1. PROJECT RISK MANAGEMENT
Presented by
Neenu Babu
Roll no: 28
S3 MBA

2. Introduction
• Project risk management is the Art and science of
planning, organizing, securing and managing
resources (Management) to manage the effects of
uncertainties on objectives (Risk)of a temporary
endeavor (project).
• Notion of project risk= f(likelihood, impact)
• The likelihood is some problematic error will occur
• The Impact of the event if it does occur

3. Process of risk management
• Risk identification
• Risk assessment
• Risk response planning

4. Risk identification
Risk identification is the critical first step of
the risk management process. The objective of risk
identification is the early and
continuous identification of events that, if they
occur, will have negative impacts on the project's
ability to achieve performance or capability outcome
goals.

5. Sources of risk
• Internal risk
• External risk

6. Internal risk
• Risk originated inside the project
• Market risk
• Technical risk

7. Market risk
• Risk of not fulfilling either market needs or the requirements
particular customers
Sources
• Incompletely or inadequately defined market or customer
needs and requirements
• Failure to identify changing needs and requirements
• Failure to identify newly introduced products by competitors
Market risk can be reduced by thoroughly and accurately
defining needs and requirements at the start of the project
and continuously monitoring and updating requirements
as needed throughout the project

8. Technical risk
• It is the risk of not meeting time, cost, or performance
requirements due to technical problems with the end
item or project activities
Factors effecting technical risk
• Maturity
• Complexity
• Quality
• concurrency

9. External risk
• Risk that stem from sources outside the project
• Sources
• Market conditions
• Competitors’ action
• Government regulations
• Interest rate
• Decision made by senior management
• Customer needs and behavior
• Supplier relations
• weather
• Labor availability

10. Risk Identification techniques
• Project risks are identified from analysis of he numerous
documents reviewed or prepared during project conception and
definition.
• Report from past project
• List of user needs and requirements
• Work package definitions
• Cost estimates
• Schedules
• Schematic and models of end item

11. Risk assessment
Depends on three things
• Risk likelihood
• Risk impact
• Risk consequences

12. Risk likelihood
• It is the probability that a hazard or risk factor will
actually materialize
• Expressed as a numerical value between 1 and 0
Or
• Qualitative rating such as high, medium or low

13. Risk impact
• It is the impact of risk.
• Risk impact of projects is specified in terms of time, cost and performance
measures
• Risk impact can be expressed as qualitative rating such as high, medium
and low
• Also can be expressed as a numerical measure between 0 and1
• 0- not serious
• 1- catastrophic
Example
• Insufficient number of skilled labor staff a project has the impact of
extending the schedule or preventing the project from meeting user
requirements

14. Risk consequence
Risk consequence is the function of risk likelihood and
risk impact
• Expressed as single numerical rating system
• Value ranging between 1 and 0
• Risk consequence= impact * likelihood

15. Risk priority
• Project are subjected to numerous risk
• Risk consequences of project have been computed
• Give rank according to the risk
• More attention given to project with highest risk
• Project team members, managers, subcontractors and
consumers review them to ensure everyone’s
awareness so that appropriate risk response can be
planned

16. Risk response planning
• Addresses the matter of how to deal with risk
• Ways of dealing with risk
• Transfer the risk
• Avoid the risk
• Reduce the risk
• Preparing contingency plan
• Accept risk

17. Transfer the risk
• Risk can be transferred partly or fully from the
customers to the contractor or vice versa
By using
• Contractual incentives
• Warranties
• Penalties attached to the project performance, cost, or
scheduled measure

18. Avoid the risk
Risk can be avoided by
• altering the original project concept
• Changing contractors
• Safety procedures

19. Reduce risk
Ways to reduce the risk
• Employ the best technical team
• Use mature, computer aided system engineering tools
• Use parallel development on high risk task
• Provide the technical team with adequate incentives for
success
• Hire outside specialists for critical review and assessment of
work
• Perform extensive test and evaluations
• Minimize system complexity
• Use design margins

20. Contingency planning
• It can be post ad hoc remedial action to compensate
for the risk impact, an action taken in parallel to the
original plan or a preventive action taken parallel to
the original plan or a preventive action initiated by
preliminary risk symptoms to mitigate the risk impact

21. Accept risk
• Not all impacts are severe or fatal, and if the cost of
avoiding, reducing, or transferring the risk exceeds
the benefit then do nothing

22. Risk management principles
• Create a risk management plan
• The risk profile for each risk should include likelihood, cost
and schedule impact and contingencies to be invoked
• Risk officer
• The budget and schedule should include a calculated risk
reserve, which is a buffer of money, time and other resources
for dealing with risk as they materialize
• Risk must be continuously monitored
• Establish communication channels
• Specify procedures to ensure accurate, comprehensive project
documentation.

23. conclusion
Project risk management maximizes the areas of
project over which internal stake holders control the
outcomes, and minimize the areas over which stake
holders have absolutely no control. It involve identify
the risk, assessing them, and planning the appropriate
responses.

24. Reference
• John M Nicholas- project management for business
and technology, principles and practice , 2nd
edition prentice hall of India private limited , New
Delhi- 110001, 2002