Session 14 - Project Risk Management.pdf
- 1. Afghan Cosmos Group Capacity Building Department Professional Development Unit (PDU) PMP Exam Prep Course Session 14 Project Risk Management
- 2. Session Agenda Introduction Key Concepts Risk Management Process
- 4. Risk Management (Introduction) Risk: Risk is an uncertain event or condition that, if it occurs, has a positive or negative effect on one or more project objectives or constraint, such as scope, schedule, cost or quality.
- 5. Key Concepts Risk Management (Key Concepts)
- 6. Risk Management (Key Concepts) Project Risk: A probable even that, if it occurs, will negatively or positively affect one or more project constraints. Known Unknows vs. Unknown Unknowns Known unknows: are risks whose outcome are uncertain but recognized, like market changes. Unknown unknowns: are risks not identified beforehand, such as unexpected disasters. Bot require different management strategies. Planning for known unknows and fostering adaptability for unknown unknowns.
- 7. Risk Management (Key Concepts) Business Risk, Pure Risk, Residual Risk, and Secondary Risk: • Business Risk: Uncertainty and protentional for financial loss inherent in business activities. • Pure Risk (Insurable Risk): Applies only to this risk of loss (such as fire, theft, or potential injury or fatality). • Residual Risk: Risk remaining after implementing risk management measures. • Secondary Risk: New risks arising form implementing risk responses, like introducing new technology.
- 8. Risk Management (Key Concepts) Risk Register: The risk register is a document that includes: • Identified risks • Risk description • Owners • Probability • Impact • Response strategies • Status • Mitigation and contingency plans • Trigger and Response owners It is a dynamic documents.
- 9. Risk Management (Key Concepts) Risk Owner: The risk owner is the individual or entity responsible for overseeing and managing a specific risk within a project. They are accountable for monitoring the risk, implementing appropriate risk response strategies, and ensuring that the risk is effectively addressed to minimize its impact on the project's objectives. The risk owner is typically someone who has the authority, expertise, and resources to manage the risk effectively.
- 10. Risk Management (Key Concepts) Risk Averse: Risk averse refers to a tendency or attitude of avoiding or minimizing risk whenever possible. Individuals or organizations that are risk averse typically prefer safer or more conservative options, even if they offer lower potential returns or benefits, in order to protect against potential losses or negative outcomes.
- 11. Risk Management (Key Concepts) Risk Appetite: Risk appetite refers to how much risk an organization or individual is willing to accept to achieve their objectives. Risk Tolerance: Risk tolerance is the level of risk an organization or individual is willing to accept before taking action. It sets the threshold for when risk becomes unacceptable. Risk Threshold: Risk threshold refers to the point at which a risk becomes unacceptable and triggers a response or action to mitigate mor avoid it. It's the specific level of risk that an organization or individual is unwilling to exceed. Crossing this threshold prompts proactive measures to address the risk and protect the organization's objectives or interests.
- 12. Risk Management (Key Concepts) Risk Trigger: A risk trigger is a specific event, condition, or indicator that signals the potential occurrence of a risk. It acts as an early warning sign that prompts attention and action to manage the risk effectively. When a risk trigger is identified, it indicates that the risk is either about to materialize or has already occurred.
- 13. Risk Management (Key Concepts) Watch List: A watch list of risks is a list of potential risks that are being monitored closely but have not yet materialized into active risks. These risks may have been identified during risk analysis, but their probability or impact is not significant enough to warrant immediate action. However, they are considered important enough to keep an eye on due to their potential to escalate or become active risks in the future.
- 14. Risk Management (Key Concepts) Risk Factors: When assessing risks, the project manger needs to determine the; 1. Probability: Likelihood of a risk occurring. 2. Range of Possible Outcome: Variations in potential consequences. 3. Expected Timing: When the risk event is expected. 4. Anticipated Frequency: How often the risk is expected to occur.
- 15. Risk Management Processes Risk Management (Processes)
- 17. Risk Management (Processes) Process Name Process Group Main Output Plan Risk Management Planning Risk Management Plan Identify Risks Planning Risk Register, Risk Report Perform Qualitative Risk Planning Project Documents Updates Perform Quantitative Risk Planning Project Documents Updates Plan Risk Responses Planning Change Request, Project Documents Updates, Project Management Plan Updates Implement Risk Responses Executing Change Requests Monitor Risks Monitoring and Controlling Work Performance Information, Change Request
- 18. Risk Management (Processes) 1 . P l a n R i s k M a n a g e m e n t Plan Risk Management is the process of defining how to conduct risk management activities for a project. The key benefit of this process is that it ensures that the degree, type, and visibility of risk management are proportionate to both risks and the importance of the project to the organization and other stakeholders.
- 20. Risk Management (Processes) 2 . I d e n t i f y R i s k s Identify Risks is the process of identifying individual project risks as well as sources of overall project risk and documenting their characteristics. The key benefit of this process is the documentation of existing individual project risks and the sources of overall project risk. It also brings together information so the project team can respond appropriately to identified risks.
- 22. Risk Management (Processes) Tools & Techniques Prompt Lists: Risk prompt lists are tools to identify potential project risks systematically. They include categories like technical, external, human, organizational, financial, schedule, environmental, safety, and legal risks.
- 23. Risk Management (Processes) Output Risk Report: The Risk Report serves as a communication tool for stakeholders to understand the current risk landscape of the project and informs decision-making regarding risk management strategies and resource allocation. It includes; • Executive Summary: Key risks and their impact. • Current Status: Summary of identified risks, • changes, and responses. • New Risks: Newly identified risks with descriptions. • Risk Trends: Analysis of risk occurrence and impact. • Response Effectiveness: Evaluation of response actions. • Watch list: Potential risks being monitored. • Recommendations: Adjustments to response strategies. • Owner Updates: Updates on risk ownership. • Appendices: Supporting documentation.
- 24. Risk Management (Processes) 3 . P e r f o r m Q u a l i t a t i v e R i s k A n a l y s i s Perform Qualitative Risk Analysis is the process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics. The key benefit of this process is that it focuses efforts on high-priority risks.
- 26. Risk Management (Processes) Definition Qualitative Risk Analysis: Qualitative risk analysis assesses and prioritizes risks based on their probability and impact. It involves identifying risks, assessing their likelihood and impact, prioritizing them, and planning responses. It’s ranking the risk It’s Non-numerical
- 27. Risk Management (Processes) Tools & Techniques
- 31. Risk Management (Processes) Risk Parameters Assessment: Risk parameters assessment evaluates key aspects of risks. Urgency: How quickly the risk needs addressing. Dormancy: Likelihood of the risk becoming active over time. This is the anticipated time between when a risk occurs and when it’s impact is felt. Manageability and Controllability: Ability to control and manager the risk. It indicates the degree of difficulty involved in dealing with a risk. Strategic Impact: Significance of the risk to project goals.
- 32. Risk Management (Processes) 4 . P e r f o r m Q u a n t i t a t i v e A n a l y s i s Perform Quantitative Risk Analysis is the process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives. The key benefit of this process is that it quantifies overall project risk exposure, and it can also provide additional quantitative risk information to support risk response planning.
- 34. Risk Management (Processes) Definition Quantitative Risk Analysis: Quantitative risk analysis numerically assesses and prioritizes risks based on their potential impact. It involves data gathering, risk modeling, quantification, prioritization, and response planning. This method provides a precise evaluation of risks, enabling data-driven decisions and effective resource allocation.
- 36. Risk Management (Processes) Expected Monetary Value (EMV) • For threats we should add to the project budget. • For opportunities we should extract from project budget.
- 39. Risk Management (Processes) 5 . P l a n R i s k R e s p o n s e s Plan Risk Responses is the process of developing options, selecting strategies, and agreeing on actions to address overall project risk exposure as well as to treat individual project risks. The key benefit of this process is that it identifies appropriate way s to address overall project risk and individual project risks. This process also allocates resources and inserts activities into project documents and the project management plan as needed.
- 44. Risk Management (Processes) 6 . I m p l e m e n t R i s k R e s p o n s e s Implement Risk Responses is the process of implementing agreed-upon risk response plans. The key benefit of this process is that it ensures that agreed-upon risk responses are executed as planned in order to address overall project risk exposure, minimize individual project threats, and maximize individual project opportunities.
- 47. Risk Management (Processes) 7 . M o n i t o r R i s k s Monitor Risks is the process of monitoring the implementation of agreed-upon risk response plans, tracking identified risks, identifying and analyzing new risks, and evaluating risk process effectiveness throughout the project. The key benefit of this process is that it enables project decisions to be based on current information about overall project risk exposure and individual project risks.