Pm deep dive risk management
- 1. PM DeepDive Project Risk Management - Niraj Agarwal May 2011 Slide 1
- 2. Project Risk Management Definition of Risk • Risk is an uncertain event or condition that, if it occurs, has a positive or negative effect on a project objective. • Risk has a cause and, if it occurs has a consequence. • Project environment may contribute to project risk such as poor project management practices, or external dependencies which can not be controlled. • Project risk includes both threats to the project’s objectives and opportunities to improve on those objectives. May 2011 Slide 2
- 3. Project Risk Management Risk Factors • Risk Event - “A discrete occurrence that may effect the project”—for A project for better or worse • Risk Probability - The likelihood of occurrence. The ratio of the number of chances by which an event may happen (or not happen) to the sum of the chances of both happening and not happening. • Amount at Stake - “The extent of adverse consequences which could q occur to the project”. It equals amount wasted plus amount required to rebuild • Risk Timing - When Is the risk event expected to occur in the Project Lifecycle May 2011 Slide 3
- 4. Project Risk Management Processes • Risk Management planning • Risk Identification • Qualitative Risk Analysis • Quantitative Risk Analysis • Risk Response Planning • Risk Monitoring and Control May 2011 Slide 4
- 5. Risk Management planning Definition & ITTO Deciding how to approach and plan risk management activities. May 2011 Slide 5
- 6. Risk Management planning ITTO May 2011 Slide 6
- 7. Risk Management planning Impact Analysis May 2011 Slide 7
- 8. Risk Identification Definition • The process of systematically identifying all possible risk events which may impact on a project. • They may be conveniently classified according to their cause or source and ranked roughly according to ability to manage effective responses. • Not all risk events will impact all projects, but the cumulative effect of several risk events occurring i conjunction may well b more severe f l i k t i in j ti ll be than examination of individual risk events might suggest. May 2011 Slide 8
- 9. Risk Identification ITTO May 2011 Slide 9
- 10. Risk Identification May 2011 Slide 10
- 11. Risk Identification Risk Register • List of risks that includes an identification number risk name risk number, name, description, and risk owner i.e. the person responsible for monitoring the project to determine whether the potential for this risk event is high and then implementing the risk response p p g p plan should it occur. May 2011 Slide 11
- 12. Qualitative Risk Analysis Definition & ITTO • Qualitative Risk Analysis uses a subjective approach to determine the likelihood that a risk will actually occur and the impact to the project if it does occur. This process also involves prioritizing the risks according to their effect on the project. p j May 2011 Slide 12
- 13. Qualitative Risk Analysis ITTO May 2011 Slide 13
- 14. Qualitative Risk Analysis Probability/Impact • Risk Probability is the likelihood that a risk event will occur For occur. example, if you a flip a coin, there ’ s a .50 probability the coin will come up heads. Probability is expressed as a number from 0.0 to 1.0, with 1.0 being an absolute certainty the risk event will occur. g y • Risk possibility and consequences may be described in qualitative terms such as very high, high, moderate, low and very low. • I Impact is the amount of damage ( opportunity) th risk poses t t i th t fd (or t it ) the i k to the project if it occurs. Simple rating like the following to rate risk impact: High, Medium, Low May 2011 Slide 14
- 15. Qualitative Risk Analysis Probability/Impact Matrix • A matrix can be constructed on probability and impact impact. • A risk with high probability and high impact needs further analysis. • Also called Risk Rating Matrix May 2011 Slide 15
- 16. Quantitative Risk Analysis Definition & ITTO Aims to analyze numerically, the probability of each risk and its consequence on project objective, as well as the extent of overall project risk. May 2011 Slide 16
- 17. Quantitative Risk Analysis ITTO May 2011 Slide 17
- 18. Risk Response Planning Definition & ITTO Risk Response Planning is the process of reviewing the risk analysis and determining what, if any, action should be taken to reduce negative impacts and take advantage of opportunities as a result of a risk event occurring. May 2011 Slide 18
- 19. Risk Response Planning ITTO May 2011 Slide 19
- 20. Risk Response Planning Strategies for Risk • Avoid : Avoiding the risk altogether or eliminating the cause of the risk event • Transfer : Moving the liability for the risk to a third party by p purchasing insurance, p g , performance bonds, and so on , • Mitigate : Reducing the impact or the probability of the risk • Accept : Choosing to accept the consequences of the risk May 2011 Slide 20
- 21. Risk Response Planning Strategies for opportunities • Exploit : Looking for opportunities to take advantage of positive impacts • Share : Assigning the risk to a third party who is best able to bring about the opportunity pp y • Enhance : Monitoring the probability or impact of the risk event to assure benefits are realized May 2011 Slide 21
- 22. Risk Monitoring and Control Definition & ITTO Is the process of keeping track of the identified risks, monitoring residual risks and identifying new risks, ensuring the execution of risk plans, and evaluating their effectiveness in reducing risks. May 2011 Slide 22
- 23. Risk Monitoring and Control ITTO May 2011 Slide 23
- 24. Pop Quiz Question 1 Risk Identification is the process of which of the following? A. Quantifying the impact to the project of a potential risk event B. Determining and documenting potential risk events on the project C. Assigning a probability that a particular risk event will occur D. Defining the action to take in response to a risk event May 2011 Slide 24
- 25. Pop Quiz Question 2 This risk analysis technique uses a complex mathematical approach to numerically analyze the probability and impact of risks. A. Quantitative Risk Analysis Q y B. Risk impact analysis C. Risk probability analysis D. Qualitative Risk Analysis D Q lit ti Ri k A l i May 2011 Slide 25
- 26. Pop Quiz Question 3 All of the following are strategies for dealing with negative risks, except for which one? A. Accept B. B Transfer C. Share D. Mitigate May 2011 Slide 26
- 27. Pop Quiz Question 4 Once risks have been identified and analyzed, this tool helps you determine an overall risk score. A. Probability impact matrix B. B Risk list C. Risk register D. Risk template May 2011 Slide 27
- 28. Thank You!