Project Management Unit 3 Lecture 3.3 (1).ppt
- 1. DISCOVER . LEARN . EMPOWER INSTITUTE – University School of Business DEPARTMENT - Management M.B.A. Project Management - BAT 752 1 UNIT-3 Lecture 3.3 Risk Prioritization in Project Management
- 2. 2 Project Management BAT-752 CO Number Title Level CO1 To describe the basics of project management and project planning Understand CO2 To apply project evaluation techniques on real life business proposals Apply CO3 To analyze the risk involved in the internal and external project control management Analyze CO4 To enable students in evaluating the performance of the project through project information management system Evaluate CO5 To create network diagrams for project planning and scheduling Create Course Outcomes Will be covered in this lecture Will be covered in this lecture
- 3. Risk Prioritization When prioritizing risks, you should first focus on high imapct and high liklihood risks. With data breaches increasing annually in number and sophistication, for example, this risk likely falls into the high priority category.
- 4. Prioritizing • Since every project is unique, the priorities of certain risks will be different for every project. • Three simple steps can be used to create a project Risk Matrix in order prioritize risk events. • It is imperative that all stakeholders are involved in this process so all points of view are taken into account. In order for risks to be properly mitigated, the matrix should be revisited and updated on a regular basis.
- 5. 1) Identify: • Similar to recognizing risk, listing every potential risk to the project is necessary before any assessments can take place. • Even events that have only a slight chance of occurring should be considered when creating the beginnings of your Risk Matrix. • For example, a lost time accident could occur on any project but, with the proper safety precautions in place, it is rare. On the other hand, change orders due to unforeseen conditions are almost inevitable on any project, but with the proper precautions taking place by all parties the cost of these could be minimized.
- 6. 2) Measure Likelihood: • Each risk identified should be given a ranking based on the likelihood of them occurring. • The scale for this ranking is at the discretion of the project team, it could be 1-5 with 1 being unlikely and 5 being likely, or it could be on a likelihood percentage basis. • Using the examples discussed above, a lost time accident while using a contractor with a stellar safety record would be ranked as a 1, while encountering unforeseen conditions on a renovation without existing drawings would get a 5. • Each risk on the list should be weighed and discussed with the stakeholders.
- 7. 3) Assess Impact: • Using the same guidelines established when calculating likelihood, the project stakeholders should next rank the impact of different risks. • Continuing with our examples, a lost time accident could be devastating to a project with little to no float and given a ranking of 5. • However, if the project is not a tightly scheduled one and has a lot of float, then this occurrence may only be given a 3.
- 8. 3) Assess Impact: • The impact may also change throughout the project duration. • A change order from an unforeseen condition may not affect the project if found early when there is float in the schedule or contingencies are high, ranking it at a 1, but as the project draws to a close that same change request may cause schedule disruption or budget problems, making the impact more like a 4..
- 9. 4) Find the Overall Calculated Risk: • Depending on the scale used to measure likelihood and impact, a formula can be put together to calculate the overall risk associated with a certain event. • From there, the risks can be weighed low, medium, and high so that the team can determine which risks are priorities. • After the overall risk for each event is calculated, stakeholders should look at the urgency of each kind of risk.
- 10. 4) Find the Overall Calculated Risk: • If the majority of the risks are shown as high, they should be revisited and reranked. • If every risk on the project is labeled high priority, then in essence you have just deprioritized all of them, because you won’t be able to concentrate on every risk all the time- the entire point of the matrix is to demonstrate where to focus mitigation efforts.
- 11. High risk: Substantial impact on cost, technical performance, or schedule. Substantial action required to alleviate issue. High-priority management attention is required. Medium risk: Some impact on cost, technical performance, or schedule. Special action may be required to alleviate issue. Additional management attention may be needed. Low risk: Minimal impact on cost, technical performance, or schedule. Normal management oversight is sufficient.
- 12. Quantitative risk analysis outputs are 1. Prioritized risk lists, 2. Probabilistic cost estimates at completion per project phase and probabilistic schedule estimates for key milestones to help the project manager allocate reserve accordingly, 3. Probabilistic estimates of meeting desired technical performance parameters and validating technical performance of key components
- 13. 4. Estimates of the probability of meeting cost, technical performance, and schedule objectives (e.g., determining the probability of achieving the planned estimate at completion). Updated Risk Register Probabilistic analysis for project success (time and cost) Updated priority of risk events Trends in risk analysis ….cont’d
- 14. A common method/tool to determine whether a risk is considered low, moderate, or high by combining the two dimensions of a risk: Its probability of occurrence, and Its impact on objectives if it occurs.
- 15. Green: Low Risk (Passive Acceptance – workarounds) Yellow: Moderate Risk (Active Acceptance – contingency) Red: High Risk (Risk Response Planning) Low Impact High
- 16. Likelihood Class Likelihood of Occurrence (events/year) Not Likely (NL) <0.01% chance of occurrence Low (L) 0.01 - 0.1% chance of occurrence Moderate (M) 0.1 - 1% chance of occurrence High (H) 1 - 10% chance of occurrence Expected (E) >10% chance of occurrence Consequence Health and Safety Extreme Fatality or multiple fatalities expected High Severe injury or disability likely; or some potential for fatality Moderate Lost time or injury likely; or some potential for serious injuries; or small risk of fatality Low First aid required; or small risk of serious injury Negligible No concern
- 17. Quantify possible outcomes for the project Assess probability of achieving specific project objectives Identify risks requiring most attention • Identify realistic and achievable cost, schedule, or scope targets, given project risks • Determine best management decision when conditions or outcomes are uncertain
- 18. • Risks during the project/idea initiation phase: – Unavailable subject matter experts – Poor definition of problem or project – No feasibility study – No or unclear objectives
- 19. Risks during the project planning phase: – No risk management plan – Spotty planning – Underdeveloped requirements and specifications – Unclear statement of work – No management or stakeholder support – Poor role definition – Inexperienced team – Definite lack of skills
- 20. Risks during the project execution phase Changes in schedule No control systems in place Unskilled labour Material availability or poor quality material Unreliable suppliers Unexpected price increase (not budget for it) Strikes Weather Regulatory requirements
- 21. ….cont’d Risks during the project close-out / termination phase: Unacceptable to customer Poor quality product/project Budget problems Penalties to be paid for exceeding the time parameter of the project
- 22. THANK YOU For queries, Email: gurleen.usb@cumail.in 22