RISK ANALYSIS AND

MANAGEMENT

Submitted By: XYZ

Submitted To: Mr. ABC

CONTENT

Introduction Process of Risk Management Risk Identification Internal Risks External Risks Risk Assessment Risk Response Planning and Control

INTRODUCTION

Risk is a function of the chance and the result of an undesired event happening.

Risk can also be said to be the failure of not meeting the schedule/ budget/ technical parameters.

Risk cannot be eliminated, only reduced.

PROCESS OF RISK MANAGEMENT

Risk Identification Risk Assessment Risk Response Planning Risk Response Control

RISK IDENTIFICATION

SOURCES OF RISKAny factor which can influence the end result of project is a Risk factor or Risk hazard.

Risk classified as- internal and external

INTERNAL RISKS

Originates inside the project Project managers & the organization

generally have a degree of control over them.

Market risk and Technical risk Market risk- Incomplete identification of

customer needs

- Failure to identify changing needs - Failure to identify new products

Technical Risk is not meeting the cost, time and performance requirements due to technical problems with the end items of project.

Technical risk is high in new technologies, new skills, new products

Technical risk is low in projects dealing with familiar activities

EXTERNAL RISKS

Market Conditions Competitor’s action Government Regulations Interest Rates Customer Needs and Behavior Supplier relations Weather Labor and material availability

RISK ASSESSMENT

Only the important ones need to be assessed. Risk chance is -- the probability of happening-

low/ medium/ high -- assign numerical values - 0 to 1.0

Risk impact (result) -- specified in terms of time, cost and performance measures-- assign numerical values.

The expected value of risk is calculated as-

(result) x (chance) = probability of happening

RISK RESPONSE PLANNING AND CONTROL

Methods of dealing with risk-

Transferring risk Altering plans or procedures to avoid or

reduce risk Prepare contingency plans Accepting the risk

Transfer the RiskPaying a premium to pass the risk to another party.

Warranties, penalties, contractual incentives attached to project cost, schedule or performance measures.

Different types of contract share it in different ways

Fixed cost contract- with contractor Fixed price with incentive fee- contractor accepts

about 60% Cost + incentive- contractor accepts about 40% Cost + fixed fee- with the customer

Avoid RiskChanging the project plan to eliminate the risk or condition.

By altering the original project concept Eliminating the risky elements Minimizing system complexity Reducing end-item quality requirement Changing contractor Safety procedures Avoiding reduces payoff opportunities New product design

Reduce RiskReducing the chance that an adverse event will occurReducing the impact of adverse event.

Reducing Technical Risk- Employ the best technical team Base decisions on models and simulation of key

technical parameters Use computer aided system engineering tools Perform test and evaluations Minimize system complexity

Reducing Schedule Risk- Create a master project schedule and adhere to it Maintain focus on critical activities Allot best workers on time-critical activities Schedule risky tasks as early as possible to allow

time for failure from recovery

Reducing Cost Target Risk- Identify and monitor the key cost drivers Use low-cost design alternative reviews and

assessments Use proven technology Perform prototyping and testing on risky

components and modules

CONTIGENCY PLANNING

Identify the risk, anticipate whatever might happen, and prepare a detailed plan of action to cope with it.

Initial project is followed, and monitored closely throughout execution.

A remedial measure to compensate for impact An action taken in parallel to original plan

ACCEPT RISK

Do nothing! Cannot be used as an option when the impact is

likely to severe.

THANK YOU