Chapter 10 Contemporary Project Management Kloppenborg

Texas Medical Center

TMC is composed of 49 not-for-profit institutions dedicated to the highest standards of patient care, research, and education. Currently 11 major construction projects are underway. TMC forms the seventh largest downtown business district in the United States. Contractors must have a plan in place detailing how they are going to secure their construction sites in the event of a hurricane.

DIT0090: Project Management

At the end of this chapter

Describe risk management planning, risk identification, risk analysis, and risk response planning. Identify and classify risks for a project. Populate a risk register. Describe various risk assessment techniques and tell when each is appropriate to use. Prioritize each risk on a project using an appropriate assessment technique. Develop and defend at least one strategy for each of the high priority risks on a project. Compare and contrast the various strategies for dealing with risks.

DIT0090: Project Management

The purpose of risk management is to reduce the overall project risk to a level that is acceptable to the project sponsor and other stakeholders.

DIT0090: Project Management

Plan Risk Management

First understand the projects objectives Realize what project success is

Plan risk management the process of defining how to conduct risk management activities for a project. PMBOK Guide

DIT0090: Project Management

Plan Risk Management

Planning requires an understanding of project success Project success measures include: Meeting Agreements Cost, schedule, and specifications met Customers Success Needs met, deliverables used, customer satisfied Performing Organizations Success Market share, new products, new technology Project Teams Success Loyalty, development, satisfaction
DIT0090: Project Management

Plan Risk Management

Did the project help the performing organization?

Performing organization the enterprise whose personnel are most directly involved in doing the work of the project. PMBOK Guide

DIT0090: Project Management

Specific Project Stakeholder Priorities

DIT0090: Project Management

Risk Management Planning and Stakeholder Priorities

Understand what the project plan calls for Understand in what area would the most important stakeholders like to improve Understand where stakeholders are willing to sacrifice to enable improvements

DIT0090: Project Management

Understanding the Project Risk

A risk is anything that may impact the project teams ability to achieve the general project success measures and the specific project stakeholder priorities. A negative impact poses a threat

threat a condition or situation unfavorable to the projecta risk that will have a negative impact on a project objective if it occurs. PMBOK Guide

DIT0090: Project Management

Understanding the Project Risk

A positive impact poses an opportunity A project manager proactively seeks to eliminate/reduce the impact of threats and capitalize on opportunities

opportunity a condition or situation favorable to the project a risk that will have a positive impact on a project objective if it occurs. PMBOK Guide

DIT0090: Project Management

Risk Management Planning

The risk management plan is useful for communicating with project stakeholders and for follow up analysis

Risk management plan the document describing how project risk management will be structured and performed on a project. PMBOK Guide

DIT0090: Project Management

Risk Management Plan Guidance for an IT Consulting Company

Risk management includes guidance on how to perform three risk management activities:
1. Decide what level of risk premium to charge for the project. The team must rate factors such as project size, complexity, technology, and type. The combined ratings will dictate that a risk premium of 0, 10, or 20 percent be added to the estimated project cost or, for very risky projects, executive approval is mandated. 2. Mitigate risk external to the firm through contract clauses and risk internal to the firm through agreements. 3. Manage the risk very carefully through specifically designed weekly conference call meetings and reports.
DIT0090: Project Management

Roles and Responsibilities

Encourage wide participation in risk management activities The more perspectives considered, the more likely important risks will be uncovered Participation in project risk planning encourages buy-in to a risk management approach The risk management plan defines who has responsibility for each risk management activity

DIT0090: Project Management

Categories and Definitions

Risks may be considered by association with a specific project life cycle stage More project risks are uncovered early in the life of a project The cost per risk discovered early is less Risks discovered late in a project can be expensive

DIT0090: Project Management

Risks Over the Project Life Cycle

DIT0090: Project Management

Categories and Definitions

Risks may be categorized by their impact on a project objective (cost, schedule, scope, quality) Risks may be classified as external/internal to the organization Risks may be classified by what is known about each

DIT0090: Project Management

International Construction Project Risk Factors

DIT0090: Project Management

Information Systems Project Risk Factors

DIT0090: Project Management

Information Systems Project Risk Factors

DIT0090: Project Management

Information Systems Project Risk Factors

DIT0090: Project Management

Categories and Definitions

Cement will harden Bad weather will happen 100-year flood

A known known can be planned and managed with certainty Known unknowns can be identified and may or may not happen
Identify the risk and establish contingency reserves

Unknown unknowns are true uncertainties

Negotiate a management reserve based on project manager and key stakeholders understanding of the project

DIT0090: Project Management

Identify Risks
Information gathering Reviews Understanding relationships Risk register

Identify risks the process of determining which risks might affect the project and documenting their characteristics. PMBOK Guide

DIT0090: Project Management

Information Gathering
A brainstorming activity considering what could go wrong Use classic rules for brainstorming Variations and extensions of possible risks can help to identify additional risks Interview stakeholders

DIT0090: Project Management

Information Gathering
SWOT analysis an information gathering technique used to examine the project from perspectives of each projects strengths, weaknesses, opportunities, and threats to increase the breadth of risks considered. PMBOK Guide

Use a SWOT analysis Use the Delphi technique Use a structured review review a variety of project and other documents to uncover possible risks
Delphi technique an information gathering techniques used as a way to reach a consensus of experts on a subject Responses are summarized and recirculated for further comment. PMBOK Guide DIT0090: Project Management

Reviews

DIT0090: Project Management

Understanding Relationships
Learn the cause and effect relationships of risk events
Use a flow chart that shows how people, money, data, or materials flow from one person/location to another

Consider why a certain risk event may happen through root cause analysis
Why might this happen?

Root cause analysis an information gathering techniques used as a way to reach a consensus of experts on a subject Responses are summarized and recirculated for further comment. PMBOK Guide

DIT0090: Project Management

Understanding Relationships
Understand triggers A trigger may be specific to an individual risk Triggers can be general indications of problems for the project as a whole

Triggers indications that a risk has occurred or is about to occur. PMBOK Guide

DIT0090: Project Management

Triggers for a Project as a Whole

Project manager displays lack of self-esteem. Team members do not show enthusiasm for project. Project was started with inadequate time for planning. Communications are overly general, with little focus. Reports yield little information about true project status. Little effort has been given to risk management.

DIT0090: Project Management

Risk Register
The primary output of risk identification is the risk register The risk register includes risk categories, identified risks, potential causes, potential responses The risk register is a living document

Risk register the document containing the results of the qualitative risk analysis, quantitative risk analysis, and risk response planning. The risk register details all identified risks, including description, category, cause, probability of occurring, impact(s) on objectives, proposed responses, owners, and current status. PMBOK Guide DIT0090: Project Management

Partial Risk Register

DIT0090: Project Management

Risk Analysis
Perform qualitative risk analysis Perform quantitative risk analysis Risk register updates

DIT0090: Project Management

Qualitative Risk Analysis

How likely is a risk to happen? How big will the impact be? When is the risk likely to occur? How easy will it be to notice and correctly interpret the trigger? Perform qualitative risk analysis the process of prioritizing risks for subsequent further analysis or action by assessing and combining their probability and impact. PMBOK Guide

DIT0090: Project Management

Qualitative Risk Assessment

DIT0090: Project Management

Qualitative Risk Analysis

Determine cause and effect relationships
Part of root cause analysis It may be easier to change the effect by changing the underlying cause Use a cause and effect diagram (fishbone diagram)

DIT0090: Project Management

Cause and Effect Diagram

DIT0090: Project Management

Cause and Effect Diagram

List the risk as the effect in a box at the head of the fish Name the big bones Complete the smaller bones as responses to asking why the big bones may be a problem

DIT0090: Project Management

Perform Quantitative Risk Analysis

Bigger, more complex, riskier, more expensive projects may benefit from the rigor of quantitative structured techniques Use when it is critical to predict the probability of completing a project on-time, on-budget, at the agreed upon scope and/or agreed upon quality Quantitative risk analysis the process of numerically analyzing the effect of identified risks on overall project objectives. PMBOK Guide

DIT0090: Project Management

Common Quantitative Risk Analysis Techniques

DIT0090: Project Management

Criteria for Selecting a Quantitative Risk Technique Methodology

Use the explicit knowledge of the project team members. Allow quick response. Help determine project cost and schedule contingency. Help foster clear communication. Easy to use and understand.

DIT0090: Project Management

Risk Register Updates

Add the probability of each risk occurring and its impact to the register Document results of quantitative risk analysis in the risk register

DIT0090: Project Management

Plan Risk Responses

Strategies for Responding to Risks Risk Register Updates

Plan risk responses the process of developing options and actions to enhance opportunities and reduce threats to project objectives. PMBOK Guide

DIT0090: Project Management

Strategies for Responding to Risks

Project risk response strategy decisions must be made with a thorough understanding of the priorities key stakeholders have for cost, schedule, scope, and quality

DIT0090: Project Management

Common Project Risk Strategies

DIT0090: Project Management

Risk Register Updates

The project manager sees that the risk register is updated with the results of the response planning For each risk the response strategy is noted Assign a single person as the owner of each risk Include any changes to the project schedule, budget, resource assignments and communications plan

DIT0090: Project Management

Summary
All projects have some risks Risk planning should use an appropriate level of detail to plan for major risks Risk planning begins with an understanding of project success Risk management planning is part of the overall project management plan Risk identification includes gathering information on potential risks
DIT0090: Project Management

Summary
Identified risks are documented in a risk register Identified risks are next analyzed Risk response planning involves determining how to respond to each of the major risks Risk response strategies include avoid, transfer, mitigate, accept, research, and exploit
DIT0090: Project Management

Risk Management on a Satellite Development Project

Systematically working with the risks of the project allowed us to prepare responses to the risks if and when they occurred.

PM in Action Example

Planning
Establish the process for dealing with risk and change Day-long clinic Criteria for evaluating probabilities of occurrence Compared methods to industry standards
DIT0090: Project Management

Execution

Integrated approach to identification, analysis, and response to risks Using a risk management database tool to log each risk as a record in the database

PM in Action Example

Risk Management Worksheet

DIT0090: Project Management

Risk Management on a Satellite Development Project

Risk management reviews Review logged risks, actions and impacts of risks Review prioritized report of all projects risks Avenue to resolve high-priority risks of the project Identification of potential risks for related projects

PM in Action Example

DIT0090: Project Management