Chapter 07 Risk management
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The document discusses software project management focusing on activity planning, critical path analysis, and risk management strategies. It defines key concepts such as 'float', critical paths, risk identification and prioritization, as well as frameworks for tackling risks, including proactive and reactive approaches. Additionally, it introduces the Critical Chain Method (CCM) to manage project schedules more effectively by accounting for task dependencies and resource constraints.
Chapter 07 Risk management
- 1. SPM (5e) Activity planning© The McGraw-Hill Companies, 2009 1 Float Float = Latest finish - Earliest start - Duration ES Latest start activity LF FLOAT Earliest finish Note that Float can also be calculated as the difference between the earliest and latest start dates for an activity or the difference between the earliest and latest finish dates.
- 2. SPM (5e) Activity planning© The McGraw-Hill Companies, 2009 2 Critical path • Note the path through network with zero floats • Critical path: any delay in an activity on this path will delay whole project • Can there be more than one critical path? • Can there be no critical path? • Sub-critical paths
- 3. SPM (6e) risk management© The McGraw-Hill Companies, 2017 3 Software Project Management Unit 3- PartII Chapter Seven Risk management
- 4. There are four kinds of attitudes that are good to have in life. Friendliness Being friendly, and more so with people who are happy. If you are not friendly with happy people, you will be jealous. This is because you think that your enemy is happy, and you cannot tolerate your enemy being happy. So, shake hands with happy people. Such an attitude does a lot of good to your mind.
- 5. SPM (6e) risk management© The McGraw-Hill Companies, 2017 5 Risk management This lecture will touch upon: • Definition of ‘risk’ and ‘risk management’ • Some ways of categorizing risk • Risk management • Risk identification – what are the risks to a project? • Risk analysis – which ones are really serious? • Risk planning – what shall we do? • Risk monitoring – has the planning worked? • We will also look at PERT risk and critical chains
- 6. SPM (6e) risk management© The McGraw-Hill Companies, 2017 6 Some definitions of risk ‘the chance of exposure to the adverse consequences of future events’ PRINCE2 ‘an uncertain event or condition that, if it occurs, has a positive or negative effect on a project’s objectives’ PM-BOK • Risks relate to possible future problems, not current ones • They involve a possible cause and its effect(s) e.g. developer leaves > task delayed
- 7. SPM (6e) risk management© The McGraw-Hill Companies, 2017 7 Categories of risk
- 8. Risk Management Approaches • Proactive: • The proactive approaches try to anticipate the possible risks that the project is susceptible to. • After identifying the possible risks, actions are taken to eliminate the risks. • Reactive: • Reactive approaches take no action until an unfavourable event occurs. • Once an unfavourable event occurs, these approaches try to contain the adverse effects associated with the risk and take steps to prevent future occurrence of the same risk events. SPM (6e) risk management© The McGraw-Hill Companies, 2017 8
- 9. SPM (6e) risk management© The McGraw-Hill Companies, 2017 9 A framework for dealing with risk The planning for risk includes these steps: • Risk identification – what risks might there be? • Risk analysis and prioritization – which are the most serious risks? • Risk planning – what are we going to do about them? • Risk monitoring – what is the current state of the risk?
- 10. SPM (6e) risk management© The McGraw-Hill Companies, 2017 10 Risk identification Approaches to identifying risks include: • Use of checklists – usually based on the experience of past projects • Brainstorming – getting knowledgeable stakeholders together to pool concerns • Causal mapping – identifying possible chains of cause and effect
- 11. There are four kinds of attitudes that are good to have in life. 1.Friendliness 2. Compassion •Be compassionate towards people who are miserable. •Many people have gotten into trouble by being friendly with unhappy people – both become miserable. • It is like a doctor going to a patient who is sick, and the doctor also becomes sick. •If the doctor thinks: How can I alone be healthy? •Let me also share the patient’s misery, then who will help the patient? • So, what should be the attitude with people who are miserable? •Compassion, not pity. SPM (6e) risk management© The McGraw-Hill Companies, 2017 11
- 12. SPM (5e) risk management© The McGraw-Hill Companies, 2009 12 Boehm’s top 10 development risks Risk Risk reduction techniques Personnel shortfalls Staffing with top talent; job matching; teambuilding; training and career development; early scheduling of key personnel Unrealistic time and cost estimates Multiple estimation techniques; design to cost; incremental development; recording and analysis of past projects; standardization of methods Developing the wrong software functions Improved software evaluation; formal specification methods; user surveys; prototyping; early user manuals Developing the wrong user interface Prototyping; task analysis; user involvement
- 13. SPM (5e) risk management© The McGraw-Hill Companies, 2009 13 Boehm’s top ten risk - continued Gold plating Requirements scrubbing, prototyping, design to cost Late changes to requirements Change control, incremental development Shortfalls in externally supplied components Benchmarking, inspections, formal specifications, contractual agreements, quality controls Shortfalls in externally performed tasks Quality assurance procedures, competitive design etc Real time performance problems Simulation, prototyping, tuning Development technically too difficult Technical analysis, cost-benefit analysis, prototyping , training
- 14. • There are four kinds of attitudes that are good to have in life. • 1.Friendliness • 2. Compassion • 3. Happiness • For people who are doing good work or who are successful in the world, you should feel happy as though you are doing it…. • Whenever someone does a good job, share that happiness with them • – we need to have this attitude….
- 15. • There are four kinds of attitudes that are good to have in life. • 1.Friendliness • 2. Compassion • 3. Happiness • 4.Indifference • When people who are doing horrible things in society—destroying themselves—we usually get angry at them. • When you are angry, your mind suffers a huge loss. • You lose so much energy – you lose your mood and your enthusiasm. • When energy and enthusiasm goes away from you, you become angry and are no better than the other person. • So, what should you do in such a situation? • Have a sort of indifference in your mind.
- 16. SPM (6e) risk management© The McGraw-Hill Companies, 2017 16 Risk prioritization Risk exposure (RE) = (potential damage) x (probability of occurrence) Ideally Potential damage: a money value e.g. a flood would cause £0.5 millions of damage Probability 0.00 (absolutely no chance) to 1.00 (absolutely certain) e.g. 0.01 (one in hundred chance) RE = £0.5m x 0.01 = £5,000 Crudely analogous to the amount needed for an insurance premium
- 17. SPM (6e) risk management© The McGraw-Hill Companies, 2017 17 Risk probability: qualitative descriptors Probability level Range High Greater than 50% chance of happening Significant 30-50% chance of happening Moderate 10-29% chance of happening Low Less than 10% chance of happening
- 18. SPM (6e) risk management© The McGraw-Hill Companies, 2017 18 Qualitative descriptors of impact on cost and associated range values Impact level Range High Greater than 30% above budgeted expenditure Significant 20 to 29% above budgeted expenditure Moderate 10 to 19% above budgeted expenditure Low Within 10% of budgeted expenditure.
- 19. SPM (6e) risk management© The McGraw-Hill Companies, 2017 19 Risk planning Risks can be dealt with by: • Risk acceptance • Risk avoidance • Risk reduction • Risk transfer • Risk mitigation/contingency measures
- 20. Monte Carlo Simulation • The Monte Carlo simulation is an important technique in risk management • The Monte Carlo simulation is a quantitative risk analysis technique used in identifying the risk level of achieving objectives. • The Monte Carlo simulation is a quantitative risk analysis technique used in identifying the risk level of achieving objectives. • Every decision has a degree of uncertainty, and Monte Carlo Simulation helps you in such situations. You can run this simulation to analyze the impact of the risks on cost, schedule estimate, etc. • This technique gives you a range of possible outcomes and the probabilities that will occur for any choice of action. SPM (6e) risk management© The McGraw-Hill Companies, 2017 20
- 21. SPM (6e) risk management© The McGraw-Hill Companies, 2017 21 Monte Carlo Simulation • An alternative to PERT. • A class of general analysis techniques: • Valuable to solve any problem that is complex, nonlinear, or involves more than just a couple of uncertain parameters. • Monte Carlo simulations involve repeated random sampling to compute the results. • Gives more realistic results as compared to manual approaches.
- 22. Steps of a Monte Carlo Analysis 1. Assess the range for the variables being considered. 2. Determine the probability distribution of each variable. 3. For each variable, select a random value based on the probability distribution. 4. Run a deterministic analysis or one pass through the model. 5. Repeat steps 3 and 4 many times to obtain the probability distribution of the model’s results. SPM (6e) risk management© The McGraw-Hill Companies, 2017 22
- 23. SPM (6e) risk management© The McGraw-Hill Companies, 2017 23 Critical chain concept Traditional planning approach
- 24. SPM (6e) risk management© The McGraw-Hill Companies, 2017 24 Critical chain approach One problem with estimates of task duration: • Estimators add a safety zone to estimate to take account of possible difficulties • Developers work to the estimate + safety zone, so time is lost • No advantage is taken of opportunities where tasks can finish early – and provide a buffer for later activities
- 25. Critical chain approach • The Critical Chain Method (CCM) is one of the methods used to perform Schedule Network Analysis that takes into account task dependencies, limited resource availability and buffers. • It’s used to prepare the project schedule when limited or restricted resources are available. • The goal of CCM is eliminating project schedule delays due to uncertainties, overestimation of task duration and wasted internal buffers. SPM (6e) risk management© The McGraw-Hill Companies, 2017 25
- 26. SPM (6e) risk management© The McGraw-Hill Companies, 2017 26 Critical chain approach One answer to this: 1. Ask the estimators for two estimates • Most likely duration: 50% chance of meeting this • Comfort zone: additional time needed to have 95% chance 2. Schedule all activities using most likely values and starting all activities on latest start dates
- 27. SPM (6e) risk management© The McGraw-Hill Companies, 2017 27 Most likely and comfort zone estimates
- 28. SPM (5e) risk management© The McGraw-Hill Companies, 2009 28 Critical chain - continued 3. Identify the critical chain – same a critical path but resource constraints also taken into account 3. Put a project buffer at the end of the critical chain with duration 50% of sum of comfort zones of the activities on the critical chain.
- 29. SPM (6e) risk management© The McGraw-Hill Companies, 2017 29 Critical chain -continued 5. Where subsidiary chains of activities feed into critical chain, add feeding buffer 5. Duration of feeding buffer 50% of sum of comfort zones of activities in the feeding chain 5. Where there are parallel chains, take the longest and sum those activities
- 30. SPM (6e) risk management© The McGraw-Hill Companies, 2017 30 Plan employing critical chain concepts
- 31. SPM (6e) risk management© The McGraw-Hill Companies, 2017 31 Executing the critical chain-based plan • No chain of tasks is started earlier than scheduled, but once it has started is finished as soon as possible • This means the activity following the current one starts as soon as the current one is completed, even if this is early – the relay race principle
- 32. SPM (6e) risk management© The McGraw-Hill Companies, 2017 32 Executing the critical chain-based plan Buffers are divided into three zones: • Green: the first 33%. No action required • Amber : the next 33%. Plan is formulated • Red : last 33%. Plan is executed.