Session 33Session 33

Guest Speaker: Gini Van Siclen

Risk Management for Project Risk Management for Project ManagersManagers

Gini Van Siclen

ObjectivesObjectives

Understand concept of riskUnderstand the risk management

processShow how the risk management

process fits into project managementKeep material consistent with the

Project Management Institute Body of Knowledge (PMBOK)

What Is Risk Management?What Is Risk Management?

The systematic process of

Identifying

Analyzing, and

Responding to project risk

What Is Project Risk?What Is Project Risk?

An uncertain event or condition that, if it occurs, has a POSITIVE or NEGATIVE effect on a project objective.

Components of RiskComponents of Risk

Event– Something happens

Impact– It can be good (opportunity) or bad

(threat)Probability–We don’t know if the event will happen.

Why Bother With Risk Why Bother With Risk Management?Management?

Minimize crisis management!

Increase probability of success

Increase profit Prevent or minimize

problems Increase profitability Reduce stress!

Who Does What?Who Does What?

Project Manager: Make risk management

happen! Integrate with project!

Team: Learn and follow process Identify, analyze and

respond to risk Report status on process

THIS IS IMPORTANT!!!!!THIS IS IMPORTANT!!!!!

Risk Management is NOT a substitute for good planning!!!!

Risk Management is a Life Cycle activity!

The sooner you start, the better.

More About Risk: Its More About Risk: Its CharacteristicsCharacteristicsIt depends on The situationThe magnitude of the loss or gaininterdependenciesTimingValues

Type of RisksType of Risks

Business (chance for loss or gain)Pure (insurable)Known (identified)Unknown (not identified!)

Risk Management ProcessRisk Management Process

Plan for risk management Identify risks Analyze risks (qualify or quantify, then

prioritize) Develop plan of action Execute plan Evaluate Document Keep going!

Identifying the Risks is Essential!Identifying the Risks is Essential!

If you don’t identify them you can’t do anything about them!

You need your team to do this! They know things you don’t!

Use whatever project info you have to identify risks (WBS, contract, supplier management plan, staffing plan, schedule, cost estimates, etc.!!!)

Risk Identification and GrammarRisk Identification and Grammar

A risk statement is actually a scope statement--be very clear and precise!

Example: which do you prefer: “test failures” or “Failures may occur during the final test causing an impact on schedule”

Use complete sentences, and state the event and the area of impact.

Techniques for Identifying RisksTechniques for Identifying Risks

Nominal Group Technique

Crawford Slip Expert Interview Delphi Technique Analogy Checklists or

templates Brainstorming

Organizing All This New Organizing All This New InformationInformation Use the Affinity

Diagram! Organizes a large

set of information in a very short time

Group technique, mostly silent!

It’s amazing!

What Next?What Next?

We’ve identified all these risks, now what?

Time to decide which ones require further attention: we have to:

Analyze and Prioritize the risks.

Analysis TechniquesAnalysis Techniques

Narrative (describe the probability and impact the best you can)

Qualitative (high, medium low)Quantitative (expected value, life

cycle costing, simulation, profitability measures, decision trees, etc.)

Best PracticeBest Practice

Identify the best case Identify the worst

case

You have to know how bad it can really get to decide whether to continue with the project!

Triple ConstraintTriple Constraint

Cost Schedule Quality

These are all the areas that can be affected by risk!

Schedule ImpactsSchedule Impacts

Resources, duration expansions, other delays

Interdependencies in the network

Jan Feb Mar Apr May Jun July Sep Oct Nov Dec

Phae 1Phae 1

Phase 2Phase 2

Phase 3Phase 3

Risk Analysis ToolsRisk Analysis Tools

Expert judgment Financial measures Expected value Decision trees PERT Monte Carlo simulations Qualitative Analysis techniques

Prioritizing RisksPrioritizing Risks

Filter--important questionsRisk Assessment Models--go/no go

decisions early onPairwise comparisons (comparative

risk ranking)Expected valueQualitative analysis

NOTE!!!!NOTE!!!!

Prioritizing requires teamwork!

Engineering, manufacturing, design, services, quality, etc.--all these people need to be talking to each other!

What’s Next?What’s Next?

We’ve identified, analyzed and prioritized.

Now what?

Plan your response!

Response Strategies for ThreatsResponse Strategies for Threats

AcceptAvoidMitigate (reduce probability or

impact)Transfer (insurance, subcontract,

etc.)

Response Strategies for Response Strategies for OpportunitiesOpportunitiesPursueIgnoreEnhance

Because Stuff Happens….Because Stuff Happens….

Possible response strategies have to be reviewed by team members.

The law of unintended consequences is always at work!

Compare planned response strategies to those for other risks and to the triple constraint.

ReservesReserves Reserves: provision in the project plan to set aside

$ or other resources to mitigate cost and/or schedule impact

Management reserves: a separately planned quantity used to allow for future situations that are impossible to predict, “unknown unknowns”

Contingency reserves: the amount of money or time needed above the estimate to reduce the risk of overruns of project objectives to a level that is acceptable to the organization.

These are PMI definitions.

Putting It All TogetherPutting It All Together

Execute the risk management plan

Evaluate how the strategies are working; have things changed?

Document results

Risk ResponseRisk Response

Some strategies will result in work to be added to the project plan as preventive measures

Some strategies will be implemented only if certain other events (triggers, early warnings) happen

Early Warnings or TriggersEarly Warnings or Triggers

Changes in project (customer, scope, requirements, stakeholder attitude, organization, etc.)

Team moraleProject variancesDefined events resulting from team

analysis

Do Some Project ManagementDo Some Project Management

Risk management adds work to your project!

Update the WBS, project plan, staffing plans, schedule, cost estimates, etc.

Assign resources! (if you don’t assign someone it won’t get done!)

Bring top ten risks to regular status meetings

Evaluating Risk Response Evaluating Risk Response StrategiesStrategies Is the strategy working as we thought? Is impact acceptable? Is probability acceptable? Have tolerances changed? Has the risk gone away? Has the probability changed? Has the impact changed?

When Should We Reassess?When Should We Reassess?

Anytime there’s a major change (customer, organizational, requirements, staff, etc.)

At project change of phase, major milestone achievement

Anytime you perceive necessary

Why Documentation?Why Documentation?

Provides support for getting resources! Provides lessons learned for future

projects! Facilitates communication within team

and externally! To support change control! Can save your bacon! It’s the professional thing to do!

If You Don’t Do Risk If You Don’t Do Risk Management …Management …

You’re right back where you started!