Interview Questions for PM

7/28/2019 Interview Questions for PM

1/18

1. How will you define a project?A project is a set of task/activities undertaken to create a product, services or results. Theseare temporary, in the sense that they are not routine work like production activity but mostoften one time set of activities undertaken.

2. Provide some examples.

A project for a product will result in a complete product or part of a product. An example wouldbe the creation of the Microsoft Surprise tablet that used a liquid magnesium depositionprocess to create the enclosure. The process developed in the project will be used forsubsequent production of the tablet. Examples could include development of a new product orprocess (as in the example), constructing a road or a bridge (infrastructure in general),developing a computer/information system, etc.

3. What is your view of Project Management?Project management involves applying the knowledge & skills of the project team membersincluding the project manager, application of tools and techniques available to ensure thedefined tasks are completed properly. Proper completion means implies achievement of endresults within given cost and time constraints. It usually means balancing of the constraints ofscope, budget, schedule, quality, risks and resources.

4. Are there distinct kinds of activities in a project?Most often any project goes through some easily identifiable set of activities during its lifetime.Some typical activities can be identified as related initiating a project. Planning set of activitiesare required to plan the activities to be undertaken to achieve the defined goals. Executinggroup of activities help getting the project done. A related set of activities are required tomonitor and correct the course of actions to keep the project on the planned course chartedfor it. Final set of activities are related to the systematic closure of the project. Most importantof which is, of course, to formally record what has been learnt during the execution of theproject. When documented, this set of documents, related forms to be used, the wayestimates are to be made, database of estimates of similar projects etc. are often referred toas Organizational process assets.

5. What do you think is the difference between projects, programs and a portfolio?Projects are undertaken for a specific or a set of related purposes. A program is a set ofprojects managed in a coordinated manner to achieve different parts of an overall goal. Forexample the NASA lunar landing program had the development of the command module andthe lunar landing modules as separate projects. A portfolio is a collection of projects,programs and even other portfolios that help an organization achieve some common highlevel business purpose.

6. Who is a stakeholder?Any person, organization or an entity whose interest is affected, positively or negatively,because of the project. The influence of stakeholders is an important issue to take intoaccount in any planning and subsequently during execution of it as well.

7. What are organizational influences?Every organization has a certain way of doing things, collective wisdom about how things canbest be done, etc. and these influences the planning and execution processes. Theseinfluences need to be taken into account when estimating, planning for activities related toprojects. These are often mentioned as organizational environmental factors.

8. Can you explain project life cycle?A project has distinct phases when the range of activities required to carry out the projectwork differ. There is a distinct start phase, followed by an organizing and preparing phase.Carrying out is the actual execution part of the project. Closing phase makes sure thetemporary activities related to the project are closed systematically. The points in time whenthe phase changes happen are named variously as phase gate, exits, milestones or killpoints. If a project is to be closed, it is decided at these stages based on the performance or if

the need of the project has disappeared.


2/18

9.What to you understand by a project charter?This is a document where it all begins. Project authorization is done on this document and aproject would be initiated with the top level requirements listed in this document. Initialrequirements as seen by stakeholders and the outcomes of the project also are listed in it.

10. What do you understand by plan baselines?

Baselines are the final version of all plans before the project execution starts. Projectbaselines are the starting versions of all related plans of a project, be it the time schedule, thequality plan, the communication plan or whatever. This acts as the reference against whichproject performance is measured.

11. What qualifications are required to be an effective project manager?Besides being a good professional manager, the PM needs to have additional personal skillsfor being effective. It is not only essential for him to have project management skills but beproficient in them. Attitude, core personality characteristics and leadership qualities areneeded. Team management and leadership skills that help the team reach commonobjectives and goals are required.

12. What are processes and process groups?

A process is a defined way of doing things. Not only does the process define the actions to betaken but also in what sequence they are to be carried out. Process groups are a set ofprocesses that are applicable to various stages of a project. For example, initiating processgroup, planning process group, etc. Each of the processes has a defined set of inputs andproduce defined outputs by applying a set of tools and techniques on the input.

13. What are the knowledge areas relevant to doing a project?Scope management, time and cost management knowledge areas are quite obvious. Samegoes for quality management too. To complete a project in all its aspects one needs to beaware of the project integration knowledge area. Communications is an essential issue so isthe communication management knowledge. Procurement and risk management are two vitalsupport areas. Since people get things done Human resources management is also anequally important area.

14. What is RAID as it related to project management?RAID stand for risks, assumptions, issues and dependencies. These are vital items that a PMshould always be aware of. There are always risks about actions and a PM must take leastrisk actions. Unless assumptions about any estimates or actions are clear, these can gowrong. Issues and dependencies also limit the choices of actions often.

15. What are the important processes for project integration management?It starts with a project charter development. Project management plan development is anotherimportant activity. Direct and manage project execution and monitor and control are plans thatare to be followed all through the project. Closing of the project (or the current phase) is thefinal set of activities for integration management. Since changes are often unavoidable anintegrated change management plan must be developed to guide all changes systematically.

16. What is a SOW?SOW or the statement of work is a detailed description of the outcomes of the project in termsof what products, services or results are expected from the project. Most detailed SOW areusually given by the customer if he is the one requesting the project.

17. What does Scope management involve?Typically this process involves collecting requirements, defining scope, creating WBS,verifying scope and controlling the scope. The project scope statement, WBS and WBSdictionary defines the scope baseline. Controlling the scope process must minimize scopecreep.

18. How should changes controlled?

Through the integrated change control process. Requested changes will have to be reviewed


3/18

by a change control board. Only the approved changes shall be included in the documentchanges guiding project execution.

19. What is Work Breakdown Structure (WBD) and how does it affect the workestimates of tasks/activities?Work breakdown structure defines the work activities required for the project and the sub

activities of each of the work requirement. The breakdown goes down to levels where all thework required is clearly understood. Work need not be broken down further than that. Workbreakdown dictionary includes additional details that help define the tasks. Time and effortestimates can be accurate when everything about the work and dependencies are known.

20. How do you define a milestone?Milestone is a point in project schedule when some objective, a part of a result or a part of theplanned services planned are achieved.

21. What are some techniques used for defining scope?Product breakdown, requirements analysis, systems engineering, systems analysis, valueengineering, value analysis and alternatives analysis. Alternatives analysis can be helped bybrain storming, lateral thinking and pair-wise comparisons, etc.

22. How do project scheduling help achieve project execution?When the activity effort and resource estimates are known getting the work done depends onhow the tasks are sequenced. Dependencies with other activities have to be clearly known.The basic sequence is determined by what activities should be carried out first and whatshould follow. Unconnected tasks/activities can be sequenced in parallel to reduce projecttime. Most optimized sequencing would give you the best possible time needed given theresources allocation is ideal and there are no constraints there. Scheduling is done fromactivities list prepared after WBS has been finalized.

23. How is the activity time estimates done?Parametric estimates, three point estimates and analogous estimates are the techniquesused for estimating activity time estimates.

24. How do you estimate in the three point estimating method?One optimistic estimate, a pessimistic estimate and one most likey estimate is consideredfor an activity. (Op estimate+6 X most likely+ pess. Estimate) is calculated and divided by 6.This result then may be further iterated. This is the estimate to be used.

25. How in the project time schedule represented most often?Activity scheduling network diagram is the most common form of representation for theproject time schedule. This is often accompanied by milestone chart, and bar charts.

26. What is a critical path in schedule network diagram?When activity scheduling is done there will be activities whose start time and/or end times arenot critical. It may be possible, due to dependencies, to start a task later than the date on the

schedule, similarly an activity could be completed later as there are no other activity waitingfor its completion. These time pads are called floats. There is always a path from start tofinish, which does not have any floats. Not only all the activities in the path must be carriedout in planned time, but also there cannot be any delays. Any delays will directly reflect onproject completion time. This chain of activities or the path from start to finish is known as thecritical path.

27. What are the ways a project time schedule can be compressed?Crashing and fast tracking are two methods of accelerating a project time schedule. Crashingmethod tries to optimize the schedule making use of the time floats available while keepingcosts under control. Fast tracking is to make selected activities faster by applying additionalresources if necessary. It may mean paying team members overtime, paying for the time of aconsultant, etc.


4/18

28. What is effort variance?It is the difference in estimated effort and the effort actually needed. Work performance ismonitored periodically to find if there is any variance in efforts so that corrective actions couldbe taken.

29. What is EVM, earned value management?

At every monitoring point the planned value (PV), earned value (EV) and actual cost (AC) aremonitored. PMB, performance measurement baseline is the aggregation of all plannedvalues. Variances from baselines are determined and Schedule variance (SV) and costvariance (CV) are calculated. If earned value is equal to the planned value then the project isachieving what it is supposed to. If there is schedule or cost variance is significant,appropriate action needs to be taken to correct the slips. Estimate at completion (EAC) isestimated and compared with budget at completion. In case there is a slip, the costconsequences will be known.

30. What does A processes ensure?According to a dictionary, A is a way of systematic monitoring and evaluation of aspects of aproject, service or facility to ensure that standards of quality are met. Thus, whatever ensuresproducts meet customer expectations are part of A efforts. Ensuring quality of everything that

goes into making a product and that no mistakes are made while making it ensures quality.

31. What is quality control?QC procedures include inspections to ensure quality requirements are being met

32. Whats the need for process improvement plans?A cornerstone of A is that processes are continuously improved. Process improvements helpmistakes in processes and thus help improve quality.

33. What is the tool used for arriving at improvements in processes?GM, or the goals, questions and metrics is the method used. Goals are set, questions areasked about what improvements can be made and metrics (measurements that tell ussomething about the process) are carried out

34. What are the important aspects of a HR plan for the project team?Acquiring the team, forming the team, assigning roles & responsibilities, appraisal policies,rewards & recognition are the areas where clear cut policies should exist and be well knownto team members.

35. Why is the performance management process in the HR management planimportant?People like to be recognized for their contributions. The project management team needs torecognize talent and reward and recognize the performers. The assessment should not onlybe fair but seen to be fair.

36.How do you determine the communication needs of stakeholders?

The communication needs of stakeholders depend on their position in the power/influencegrid, power/interest grid as also impact/influence grid. Salience modeling is another techniqueto determine who is the most effective for the interest of the project. This is a qualitativeassessment and will determine the kind and details of communications they need on theproject.

37. What are the types of risks you may encounter in a project?These could be categorized as technical, external, internal/organizational, etc. Depending onthe type of projects other categories may have to be considered.

38 What is a risk register?This is a register/document that contains all the identified risks of a project. List of actions ofpotential actions are also included.


5/18

39. Are there any positive aspects of the risk identification process?The risk identification process may be able to come up with some opportunities too.

40. What is risk impact and probability?When assessing risks the project team also tries to determine the probability of the risk

actually happening and the impact it will have on the project when it does.

41. What is the role of Isikawa/ Fishbone diagrams in determining root causes of risks?This is a graphical method of determining cause and effect relationships leading to a specificrisk. One could then determine mitigation actions for that risk.

42.What do you understand of Pareto (80/20) principle/analysis?This is a statistical analysis method that helps decide priorities between several actions to betaken. The basis is that there are about 20% action which when executed gets you 80% of theresults. In QA this is used to identify the 20% of causes that create 80% of the problems.

43. What are fixed type contracts in procurement processes?The seller must supply the contracted items at a fixed price determined at the time of contract.

44. What are time & material contracts?In this type of contracts the contractor gets paid for time used on the project and expenses formaterial used and other agreed upon expenses.45 What is the primary purpose of procurement management plan?To determine what exactly is to be procured, ensure they are procured at the best price and ismade available to the project team at the right time.

46.What does procurement administrator involve?To keep monitoring and ensure that all open procurement contracts are progressing asexpected.

47. Why does a PM need to be very proactive?

A PM needs to be able to see any signs of a deviation in time and/or cost to project progressas early as possible. This gives the team as much reaction time as possible to correct thesituation or to minimize the impact.

48.Forming a team, developing the team and improving knowledge are directresponsibilities of the project manager, do you agree?It is the team that executes the project. Thus ensuring you has right people is essential.Developing the team is important as whatever gaps are there need to be bridged. Improvingself and the team knowledge is equivalent to the continuous improvement of A process andshould impact the quality of the project outcome.

49. Do you think professionalism and integrity are essential qualities of a PM?PM is charged with managing all aspects of the project. Unless he is a professional and has

integrity there are many things that can go wrong. Not so truthful progress reporting will easilyboomerang on the PM but the organization will have a delayed or a failed project.

50. Explain the team forming process?After the members are collected as a project team there is a turmoil before everything settlesdown. This is known as the forming-storming-norming-performing process. The team peoplego through a storming of relationships when before settling to the role assignment. Over timethey then get used to the structure of the relationship, that is the norming phase. It is onlyafter everybody has settled into their new roles that the team starts performing.

What are the necessary steps to successful project management?

What is your understanding and experience of the project manager role?


6/18

Include aspects such as setting clear project objectives,building the project requirements, managing project cost,time, quality and scope. Refer in you answer to thespecific steps you took to successfully manage and close arecent project.

What are the priorities to consider when planning a

project in your field?

Refer again to a recent project and outline your most

important considerations in the planning stage. Time,scope and budget are the usual constraints to consider,but how did you allocate and integrate all the necessaryinputs to meet the project objectives and plan for risk?The more in-detail the planning the greater the chancesof project success. Highlight how each activity that is expected during the courseof the project gets due attention.

In your experience what are the warning signs that your project may

fail?

All project managers have had this experience. How did you pick up the warningsignal (your monitoring and control processes and systems) and how did youmanage it (corrective actions and implementing changes)?Warning signals can include constantly changing specifications, lack of interestfrom executive management, incompetence on the project team, changes in thebusiness environment and inadequate resources.A project manager has to understand the uniqueness of each project and keep

checking the projects contours against what they have learned on previousprojects.

What are the most important considerations when recruiting and buildingan effective project team?

Project management is all about team work. Your ability to effectively manage ateam is essential.

When answering this project manager interview question highlight how you notonly consider the necessary experience and technical skills but look at critical

roles and responsibilities and the dynamics between team members. How will theperson fit in with organizational beliefs and goals? How will the person relate to

the stakeholder group? A clear understanding of what is expected of each projectmember is essential.

Describe some innovative ways you have improved effectiveness onrecent projects.

Solutions and improvements need to be found through the generation of ideasand alternatives in a creative, out-of the-box manner. Show your willingness to

be creative and inventive with both the initiation of a new project and thecomponents of an existing project.

What did you learn from your last project?


7/18

In your project manager interview focus on technical skills and knowledge as wellas soft skills such as people and client management. Perhaps you learnedsomething valuable about yourself as a project manager such as your willingnessto adapt to a changing environment or your ability to mentor a team member.Highlight how you are able to learn from mistakes. What would you do differentlyknowing what you now know about the project?

What do you consider to be the most important project manager skills interms of people management?

Leadership skills are key to successful project management. What are themethods you have used to guide and influence the project team towards reachingobjectives. Good leaders make team members feel they have a real stake in thesuccessful completion of the project. How do you structure your team, introduceand maintain good intra-team communication and improve team motivation andsatisfaction?

Costing

Project Cost Management is a group of processes required to ensure the project is completed withinthe approved budget.ProcessesThere are following processes which are part of Project Cost Management.Estimate CostsDetermine BudgetControl Costs

Few Important pointsYou can expect five to ten questions related to Earned Value Management.Planned Value (PV) refers to what the project should be worth at this point in the schedule. It is alsoreferred as BCWS (Budgeted Cost of Work Scheduled).Earned Value (EV) is the physical work completed to date and the authorized budget for that. It is alsoreferred as BCWP (Budgeted Cost of Work Performed).Actual Cost (AC) is the actual amount of money spent so far. It is also referred as ACWP (Actual Costof Work Performed).Estimate At Completion (EAC) refers to the estimated total cost of the project at completion.

CPI refers to Cost Performance Index. It is defined asCPI = EV/AC

If CPI is less than 1, this means that the project is over budget.BAC refers to Budget at Completion. It is related to EAC.

EAC = BAC/CPI
https://play.google.com/store/apps/details?id=com.bricksbay.exam.pmpprepareFree


8/18

ETC refers to Estimate to Completion. It is defined asETC = EAC - AC

CV refers to Cost Variance. It is defined asCV = EV - AC

SV refers to Schedule Variance. It is defined as

SV = EV - PV

Negative cost or schedule variance means that project is behind in cost or schedule.SPI refers to Schedule Performance Index. It is defined asSPI = EV/PV

VAC refers to Variance At Completion. It is defined asVAC = BAC - EAC

1. Estimate Costs

2. Determine Budget

3. Control Costs


9/18

These questions are randomly taken from certchamp PMP exam kit

Question - 9

Your company has been hired to configure software in 500 computers. All computers need equal

time to configure. The contract for the project is set at a fixed cost, and the incentive based on

how fast the project work is going to be completed. Management has requested that you study

the work method to determine a faster, less costly, and a better method to complete the project.

This scenario is an example of _________.

1.Time Constraint

2.Schedule Constraint

3.Value Analysis

4.Learning Curve

Correct Answers are : 3

Explanation :

Value Analysis is a systematic approach to find less costly ways to complete the same work. A and B

are incorrect, as this situation does not describe a specific time or cost constraint. D is incorrect: the

learning curve happens as the project team completes the work.

Question - 12

You have just started a project. The project team member reported that 20 percent of the project

is done. You agree with their completion status, but do not change any of the progress in your

report to the customer. This is an example of which one of the following?

1.0/100 Rule

2.50/50 Rule

3.Percent Complete Rule

4.20/20 rule


Explanation :

The 0/100 Rule allows for zero percent credit on an activity until it is 100 percent complete. B is wrong

(50/50 rule): 50 percent completion when the work begins and 50 percent when the work is completed.

Question - 19


10/18

You have two possible projects to manage, but you can only choose one. Project MKTG is worth

$23,000, while Project SALESPTR is worth $25,000. Management elects to choose Project

SALESPTR. Which one of the following is the opportunity cost of this choice?

1.$23,000

2.$27,000

3.$50,000

4.$4000


Explanation :

The opportunity cost is the amount of the project that was not chosen.

Question - 39

Your project has a budget of $240,000 and is expect to last for 1 year, with the work and budget

spread evenly across all months. The project is now in the fourth month, the work is on

schedule, but you have already spent $120,000 of the project budget. What is your COSTVariance in this case?

1.-$40,000

2.$40,000

3.$240,000

4.$56,000


Explanation :

A is the correct answer. The project is now in the fourth month, the work is on schedule means ,

percentage of work completed = (4/12)*100

Cost Variance = Earn Value - Actual Cost Earn Value = total cost * percentage of work actually

completed = $240,000 * (4/12)=$80,000 CV = $80,000 - $120,000 = -$40,000

POV: The Project PyramidProject management has become key to companies that achieve long-term customer satisfaction, increasedprofit, employee morale, and quality improvement. Many companies treat project management as a person,not as a process. They usually assign their best troubleshooter or lead technician as project manager, sincethat person can pull a project out of the fire. This strategy relies on the individual's ability to be a reactiveproblem-solver and doesn't foster proactive planning and up-front communication. A project manager's keyrole is to keep primary elements in balance, which does not exactly mean perfection.

A project can be viewed as a pyramid with five interrelated elements that must be kept in balance. The projectmanager's role is somewhat like a newspaper reporter's job constantly asking questions of key individualsto find answers to make the project viable. Project managers must also be aware that although they may thinktheir views are important, the most important opinions belong to the client.

The first element on the project pyramid is the scope of the deliverable whether it is a videoconferenceroom, a home theater, a boardroom, or an auditorium. The questions to be asked are, What are wedelivering? and What are we not delivering?

The second element is time. Two main issues arise here: The first is, How will this deliverable be designed,installed, commissioned, trained, etc.? It is an activity-based question, and the project manager needs to relyon the company's functional managers and process owners for those answers. The second question is, Howlong will it take to deliver this project? The duration is often determined by the cl ient.

The third element is the cost associated with the resources and materials needed to accomplish the project'sdeliverables. First ask, Who is needed to fulfill this project? That determines the skill set and competencerequired. Secondly, What materials are required (plasmas, cabling, microphones, racks, control systems,

etc.)? The third question is, How much? pertaining to both the amount of man-hours needed, as well as thequantity of materials required. In my experience with the AV marketplace, the effort actually required to fulfill aproject is often underestimated, or collapsed with the duration (time) element.


11/18

The fourth element, quality, makes up the volume of the pyramid, and is dependent upon, and impacted by,all previous variables: scope, time, and cost. How well do the deliverables have to function? What are theperformance specifications for reliability, maintainability, availability, and ease of use? How good are theprocesses used to design, install, test, train, and commission the products and services to be delivered? Arethere standards, procedures, or guidelines in place that are followed, or do individuals do their assigned workin their own way? How good are our human resources? Have they been well trained, and are they rewardedfor performing in compliance with established standards? How high quality are the materials being used?

Does each individual piece meet the desired quality specifications, or will the ultimate deliverable sufferbecause components and functions are a mix-match of capabilities?

The fifth element is risk, which makes up the foundation of the project. Ask, How sure are we regarding theoutcome of this particular project? The more similar a project is to previous projects, the more predictable theoutcome should be, and therefore, the project ought to have a sense of stability. The more unique a givenproject is, the less predictable the outcome and the weaker the foundation. In order to make the project morestable, the project manager will typically have to revise one of the other elements increase cost, increasetime, decrease quality, or decrease scope.

A project manager must have flexibility in at least one or a combination of scope, time, or cost. This flexibility isdetermined by prioritizing the three elements. In the AV marketplace, scope and time are often fixed orconstrained by the client, as is the ultimate price. But price does not equal cost. The price may be fixed at thebeginning of the project by the sales organization, but the project manager must have flexibility in the costs ofthe project, especially with regard to the amount of effort required by project team resources. The more uniquethe project, the wider the variance threshold required by the project manager

Project management methodologies are the various ways in which

projects are initiated, planned, and executed unto completion. For different

industries and different types of projects, there are specific methodologies

that can be used. In the sections below, these project management

methodologies are discussed in greater detail.

Project Management Methodologies, Processes, and

Frameworks: Clarification

The word methodologies is sometimes confused with other terms like

processes and frameworks. However, there are important distinctions

between the three. A framework is a state of mind for approaching a project,

whereas a methodology is a prescriptive form of approaching a project. A

process is a specific function in which the stages of a methodology are carried

out. It is generally agreed that within the management hierarchical structure,

the frameworks precede the methodologies, and the methodologies precede

above the processes.

Even with this clarification of terminology, the differences betweenproject

management methodologies, processes, and frameworks continue to undergo

constant discussion. The intent of this article, however, is not to argue the

categorization of these terms, but rather, it is to provide a basic

understanding of what practices are available in project management. Below

is a list of common methodologies, processes, and frameworks. Because

project management methodologies have been developed for literally

thousands of years, this list is in no way inclusive.

Project Management Methodologies, Processes, andFrameworks: Basic List


12/18

Traditional project management is a step-by-step approach througheach of the projects five stages initiation, planning, execution,monitoring, and completion. Each stage is broken down and begins onlywhen the previous stage has been completed (though it is not uncommonfor traditional projects to cycle back to a previous stage). Thismethodology is most common in construction projects where the work isvery linear and rarely subject to significant change.

The Critical Path Method (CPM) associates each task with a timeduration then determines the resources necessary to carry out the projectwithin that time. As one project management professional puts it, Thecritical path is simply all the tasks that determine the end date in yourproject schedule. If one of those tasks is late by one day, then yourproject end date will be extended by one day. In other words, the criticalpath method aligns all tasks to bring about the greatest possible time-efficiency.

Critical Chain Project Management (CCPM) is in contrast to the criticalpath method in the way that it focuses on resources rather than time

constraints. The critical chain is essentially the sequence of tasks that theteam members are able to efficiently handle. When a project has limitedresources and its time schedules are less strict, CCPM is used to distributework in a flexible, collaborative way.

Event Chain Methodology (ECM) is used for projects with tasks thatinitiate chains of events. Each task, upon completion, causes a new eventin which a new task must be worked on. Because these events can beeither anticipated or unanticipated, risky or safe, they must be managedvery carefully in order to achieve the desired results. ECM is very differentfrom traditional project management where each stage of the project ispredetermined and executed in a linear fashion.

Below are a few otherproject management methodologies, processes, and

frameworks more specific to the IT industry. As these tend to be much more

complicated, their names are only listed: Agile Six Sigma Scrum XP (Extreme Programming) Crystal FDD (Feature Driven Development) DSDM (Dynamic Systems Development) Adaptive Software Development RUP (Rational Unified Process) PRINCE2

Once again, for clarification, the exact definitions for these project

management practices are not always agreed upon among project managers.

For example, some may insist that a methodology is a process while others

insist that a process is a framework. Some may even use the three

synonymously. However, the list is intended only to demonstrate what most

project managers consider to be the best practices associated with project

management methodologies.


13/18

Risk Management

This post aims to explain what a risk is and describes the risk

management process, so that at the end of this article you will have

everything you need to successfully find, manage, and report on risks

throughout the duration of your project or program.

What is a Risk?

There is no one single definition of a risk. How risk is defined depends on

the context under consideration. For example, financial risk is often

described as the volatility of returns, both above and below the expected

rate of return. In the context of projects and programs, we can define risk

as being the likelihood of a specific event occurring which has a negative

impact on our project or program.

Often when we speak of risk, we really mean the risk severity, which is

defined as the product of the probability that the risk will occur and the

impact the risk will have on our program should it materialise:

Risk Severity = (probability of risk occurring) x (impact of risk)

I typically score both Risk Probability and Risk Impact using a scale of 1 to

5. A probability score of 1 for a given risk means the risk has a low

probability of occurring, whereas a probability score of 5 means the risk

has a very high probability of occurring. I use a similar 1 to 5 scoring for

Risk Impact, with one being low impact on the program if the risk

materialises, and 5 being a very high impact should the risk materialise.

How we manage a risk will depend very much on the combination of Risk

Impact and Risk Probability. For example, although a risk may have a very

high probability of occurring, we may not devote too much time to

managing it if the impact on our program is negligible. If the impact of a

risk occurring was very large, such that it resulted in the termination of

our program mid execution, we would obviously be prepared to devote a

lot of time to managing it even if the probability of it materialising was

low.


14/18

If we always measure Risk Impact and Risk Probability using our scale of 1

to 5 then we have a standard range of 1 to 25 for our Risk Severity.

Having a standard range for Risk Severity is important as it allows using to

compare risks against each other and allows us to understand the total

level of risk facing the program at any given time.

Benefits of Risk Management

There are a number of benefits to having a solid risk management

process, including:

Clear ownership and accountability for all risks

Creation of an environment where risks and be accepted by the

business on an informed basis

An increased likelihood that the program will be a success, along

with the increased likelihood that the objectives of the organisation will

be metThe Risk Management Process

The risk management process I use looks like this:
http://www.expertprogrammanagement.com/wp-content/uploads/2009/06/the-risk-process2.jpg


15/18

One we have determined our Risk Strategy, which simply means we have

decided how we are going to manage risk throughout the duration of the

program, we enter a 6-step loop as follows:

Identify Risk: here we must identify what is the risk, and what is at

risk. It could be timescales, the realisation of a benefit, or the delivery

of a capability.

Allocate Ownership: As the program manager, it is ultimately

your responsibility to manage the risks within the program, however,

each risk should be given an owner who is best positioned to perform

mitigating actions on the risk and monitor the risk.

Evaluate Risk: this simply refers to evaluating and assigning therisk with an impact and probability score.

Plan Mitigations:In a general sense, every risk has a standard set

of mitigations which can be applied to it. These are commonly referred

to as The 4 Ts:

Transfer: can the risk be transferred to another party, for

example, could an insurance policy be taken out.

Tolerate: this is frequently used for risks with very low

impact, and is effectively the do nothing option. Tolerate effectivelymeans the risk is monitored but the program proceeds without

proactive action being taken to address the risk.

Terminate: this refers to adjusting the program so the risk is

no longer applicable to the program, for example, a project may be

removed entirely from the program so the risk can never now

materialise.

Treat: this is where concrete actions are taken to reduce the

probability of the risk materialising or impact of the risk should itmaterialise.

Implement Actions: here concrete actions are given to the risk

owner to ensure they are carried out

Monitor and Control: all risks and actions which have been

created need to be reviewed regularly, so the risk impact and

probability can be updated following any actions which have been

performed to treat them.

This 6-step loop should be a continuous process throughout the program.Most program management textbooks will tell you that the frequency of


16/18

the risk management process should vary with the complexity of the

program, with more complex programs requiring a greater frequency,

however, I would argue that most programs should carry out this process

as frequently as practical, as risk management is one of the most

important things to get right on any program.

Embedding Risk Management

It is obviously important that the risk management process described

above be repeated continually throughout the duration of the program,

but it is equally important that the risk management process be fully

embedded into all the projects running within the program.

How frequently the risk management cycle is repeated will depend on the

process being followed by each sub-project, and the Risk Strategy for each

project within the program should be agreed when initiating each project.

As an example, let us consider an R&D team within the program using an

Agile software development life cycle (SDLC). Within the R&D team there

may be a number of sprints. The simple way to embed the 6-step risk

process described above into this agile life cycle is simply to complete the

risk management loop once for each sprint:

No matter which team a person is part of, or which project they are

working within, every single person working within the program should

have the opportunity at any time to raise risks to the program. The way I

like to do this is by creating a form on a Wiki that allows risks to besubmitted to the program. Then whenever I perform an Info Sharing
http://www.expertprogrammanagement.com/wp-content/uploads/2009/06/agile-risks1.jpg


17/18

session or write my weekly program team communications I actively

encourage the team members to submit risks. If you do this well then you

will have a lot of emails to sift through, but this is preferable to missing an

important risk. The other benefit of this approach is that it flattens the

organisation, allowing everyone to communicate directly with the

program.

Highlighting Risks to Stakeholders

Now that we understand risks and the risk management process, we are

ready to use a Risk Map to highlight key risks to stakeholders:

To learn how to create a Risk Map, read the article on Risk Mapping. We

are also ready to track the total risk being faced by the program over time

using a Risk Burn Down Graph:
http://www.expertprogrammanagement.com/2009/06/visualise-risks-using-a-risk-map/http://www.expertprogrammanagement.com/wp-content/uploads/2009/06/riskburndownexample2.jpghttp://www.expertprogrammanagement.com/wp-content/uploads/2009/06/Program-Risk-Map.jpghttp://www.expertprogrammanagement.com/2009/06/visualise-risks-using-a-risk-map/


18/18

To learn how to create a Risk Burn Down Graph, read the article

on Charting Total Program Risk.Key Success Factors in Risk Management

In my opinion, the three key factors needed to successfully manage risk

are:

Fully embed the risk management process into the program allow

everyone the opportunity to engage with the risk management process

Each risk should have an owner, with clearly defined actions against

the risk.

Clear communication with steering group, so that risks can be

accepted by the business on an informed basis.
http://www.expertprogrammanagement.com/2009/06/charting-total-program-risk/http://www.expertprogrammanagement.com/2009/06/charting-total-program-risk/

Interview Questions for PM

Documents

Transcript of Interview Questions for PM