality, cost and time
Quantify the likely impact of each factor
Give a baseline for project non-controllables
Mitigate impacts by exercising influence over project controllables
The pmbok also points out that risk management includes maximizing the results of positive events and minimizing the consequences of adverse events.
ISSUES
A risk should only be taken when the potential benefit and chances of winning exceed the remedial cost of an unsuccessful decision and chances of losing by a satisfactory margin
What will be gained?What could be lost?What are the chances of success (and failure)?What can be done if the desired result is not achieved?Is the potential reward worth the risk?
Potential frequency of lossAmount and reliability of information availablePotential severity of lossManageability of the riskVividness of the consequencesPotential for (adverse) publicityWhose money is it?
NATURE OF RISK MANAGEMENT
WHEN SPEAKING OF RISK, THINK OF ONLY HAZARDOUS ONES
EVERYDAY COMMON DAY ONES ARE IGNORED
RARELY DO WE SYSTEMATICALLY IDENTIFY ALL RISKS INVOLVED
HOWEVER, INCLINED TO CONSIDER RISK DIFFERENTLY RELATIVE TO FAMILY - VERY PRECIOUS AND LOTS OF POTENTIAL
EXAMPLES:SMALL CHILDREN - STAY AWAY FROM ROAD - RISK ID & AVOIDANCEHOW DID DAY GO? - DO MORE TO HELP THEM - INFO FEEDBACK
THESE ACTIONS ARE ESTABLISHING THE BASIC ELEMENTS OF MANAGING PROJECT RISK INTO OUR CHILDREN
PROJECT RISK MGMT IS PRO-ACTIVE
Classic systems methodology:
Input process output
Feedback loop
This process vital to effective project control, however
Risk is different - - has to do with:
Uncertainty, probability or unpredictability, and contingent planning
REACTIVE vs. PRO-ACTIVE
Crisis management -- reactive mode -- select response
Pro-active -- anticipate and plan to avoid
Risk & decision making:
Take risk if potential benefit and chance of winning exceeds cost of unsuccessful decision and chances of losing by a satisfactory margin (classic cost / benefit analysis)
Project Risk Management
R iskIdentifica tion
11.1
R iskQ uantification
11.2
R isk ResponseD evelopm ent
11.3
R isk ResponseC ontro l
11.4
P rojec t R iskM anagem ent
11.0
PMBOK Risk
• Opportunities - Positive outcome• Threats - Negative outcome
Benefits of Risk Management
• More and better information is available during planning and decision making
• Project objectives are verified• Improved communications• Higher probability of project success• Proactive approach• Project might be canceled
Why Organizations don’t doRisk Management
• Unwillingness to admit risks exist• Postpone the hard parts of the project until
later• Risk management costs money
– Up front investment of time– Can’t prove it’s necessary
• Think health insurance
Why Organizations don’t doRisk Management
• “Can Do” management style severely inhibits risk management
• Risk identification can make you look like a whiner
Ways to AvoidRisk Management
• “Managing risk is everybody’s business”• “There is only one risk: The project might
fail. And we’re managing that by working real hard to assure that doesn’t happen.”
The Uncertainty Spectrum
TOTALCERTAINTY
TOTALUNCERTAINTY
GENERALUNCERTAINTY
SPECIFICUNCERTAINTY
(Unknownunknowns) (Knowns)
NOInformation
CompleteInformation
PartialInformation
(Knownunknowns)
SCOPE OF PROJECT RISK MANAGEMENT*
*Note: in this range the information to be sought is known
Project Risk
Project Risk
Scope
IntegrationCommunication
Human Resources
Procurement
Cost
Quality
Time
INTEGRATING RISK
PROJECT MANAGEMENT INTEGRATION
SCOPE
QUALITY
TIME
COST
HUMAN RESOURCES
CONTRACT / PROCUREMENT
INFORMATION / COMMUNICATIONS
PROJECT RISK
Life Cycle and Environment Variables
Services, Plant, Materials: Performance
Cost Objectives, Restraints
Time Objectives, Restraints
Expectations Feasibility
Ideas, Directives, Data Exchange Accuracy
Requirements Standards
AvailabilityProductivity
Project Risk Management
A subset of project management that includes the processes concerned with
identifying, analyzing, and responding to project risk.
Risk Management Objectives
• Reduce the number of surprise events• Minimize consequences of adverse events• Maximize the results of positive events
Risk Classification
• Business risks vs. pure (insurable) risks• Classified by uncertainty (business risks)• Classified by impact on project elements• Classified by their nature• Classified by their source• Classified by their probability to occur and
amount at stake
Consequences of Risk Analysis
Positives• greater information is made available
during the course of planning and decision making
• project objectives are verified• better communications• better probability that project realization will
be optimal• increased chance of project success
Consequences of Risk Analysis
Negatives• belief that all risks have been accounted for• project could be shut down
Some Considerations
• Real information is the key.• The relationship between uncertainty and
information is inverse.• For the project manager, conditions of
relative uncertainty (partial information) are the rule.
• There is a natural resistance to formal risk analysis.
• Risks should only be taken to achieve a project objective.
PMBOK FIGURE 11-1
PROJECT RISK MANAGEMENT OVERVIEWRisk IdentificationInputs
Product DescriptionOther Planning OutputsHistorical Information
Tools & TechniquesChecklistsFlowchartingInterviewing
OutputsSources of RiskPotential Risk EventsRisk SymptomsInputs to other Processes
Risk QuantificationInputs
Stakeholder risk tolerancesSources of RiskPotential Risk EventsCost EstimatesActivity Duration Estimates
Tools & TechniquesExpected Monetary ValueStatistical SumsSimulationDecision TreesExpert Judgment
OutputsOpportunities to pursue, threats to respond toOpportunities to ignore, threats to accept
Response DevelopmentInputs
Opportunities to pursue, threats to respond toOpportunities to ignore, threats to accept
Tools & TechniquesProcurementContingency PlanningAlternative StrategiesInsurance
OutputsRisk Management PlanInputs to other ProcessesContingency PlansReservesContractual Agreements
Response ControlInputs
Risk Management PlanActual Risk EventsAdditional Risk Identification
Tools & TechniquesWorkaroundsAdditional Risk Response Development
OutputsCorrective ActionUpdates to Risk Management Plan
Risk Identification
R iskIdentification
11.1
R iskQ uantification
11.2
R isk ResponseD evelopm ent
11.3
R isk ResponseC ontro l
11.4
P rojec t R iskM anagem ent
11.0
Risk identification is determining which risks are likely to affect the project and documenting the characteristics of each.
Typical Life Cycle ProfilesRisk versus Amount at Stake
Total project life cycleINCREASING
RISK
$
VALUE
TIME
Plan AccomplishPhase 1
ConceivePhase 2Develop
Phase 3Execute
Phase 4Finish
Opportunity & Risk
Amount at Stake
(period when highestrisks are incurred)
(period of highestrisk impact)
Inputs to Risk Identification
• Product description– Specification– SOW– Contract
• Other planning outputs– WBS– OBS– Cost and Schedule estimates
Inputs to Risk Identification
• Historical information– Commercial databases– Corporate memory– Corporate database (lessons learned)– Websites
Inputs to Risk Identification
• Assumptions– Explicit– Implicit
• Critical success factors
PHASE 1: RISK IDENTIFICATIONIdentify all possible risks which may significantly impactThe success of the project -- can do this by:
Cause-and-effect analysis (what could happen é what ensues)
Effect-and-cause analysis (what outcomes to avoid é how they might occur)
Bring in the experts on the program and question them
Brainstorm
Wbs - individual work packages plus combinations thereof
Willoughby templates, sei taxonomy and charellet checklistRisk typically examines possibility of suffering harm or loss; however, Risk Identification is also concerned with opportunities (positive outcomes) and threats (negative outcomes).
TYPES OF RISK
• Business vs. Insurable Risk
• Risk Sources– External Unpredictable– External Predictable– Internal Non-Technical– Technical– Legal
TYPES OF RISK (2)• Knowns
– An item or situation containing no uncertainty• Known Unknowns
– Things which we know exist but do not know how they will affect us. These can be identified and evaluated.
• Unknown Unknowns– Those risks that cannot be identified and
evaluated (unexpected needs). These can be handled via contingency allowances.
TYPES OF RISK (3)• Risks can also be classified as:
– External Unpredictable– External Predictable– Internal Non-Technical– Technical– Legal
EXTERNAL UNPREDICTABLE • Regulatory• Natural Hazards• Postulated Events• Unexpected Side Effects of the Project• Failure to Complete Project Due to
Uncontrollable External Events
EXTERNAL PREDICTABLE• Market Risks• Operational• Environmental Impacts• Social Impacts• Currency Risk• Inflation• Taxes
INTERNAL, NON-TECHNICAL
• Management• Schedule• Cost• Cash Flow• Loss of Potential Benefit or Profit
TECHNICAL
• Changes in Technology• Performance Uncertainty• Risks Associated with Project’s
Technology • Design• Sheer Size or Complexity
LEGAL• Licensing• Patent Rights• Contractual Difficulties• Outsider Suits• Insider Suits• Force Majeure (PMI’s Word)
OTHER RISK ID SOURCES• Overly Aggressive Cost Estimates• Overly Aggressive Duration Estimates• Staffing Plan - Personnel With Special
Skills• Procurement Management Plan• Historical Project Files & Project Team
Knowledge• Commercial Databases
KEEP IN MIND
• How can you assess risks?– Break things down into individual elements and
determine their relationships• What risks should you assess?
– All of them– Concentrate on those with greatest impact and
most likely probability of occurrence
RISK FACTORSALL PROJECT RISKS ARE CHARACTERIZED BY THE FOLLOWING
THREE RISK FACTORS
RISK EVENT: PRECISELY WHAT MIGHT HAPPEN TO THE DETRIMENT OF THE PROJECT
Write it as an “If - Then” Statement
RISK PROBABILITY: HOW LIKELY THE EVENT IS TO OCCUR
AMOUNT AT STAKE: THE SEVERITY OF THE CONSEQUENCES
WITH THIS DATA, THE RISK EVENT STATUS ("CRITERION VALUE" ORRANKING) OF A GIVEN RISK EVENT CAN BE DETERMINED BY:
RISK EVENT STATUS = RISK PROBABILITY X AMOUNT AT STAKE
RISK EVENT vs. RISK SYMPTOM
RISK EVENT ARE DISCRETE OCCURRENCES
RISK SYMPTOM Þ TRIGGERS
THESE ARE INDIRECT MANIFESTATIONS OF ACTUAL RISK EVENTS
EXAMPLES OF RISK SYMPTOMS:
POOR MORALE = EARLY WARNING SIGN OF SCHEDULE DELAY
EARLY PROJECT COST OVERRUN = POTENTIAL POOR PROJECT OVERALL ESTIMATING
Risk IdentificationTools and Techniques
• Checklists– Project Healthcheck
• Flowcharting– Cause & Effect (fishbone or Ishikawa charts
• What could happen What ensues– Effect & Cause
• Outcomes to avoid How they occur– System or Process flowcharts
Risk IdentificationTools and Techniques
• Interviewing• Brainstorming