Risk Management for beginners

1. 7-1
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
Risk Management
Chapter 7

2. 7-2
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
Risk
Risk management - the art and science of
identifying, analyzing, and responding to risk
factors throughout the life of a project and in
the best interest of its objectives.
Project risk – any possible event that can
negatively affect the viability of a project

3. 7-3
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
Risk Vs Amount at Stake
Phase 1
Conceive
(C)
Phase 2
Develop
(D)
Phase 3
Execute
(E)
Phase 4
Finish
(F)
Time
$
Value
Increasing
Risk
Total Project Life Cycle
Amount at stake
Plan Produce
Opportunity and risk
Period of
highest
risk impact

4. 7-4
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
Process of Risk Management
• What is likely to happen?
• What can be done?
• What are the warning signs?
• What are the likely outcomes?
Project Risk = (Probability of Event)(Consequences of Event)

5. 7-5
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
Four Stages of Risk Management
1. Risk identification
2. Analysis of probability and consequences
3. Risk mitigation strategies
4. Control and documentation

6. 7-6
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
Risk Clusters
• Financial
• Technical
• Contractual/Legal
• Commercial
• Execution
Common Types
• Absenteeism
• Resignation
• Staff pulled away
• Time overruns
• Skills unavailable
• Ineffective Training
• Specs incomplete
• Change orders

7. 7-7
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
Risk Factor Identification
 Brainstorming meetings
 Expert opinion
 Past history
 Multiple (or team based) assessments

8. 7-8
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
Risk Impact Matrix
Consequences
Likelihood
High
Low
Low High

9. 7-9
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
Project Risk Scoring
1. Identify factors and assess the probability
(Pf ) and consequences (Cf) of failure
2. Calculate overall probability & consequence
3. Calculate overall risk factor
3
m c d
f
P P P
P
 

4
c s r p
f
C C C C
C
  

( )( )
f f f f
RF P C P C
  

10. 7-10
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
Risk Mitigation Strategies
• Accept
• Minimize
• Share
• Transfer
• Contingency Reserves
–Task contingency
–Managerial contingency
• Mentoring
• Cross training

11. 7-11
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
Control & Documentation
Help managers classify and codify risks,
responses, and outcomes
Change management report system answers
• What?
• Who?
• When?
• Why?
• How?

12. 7-12
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
Project Risk Analysis & Management
Extends risk management over project’s life cycle
Key Features of PRAM
Risk management follows a life cycle
Risk management strategy changes over the
project life cycle
Synthesized, coherent approach

13. 7-13
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
Nine Phases of Risk Assessment
1.Define
2.Focus
3.Identify
4.Structure
5.Clarify ownership of risks
6.Estimate
7.Evaluate
8.Plan
9.Manage

14. 7-14
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall