Project Management Certificate Program - ral.ucar.edu · Certificate Program 1 Risk Management...
Transcript of Project Management Certificate Program - ral.ucar.edu · Certificate Program 1 Risk Management...
Project Management
Certificate Program
1
Risk Management
Terry Skaggs ( Denver class)
719-783-0880
Lee Varra-Nelson (Fort Collins class)
970-407-9744 or 970-215-4949
Project Management
Certificate Program
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Introduction
In this Module we will cover:
• Overview of PMI processes
• Overview of PMI knowledge areas
• Risk management
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INITIATING PLANNING
CONTROLLING
CLOSING
EXECUTING
Project Management Process Areas
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PMI Process Groups to Knowledge Areas
Map (PMBOK page 70)Knowledge Area Initiating Planning Execution Controlling Closing
Integration 4.1, 4.2 4.3 4.4 4.5, 4.6 4.7
Scope 5.1, 5.2, 5.3 5.4, 5.5
Time 6.1, 6.2, 6.3, 6.4,
6.5
6.6
Cost 7.1, 7.2 7.3
Quality 8.1 8.2 8.3
HR 9.1 9.2, 9.3 9.4
Communications 10.1 10.2 10.3, 10.4
Risk11.1, 11.2,
11.3, 11.4,
11.5
11.6
Procurement 12.1, 12.2 12.3, 12.4 12.5 12.6
* Notice Risk Management processes mostly all in planning process group
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Risk Happens. . .
• We all take risks on a daily bases. . .
• Risk is in every thing we do, every action we take and every action we don’t take.
• Risks comes from different sources
• Internal to the project or external to the project
• May be known or unknown (planned/unplanned)
• Not all are bad (opportunities vs threats). . .
• Risk types:
• Business - risk of gain or loss
• Pure (insurable) risk - loss only (fire, theft, injury)
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.
Risk Management
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Risk management is the
systematic process of identifying,
analyzing and responding to
project risk.
Risk Management
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11.1 Risk Management Planning
11.2 Risk Identification
11.3 Qualitative Risk Analysis
11.4 Quantitative Risk Analysis
11.5 Risk Response Planning
11.6 Risk Monitoring and Control
Risk Management Processes
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...is the process of deciding how to
approach, plan, and execute the
risk management activities for a
project.
11.1 Risk Management Planning
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Real World - Think book ends - Planning & Monitoring
[PwwwM] on the ends and www = (see below) and think
www = world wide web for great sources of research of
potential risks and lessons learned.
Then Think
1) Which risks apply to our project? (identification)
2) Why do we care? (analysis - qualitative & quantitative)
3) What can we do about it? (response planning)
Risk Management Processes
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Inputs
• Enterprise Environmental Factors
• Organizational Process Assessment
• Project Scope Statement
• Project Management Plan
Risk Management Planning
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Tools & Techniques
• Planning Meetings and Analysis
Outputs
• Risk Management Plan
Risk Management Planning
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• Methodology
• Roles & responsibilities
• Budgeting
• Timing
• Risk categories
• Definition of probability &
impact
• Probability & impact matrix
• Revised stakeholders’
tolerances
• Reporting formats
• Tracking
Elements of a Risk Management Plan
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Methodology
Defines approach, tools and data sources that may be used to perform risk management on the project.
Example:
The project team will meet weekly to conduct a risk meeting. This meeting will determine new risks, analyze...
Risk Management Planning
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Roles and Responsibilities
Defines the lead, support and risk management
team membership for each type of activity in the
risk management plan, assigns people to these
roles, and clarifies their responsibilities.
Example:
The project manager will chair each risk meeting.
Each core team member is responsible for...
Risk Management Planning
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Budgeting
Assigns resources and estimates costs needed for
risk management for inclusion in the project cost
baseline.
Example:
The team has allocated 10% of the project budget
or $10,000 toward the risk...
Risk Management Planning
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Timing
Defines when and how often the risk management process will be performed throughout the project life cycle, and establishes risk management activities to be included in the project schedule.
Example:
The project team will meet weekly to conduct a risk meeting. In the middle of the project, the team will…
Risk Management Planning
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Risk Categories
Provides a structure that ensures a comprehensive
process of systematically identifying risk to a
consistent level of detail and contributes to the
effectiveness and quality of Risk Identification.
Example:
The team shall use the RBS to identify risk
categories and …
Risk Management Planning
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Definition of Risk Probability and Impact
The quality and credibility of the Qualitative Risk
Analysis process requires that different levels of the
risks’ probability and impact be defined.
Example:
The team shall use a High, Medium, Low scale for
both probability and impact.
Risk Management Planning
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Probability & Impact Matrix
Risks are prioritized according to their potential
implications for meeting the project’s objectives.
Example: High B
Med C
Low A
Low Med High
Risk Management Planning
(also see sample tables 5.1 Heldman book, p184 and p252 PMBOK)
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Stakeholder Tolerance
Stakeholders’ tolerances may be revised in the
Risk Management Planning process, as they apply
to the specific project.
Example:
Stakeholder wishes to hold schedule constant and
sacrifice cost if risks occur…
Risk Management Planning
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Reporting FormatsDescribes the content and format of the risk register as well as any other risk reports required. Defines how the outcomes of the risk management process will be documented, analyzed, and communicated.
Basic Example:
RISK DESCRIPTION OWNER RESPONSE BUDGET ETC.
Risk Management Planning
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Tracking
Documents how all facets of risk activities will be
recorded for the benefit of the current project,
future needs, and lessons learned.
Example:
Risk audits will be performed once a month using a
independent survey...
Risk Management Planning
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Risk Management Plan Exercise
• Pick a new project manager
• For each plan element, describe
its use on the class project
• Create a risk management plan
for your project
Methodology Definition of risk probability & impact
Roles & responsibility Probability & impact matrix
Budgeting Revised stakeholders’ tolerances
Timing Reporting format
Risk Categories Tracking
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11.2 Risk Identification
determines which risks might affect the
project and documents their characteristics.
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Risk Identification
INPUTS
• Enterprise Environmental Factors
• Organizational Process Assets
• Project Scope Statement
• Risk Management Plan
• Project Management Plan
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Risk Identification
• Insurance risks (Pure Risk)
a type of risk that has a chance for a
loss.
• Business risks
a chance for profit or loss within a
business venture.
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Risk Category Examples
Risk sources
• External unpredictable
• External predictable
• Internal (non - Technical)
• Technical
• Legal
From Max Wideman
Risk Identification
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External Risk
Cause lies outside the project’s
control, but impacts the project
direction.
Risk Identification
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External Risks
External Unpredictable External Predictable
Government/Regulatory Market Risks
Natural Hazards Operational
Vandalism Environmental Impacts
Sabotage Inflation/Currency changes
Political Unrest Taxation
Etc. Etc.
Risk Identification
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Internal Non-Technical Risk
Events within the control of project management
which present uncertainty that may impact
program/project direction.
• Management
• Schedule
• Cost
• Cash Flow
• Loss of Potential
Risk Identification
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Technical Risk
Risks relating to evaluating/using state-of-the-art
systems/processes/products that may impact
project direction and support.
• Design Risks
• Changes in Technology
• Performance
• Design
• Size & Complexity of the Project
Risk Identification
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Legal Risks
• Licenses/Patent Rights
• Lawsuits
• Contractual failure
• Claims
• Outsider suit
• Insider suit
• Force majeure - uncontrollable event
Risk Identification
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Tools & Techniques
• Documentation Reviews
• Information Gathering Techniques
• Checklists
• Assumptions Analysis
• Diagramming Techniques
Risk Identification
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Information Gathering Techniques
• Brainstorming
• Delphi technique
• Interviewing
• Root Cause analysis
• Strengths, Weaknesses, Opportunities and
Threats analysis (SWOT)
Risk Identification
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Diagramming Techniques
• Cause-and-effect
• Ishikawa or fishbone
• System or process flow charts
• Influence
• force field analysis, relationship, time
order of events
Risk Identification
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Outputs
• Risk Register• List of identified risks
• List of potential responses
• Root cause of risk
• Updated risk categories
• Triggers
• Inputs to other processes
Risk Identification
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Risk Identification &
Trigger Exercise
• Create a list of risks
for the class project.
• Identify at least 8
risks.
• Identify the Triggers
Risk Identification
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… is the process of assessing the
probability and impact of identified risks.
probability impact
likelihood consequence
chance effect
possibility outcome
odds
11.3 Qualitative Risk Analysis
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Risk Management Planning
Risk Monitoring & Control
Qualitative Risk Analysis
Risk Identification
Quantitative Risk Analysis
Risk Response Planning
Often
Seldom,
but sometimes
Qualitative Risk Analysis
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Inputs
• Organizational Process Assets
• Project Scope Statement
• Risk Management Plan
• Risk Register
Qualitative Risk Analysis
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Tools & Techniques
• Risk Probability & Impact Assessment
• Probability & Impact Matrix
• Risk Data Quality Assessment
• Risk Categorization
• Risk Urgency Assessment
Qualitative Risk Analysis
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Outputs• Risk Register (Updates)
• Relative ranking or priority list of project risks
• Risks grouped by categories
• List of risks requiring response in the near-term
• List of risks for additional analysis and response
• Watch lists of low priority risks
• Trends in qualitative risk analysis results
Qualitative Risk Analysis
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QUALITATIVE RISK ANALYSIS ASSESS
PROBABILITY & IMPACT EXERCISE
• Assess the probability of the risk event happening.
• Assess the impact to the project of the event happening.
• Determine what criteria you will use to prioritize
• Prioritize your list
Qualitative Risk Analysis
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…analyzes the effect of those [prioritized] risk events and assigns a numerical rating to those risks. It also presents a quantitative approach to making decisions in the presence of uncertainty.
11.4 Quantitative Risk Analysis
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Inputs• Organizational Process Assets
• Project Scope Statement
• Risk Management Plan
• Risk Register
• Project Management Plan
• Project schedule management plan
• Project cost management plan
Quantitative Risk Analysis
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Tools & Techniques• Data Gathering and Representation Techniques
• Interviewing
• Probability distributions
• Expert judgment
• Quantitative Risk Analysis & Modeling Techniques• Sensitivity Analysis
• Expected monetary value analysis
• Decision tree analysis
• Modeling & simulation
Quantitative Risk Analysis
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Sample Decision Tree Analysis Question is, do we build a new prototype or not?
Quantitative Risk Analysis
Prototypo
Prototype Setup cost = $200,000
No prototype Setup cost = $0
Failure: 35% probability and
$120,000 impact
Failure: 70% probability and
$450,000 impact
Pass: no impact to project
Pass: no impact to project
Prototype .35 x $120,000=$42,000 +$200,000= $242,000
Do not prototype .70 x $450,000 = $315,000 (costs more due to rework)
Page 340 Rita Mulcahy book. Also see
p258 PMBOK for additional example
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Expected Monetary Value
Quantitative Risk Analysis
Buy Acme or
Buy Nadir
Water Pumps
Buy Acme
400 trucks
$500@
5% fail rate
$150 repair cost
$100 maintenance cost
Acme
400x$500=$200,000
Nadir
400x$485=$194,000
Maintain
(0.95)(400)($100)
Fail
(0.05)(400)($150)
Payoff EMV
$38,000
Maintain
(0.85)(400)($100)
Fail
(0.15)(400)($200)
$3,000
$34,000
$12,000
$241,000
$240,000
Buy Nadir
400 trucks
$485@
15% fail rate
$200 repair cost
$100 maintenance cost
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Monte CarloThe Monte Carlo method is a simulation by means of random
numbers. The basic steps are:
1. Assess the range for the variables and determine
the probability distribution.
2. Select a random value for each variable.
3. Run a deterministic analysis.
4. Repeat steps 2 and 3 a number of times to
obtain probability distribution.
Quantitative Risk Analysis
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Outputs
• Risk Register (Updates)
• Probabilistic analysis of the project
• Probability of achieving cost and time
objectives
• Prioritized list of quantifies risks
• Trends in quantitative risk analysis results
Quantitative Risk Analysis
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Quantitative Risk Analysis Exercise
• Assess the amount at stake with the possibility of the
risk event happening for your top 2 risks
Quantitative Risk Analysis
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… is the process of developing options and
determining actions to enhance
opportunities and reduce threats to the
project’s objectives.
11.5 Risk Response Planning
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Inputs
• Risk Management Plan
• Risk Register
Risk Response Planning
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Tools & Techniques
• Strategies for Negative Risks or Threats
• Avoidance
• Transference
• Mitigation
Risk Response Planning
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Avoidance
I do not accept this option because of the potentially unfavorable results.
• Examples:
• Screening out contractors during source
selections.
• Elimination approaches on parallel technology
programs.
Risk Response Planning
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TransferenceI will attempt to share or deflect this risk with others.
• Examples:
• Warranties
• Insurance policies
• Contracting out / types of contract
• Bond - bid, performance, payment
Risk Response Planning
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MitigationI will take the necessary measures required to
control this risk by continually re-evaluating it and
developing fall-back positions.
• Examples:
• Risk reduction milestones
• Reviews
• Risk budgeting
• Contingency planning
Risk Response Planning
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Tools & Techniques
• Strategies for Both Threats and Opportunities
• Acceptance
Risk Response Planning
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Acceptance
I know the risk exists and am aware of the consequence. I will accept the consequence if it should occur.
• Examples:
• On schedule, on cost, etc.
• Most decisions to proceed with an action
• Contingency reserve
Risk Response Planning
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Tools & Techniques
• Contingency Response Strategy
• Plans recorded for the likelihood of the
event
• Triggers identified/monitored
• Responsible individual to respond
Risk Response Planning
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Outputs
• Risk Register (Updates)
• Project Management Plan (Updates)
• Risk-Related contractual Agreements
Risk Response Planning
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• Contingency & fall back plans
• Contingency Reserves
• Level of residual risk
• Secondary risks
Risk Response Plan Contents• Identified risks
• Risk owner
• Qualitative/Quantitative analysis
• Response
• Triggers
• Actions to implement strategy
• Budget & times for responses
Risk Response Planning
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Risk Response PlanBasic Example:
RISK OWNER RESPONSE ACTIONS TO IMPLEMENT
CONTINGENCY
Risk Response Planning
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Mitigation Versus Contingency
Mitigation plans
• Forward looking
• Designed to prevent risk from occurring
Contingency plans
• Designed to respond to risk once it
occurs
Risk Response Planning
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Risk Reserves
• Management Reserve
•Project Contingency Reserve
Risk Response Planning
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Team Exercise (if time allows)
• Break into your teams
• Pick new PM (20 min. exercise)
• Identify top 5 risks on your project
and create a risk response plan.
• PM to report results
Risk Response Planning
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• … is the process of identifying, analyzing and planning for newly arising risks, • keeping track of the identified risks and those on the watchlist, • reanalyzing existing risks, monitoring trigger conditions for contingency plans,• monitoring residual risks, and • reviewing the execution of risk responses while evaluating their effectiveness.
11.6 Risk Monitoring & Control
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Inputs
• Risk Management Plan
• Risk Register
• Approved Change Requests
• Work Performance Information
• Performance Reports
Risk Monitoring & Control
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Tools & Techniques
• Risk Reassessment
• Risk Audits
• Variance & Trend Analysis
• Technical Performance Measurement
• Reserve Analysis
• Status Meetings
Risk Monitoring & Control
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Outputs
• Risk Register (Updates)
• Requested Changes
• Recommended Corrective Actions
• Recommended Preventive Actions
• Organizational Process Assets (Updates)
• Project Management Plan (Updates)
Risk Monitoring & Control
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Risk Monitoring & Control
Exercise
• You have a new potential risk
affecting your
project. (Make it – Shelve it)
• Step through the entire risk
methodology for this new risk
Risk Monitoring & Control
Project Management
Certificate Program
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Summation
• Risk Management is mostly a planning process
• Risk Management uses Progressive Elaboration
• Risk Management is often not done (but should be)
• Project complexity drives Risk Management effort
• Risk Management ownership: the client
• The Project Managers job is to provide motivation,
focus and organization to risk management
• The Project Manager ensure Risk Management
documentation
Project Management
Certificate Program
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Assignment for Next Week
• Read PMBOK Chapter 12
(Procurement)
• Read page 387 – 394 in Kim
Heldman (black & white) book
• Read ONLY - Creating the contract
exercise 9.1 (p. 777-780), Heldman
book
• COMPLETE exercise 11.2 (p. 816 -
820) Closing a Project or Phase and
review your answers on page 821 &
822 in Heldman book.
Project Management
Certificate Program
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Congratulations!!