Risk is a function of the chance and the result of an
undesired event happening.
Risk can also be said to be the failure of not
meeting the schedule/ budget/ technical
Risk cannot be eliminated, only reduced.
PROCESS OF RISK MANAGEMENT
Risk Response Planning
Risk Response Control
SOURCES OF RISK
Any factor which can influence the end result of
project is a Risk factor or Risk hazard.
Risk classified as- internal and external
Originates inside the project
Project managers & the organization generally have
a degree of control over them.
Market risk and Technical risk
Market risk- Incomplete identification of customer
- Failure to identify changing needs
- Failure to identify new products
Technical Risk is not meeting the cost, time and
performance requirements due to technical
problems with the end items of project.
Technical risk is high in new technologies, new
skills, new products
Technical risk is low in projects dealing with familiar
Customer Needs and Behavior
Labor and material availability
Only the important ones need to be assessed.
Risk chance is -- the probability of happening-
low/ medium/ high -- assign numerical values - 0 to 1.0
Risk impact (result) -- specified in terms of time, cost and
performance measures-- assign numerical values.
The expected value of risk is calculated as-
(result) x (chance) = probability of happening
RISK RESPONSE PLANNING AND CONTROL
Methods of dealing with risk-
Altering plans or procedures to avoid or reduce risk
Prepare contingency plans
Accepting the risk
Transfer the Risk
Paying a premium to pass the risk to another party.
Warranties, penalties, contractual incentives attached to
project cost, schedule or performance measures.
Different types of contract share it in different ways
Fixed cost contract- with contractor
Fixed price with incentive fee- contractor accepts about
Cost + incentive- contractor accepts about 40%
Cost + fixed fee- with the customer
Changing the project plan to eliminate the risk or
By altering the original project concept
Eliminating the risky elements
Minimizing system complexity
Reducing end-item quality requirement
Avoiding reduces payoff opportunities
New product design
Reducing the chance that an adverse event will occur
Reducing the impact of adverse event.
Reducing Technical Risk-
Employ the best technical team
Base decisions on models and simulation of key
Use computer aided system engineering tools
Perform test and evaluations
Minimize system complexity
Reducing Schedule Risk-
Create a master project schedule and adhere to it
Maintain focus on critical activities
Allot best workers on time-critical activities
Schedule risky tasks as early as possible to allow time for
failure from recovery
Reducing Cost Target Risk-
Identify and monitor the key cost drivers
Use low-cost design alternative reviews and
Use proven technology
Perform prototyping and testing on risky components and
Identify the risk, anticipate whatever might happen, and
prepare a detailed plan of action to cope with it.
Initial project is followed, and monitored closely
A remedial measure to compensate for impact
An action taken in parallel to original plan
Cannot be used as an option when the impact is likely to