1. 4/3/2011
Project Management
Knowledge Areas
Section – 3
Chapter – 11
Project Risk Management

Session Objectives…
1. To identify the project Risk management
knowledge area’s processes
2. How to plan Risk Management for the project
3. How to identify Risk
4. How to perform Qualitative Risk Analysis
5. How to perform Quantitative Risk Analysis
6. How to plan risk Responses
7. How to perform Risk Monitoring and
Control
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2. 4/3/2011
Project Risk Management

Exam Objectives
1. Planning for Risk Management
2. Identifying Risks
3. Creating a Risk Register
4. Performing Qualitative Risk Analysis
5. Performing Quantitative Risk Analysis
6. Planning for Risk Responses
7. Monitoring and controlling Risks
Project Risk Management

The Project Risk Management Knowledge
area, discusses the processes of
 Plan Risk management
 Identify Risks
 Perform Qualitative Risk analysis
 Perform Quantitative Risk analysis
 Plan Risk responses
 Monitor and Control Risks
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3. 4/3/2011
Project Risk Management

What is Risk?
 Risk is unplanned event or condition that
can have a positive or negative effect on its
success
 Not all Risks are bad, and are seen as a
Threat
 Risk is uncertainty
Plan Risk Management
The process is to decide
 How to approach
 How to conduct
 Risk management activities
 Exam point to remember
The objective of Risk Management Planning is to
ensure that the level, type and visibility of Risk
Management are commensurate with both the
risk and importance to the project to the
organization, to provide sufficient resources and
time for risk management activities and to
establish an agreed-upon basis for evaluating risks.

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4. 4/3/2011
Plan Risk Management
• 1. Project Scope
Statement
• 2. Cost Management Plan
• 3. Schedule Management
Plan
• 4. Enterprise
Environmental Factors
• 5. Organizational Process
Assets
Tools &
Techniques
• 1. Risk Management Plan
• 1. Planning Meetings and
Analysis
Input
Output
Plan Risk Management

Inputs
1. Project Scope Statement
2. Cost Management Plan
3. Schedule Management Plan
4. Enterprise Environmental Factors
5. Organizational Process Assets
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5. 4/3/2011
Plan Risk Management
Tools and Techniques
1. Planning Meeting and Analysis
 Outputs
1. Risk Management Plan

Risk Management Plan

Contains…
 Methodology
 Roles and Responsibility
 Budgeting
 Timing
 Risk Categories
 Definitions of Risk Probability and Impact
 Probability and Impact Matrix
 Revised stakeholders’ tolerances
 Reporting formats
 Tracking
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6. 4/3/2011
Risk Categorization
Risk Breakdown Structure
 The Categories are
 Technical
 External
 Organizational
 Project Management

Risk Categorization
Risk Breakdown Structure
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7. 4/3/2011
Plan Risk Management
Probability : Is the chance that something is likely to
happen
 Ranked as “Very Unlikely” to “Almost
Certainty”
 Impact: The resultant of the probable event, is
measured as impact
 Negative for threats or
 Positive opportunities
 Ranked as “Very Low”, “Low”, “Moderate”,
“High”, “Very High”

Probability and Impact Matrix
Defined Conditions for Impact Scales of a Risk on
Major Project Objectives
Project
Very Low
Objectives / .05
Low
/ .10
Moderate
/ .20
High
/ .40
Very High
/ .80
Cost
Time
Scope
Quality
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8. 4/3/2011
Probability and Impact Matrix

Legend - Watch list - Moderate - High
Alert
Defined Conditions for Impact Scales of a Risk on
Major Project Objectives
Probability/i / .05
mpact
/ .10
/ .20
/ .40
/ .80
Very Low
Low
Moderate
High
Very High
Identify Risk
The process of
 Identifying the Risks
 Documenting their characteristics
 The process is repetitive

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9. 4/3/2011
Identify Risk

Risks may be found
1. Budgets/funding
2. Schedules
3. Scope or requirement changes
4. Project plan
5. Project management processes
6. Technical issues
7. Personnel issues
Identify Risk

Risks may be found
8. Hardware
9. Contracts
10. Political
11. Business risk
12. Legal
13. Environmental
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10. 4/3/2011
Identify Risk
•
•
•
•
•
•
•
•
•
•
1. Risk Management Plan
2.Activity Cost Estimates
3.Activity Duration Estimates
4. Scope Baseline
5. Stakeholder Register
6. Cost Management plan
7. Schedule Management Plan
8. Quality Management Plan
9. Project Documents
10. Enterprise Environmental
Factors
• 11. Organizational Process
Assets
Tools &
Techniques
• 1. Documentation Reviews
• 2. Information Gathering
Techniques
• 3. Checklist Analysis
• 4. Assumptions Analysis
• 5. Diagramming techniques
• 6. SWOT Analysis
• 7. Expert Judgment
• 1. Risk Register
Output
Input
Identify Risk

Inputs
1. Risk Management Plan
2. Activity Cost Estimates
3. Activity Duration Estimates
4. Scope Baseline
5. Stakeholder Register
6. Cost Management Plan
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11. 4/3/2011
Identify Risk

Inputs
7. Schedule Management Plan
8. Quality Management Plan
9. Project Documents
10. Enterprise Environmental Factors
11. Organizational Process Assets
Identify Risk

Tools and Techniques
1. Documentation Reviews
2. Information Gathering techniques
 Brainstorming
 Delphi technique
 Interviewing
 Root Cause Identification
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12. 4/3/2011
Identify Risk

Tools and Techniques
3. Checklist Analysis
4. Assumptions Analysis
5. Diagramming Techniques
 Cause-and-Effect diagrams
 System or Process Flow charts
6. SWOT Analysis
7. Expert Judgment
Identify Risk

Outputs
1. Risk Register
 List of identified Risks
 List of Potential Responses
 Root causes of Risks
 Updated Risk Categories
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13. 4/3/2011
Perform Qualitative Risk Analysis
Qualitative Analysis is a subjective approach
to prioritizing risks.
 According to probability and potential
impact, identified risks are rated
 The ranking categorizes into
 That require additional analysis
 That may proceed directly to risk
response planning
 That are not critical
 And prioritizes risks

Perform Qualitative Risk Analysis
•
•
•
•
1. Risk Register
2. Risk Management Plan
3. Project Scope Statement
4. Organizational Process
Assets
Input
Tools &
Techniques
• 1. Risk probability And Impact
Assessment
• 2. Probability and Impact
Matrix
• 3. Risk Data Quality
Assessment
• 4. Risk Categorization
• 5. Risk Urgency Assessment
• 6. Expert Judgment
• 1. Risk Register
• Updates
Output
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14. 4/3/2011
Perform Qualitative Risk Analysis

Inputs
1. Risk Register
2. Risk Management Plan
3. Project Scope Statement
4. Organizational Process Assets
Perform Qualitative Risk Analysis

Tools and Techniques
1. Risk Probability and Impact
Assessment
2. Probability and Impact Matrix
3. Risk Data Quality Assessment
4. Risk Categorization
5. Risk Urgency Assessment
6. Expert Judgment
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15. 4/3/2011
Perform Qualitative Risk Analysis

Outputs
 Updated Risk Register
 Relative ranking or priority list of risks
 Risks grouped by categories
 List of risks requiring responses in the
near term
 List of risks for additional analysis and
response
 Watch-lists of low priority risks
 Trends in qualitative risk analysis results
Perform Quantitative Risk
Analysis
Quantitative Risk Analysis tries to numerically
assess the probability and impact of the identified
risks
 The objectives of quantitative risk analysis are
 Ascertain the likelihood of project success
 Determine the risk exposure
 Determine the likely amount of contingency
reserve needed
 Determine the risks with largest impact on
the project

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16. 4/3/2011
Perform Quantitative Risk Analysis
• 1. Risk Register
• 2. Risk Management Plan
• 3. Project Cost
Management Plan
• 4. Schedule Management
Plan
• 5. Organizational Process
Assets
Input
Tools &
Techniques
• 1. Data Gathering And
Representation Techniques
• 2. Quantitative Risk Analysis
And Modeling techniques
• 3. Expert Judgment
• 1. Risk Register
• Updates
Output
Perform Quantitative Risk Analysis

Inputs
1. Risk Register
2. Risk Management Plan
3. Project Cost Management Plan
4. Project Schedule Management Plan
5. Organizational Process Assets
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17. 4/3/2011
Perform Quantitative Risk Analysis

Tools and Techniques
1. Data Gathering and Representation
 Techniques
 Interviewing
 Probability Distributions
 Expert Judgment
Perform Quantitative Risk Analysis

Tools and Techniques
 2. Quantitative Risk Analysis and
Modeling
 Techniques
 Sensitivity Analysis
 Expected Monetary Value Analysis
 Decision Tree Analysis
 Modeling and Simulation
 3. Expert Judgment
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18. 4/3/2011
Perform Quantitative Risk Analysis

Outputs
1. Updated Risk Register
 Probabilistic Analysis of the Project
 Probability of Achieving Cost and
Time Objectives
 Prioritized list of quantified risks
 Trends in Quantitative Risk Analysis
Results
Perform Quantitative Risk Analysis
Buy or
Build
Decision Tree Analysis
Decision Name
Buy
200,000
Build
190,000
Probability of On-Time
Completion
Strong
85%
Weak 15%
Strong
75%
Weak 25%
170,000
30,000
142,500
47,500
Best Decision
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19. 4/3/2011
Plan Risk Responses
Risk response planning is all about options and
actions
 It involves activities
 How to decrease the possibility of risks
 How to reduce the impact of the risk if has
to happen
 Effectiveness of Risk Response will control
number of risks that occur
Exam Point:- Planned risk responses must be
appropriate to the significance of the risk, cost
effective in meeting the challenge, timely, realistic with
the project context, agreed upon by all parties
involved, and owned by a responsible person.

Plan Risk Responses
• 1. Risk Management Plan
• 2. Risk Register
Tools &
Techniques
• 1. Strategies For negative risks
or Threats
• 2. Strategies for positive risks
or Opportunities
• 3. Contingent Response
Strategies
• 4. Expert Judgment
Input
• 1. Updated Risk Register
• 2. Updated Project
Management Plan
• 3. Risk-related Contract
Decisions
• 4. Project Document Updates
Output
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20. 4/3/2011
Plan Risk Responses

Inputs
1. Risk Management Plan
2. Risk Register
Plan Risk Responses

Tools and Techniques
 1. Strategies for Negative Risks or
Threats
 Avoid
 Transfer
 Mitigate
 Accept
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21. 4/3/2011
Plan Risk Responses
 Tools
2.
3.
4.
and Techniques
Strategies for Positive Risks or
Opportunities
 Exploit
 Share
 Enhance
 Accept
Contingent Response Strategies
Expert Judgment
Plan Risk Responses

Outputs
1. Updated Risk Register
2. Updated Project Management Plan
3. Risk – Related Contract Decisions
4. Project Document Updates
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22. 4/3/2011
Plan Risk Responses

Risk Transfer
 Insurance
 Performance Bonds
 Warranty
 Guaranty
 Fixed-Price contracts
Plan Risk Responses

Risk Mitigation
 An effort to reduce the probability,
impact or both of an identified risk.
 Ex:
 Developing prototypes, simulations.
 Adding activities to reduce the risk
probability or impact.
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23. 4/3/2011
Plan Risk Responses

Risk Acceptance
 Is the process of simply accepting the
risk because
 No other option
 Risk may be small probability, impact
or both
 Passive acceptance requires no action
 Active acceptance requires developing
a contingency plan if the risk occurs
Plan Risk Responses
Residual Risks
 The remains of the risk after
avoidance, transfer, or mitigation
 Secondary Risks
 The risks that are resulted from risk
responses

Secondary
Risk
Risk
Solution
Secondary
Risk`
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24. 4/3/2011
Monitor & Control Risks
The process is for:
 Monitoring identified risks triggers at the
thresholds
 Controlling identified risks with
responses
 Scouting for new risks that may creep up
 The objectives are to
 Confirm risk responses are implemented
as planned
 Determine if risk responses are effective
or new responses are needed

Monitor & Control Risks

The objectives are to
 Validate the project assumptions
 Monitor risk triggers
 Monitor for new risks
 Confirm policies and procedures
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25. 4/3/2011
Monitor & Control Risks
•1. Risk Management Plan
•2. Risk Register
•3. Approved Change requests
•4. Work performance
Information
•5. Performance reports
Tools &
Techniques
•1. Risk Reassessment
•2. Risk Audits
•3. Variance and Trends Analysis
•4. Technical Performance
Measurement
•5. Reserve Analysis
•6. Status Meetings
Input
•1. Updated Risk Register
•2. Requested Changes
•3. Recommended Corrective
Actions
•4. Recommended Preventive
Actions
•5. Updated Organizational
Process Assets
•6. Updated Project Management
Plan
Output
Monitor & Control Risks

Inputs
1. Risk Management Plan
2. Risk Register
3. Approved Change Requests
4. Work Performance Information
5. Performance Reports
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26. 4/3/2011
Monitor & Control Risks

Tools and Techniques
1. Risk Reassessment
2. Risk Audits
3. Variance and Trend Analysis
4. Technical Performance Measurement
5. Reserve Analysis
6. Staff Meetings
Monitor & Control Risks

Outputs
1. Updated Risk Register
2. Requested Changes
3. Recommended Corrective Actions
4. Recommended Preventive Actions
5. Updated Organizational Process
Assets
6. Updated Project Management Plan
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27. 4/3/2011
Project Risk Management
To Sum Up….
1. We identified the project Risk management
knowledge area’s processes
2. We know how to do Risk Management for the
project
3. We know how to do Risk Identification
4. We know how to perform Qualitative Risk
Analysis
5. We know how to perform Quantitative Risk
Analysis
6. We know how to do risk Response Planning
7. We know how to perform Risk Monitoring and
Control
Questions ?
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