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Risk Management
Chapter 7
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Risk
Risk management - the artand scienceof
ident i fy ing, analyzing , and respond ingto risk
factors throughout the l i fe of a pro jectand in
the best interest of its objectives.
Project riskany possible event that cannegatively affect the viability of a project
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Risk Vs Amount at Stake
Phase 1
Conceive
(C)
Phase 2
Develop
(D)
Phase 3
Execute
(E)
Phase 4
Finish
(F)
Time
$
Value
IncreasingRisk
Total Project Life Cycle
Amount at stake
Plan Produce
Opportunity and riskPeriod of
highest
risk impact
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Process of Risk Management
What is likely to happen?
What can be done?
What are the warning signs?
What are the likely outcomes?
Project Risk = (Probability of Event)(Consequences of Event)
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Four Stages of Risk Management
1. Risk identification
2. Analysisof probability and consequences
3. Risk mitigationstrategies
4. Controland documentation
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Risk Clusters
Financial Technical Contractual/Legal
Commercial Execution
Common Types
Absenteeism
Resignation
Staff pulled away
Time overruns
Skills unavailable
Ineffective Training
Specs incomplete
Change orders
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Risk Factor Identification
Brainstorming meetings
Expert opinion
Past history
Multiple (or team based) assessments
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Risk Impact MatrixConsequences
Likelihood
High
Low
Low High
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Project Risk Scoring
1. Identify factors and assess the probability
(Pf) and consequences (Cf) of failure
2. Calculate overall probability & consequence
3. Calculate overall risk factor
3
m c df
P P PP
4
c s r p
f
C C C C C
( )( )f f f fRF P C P C
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Risk Mitigation Strategies
Accept Minimize Share Transfer Contingency Reserves
Task contingency
Managerial contingency Mentoring Cross training
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Control & Documentation
Help managers classify and codify risks,responses, and outcomes
Change management report system answers What?
Who?
When?
Why?
How?
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Project Risk Analysis & Management
Extends risk management over projects life cycle
Key Features of PRAM
Risk management follows a life cycle
Risk management strategy changesover the
project life cycle
Synthesized, coherentapproach
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Nine Phases of Risk Assessment
1.Define
2.Focus
3.Identify
4.Structure5.Clarify ownership of risks
6.Estimate
7.Evaluate
8.Plan
9.Manage
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