Project Risk Management

Project Risk Management
Agenda
What is Risk?
Risk Management Planning
Risk Identification
Qualitative Risk Analysis
Quantitative Risk Analysis
Risk Response Planning
Risk Monitoring and Control
What is Risk?
Risk Identification
What is risk?
Risk Management should be completed ________ the

planning phase.
Early in
A . End of
B: Middle
C: Early in
D: Any time
Project risk is the uncertainty that an event or condition

that effects ________ will be realized.
At least on of the project objectives cost, scope time or quality
A . Project performance as measured by the functional managers

B . Project Impact on the organization
C . Opportunities that project could realize
D . At least on of the project objectives cost, scope time or quality
What is Risk?
A risk is any uncertain event or condition that affect the
project.
It is something that may or may not happen.but if it does, then it
will impact the project
Not all the risks are negative

Some events (finding an easier way to do an
activity) or conditions (lower price for certain
material) can help your project. When this
happens it is called as an Opportunity
6
What is Risk?
Risk Identification

If you need water today, you should dig well yesterday Old Chinese proverb
When the risk planning happens?

Plan for the risks from beginning and keep
coming back to do more planning through out
the project.
Standard Templates
Inputs
Roles and Responsibilities
Organizational Process Assets

Enterprise Environmental
Factors
Project Management Plan
Project Scope Statement
Learnings from similar projects
Risk Categories
Are the people in the
company or risk takers?
Do they play it safe?
8
Do all your risk planning

by meeting with the team
Keep meeting with them
throughout the project to
stay on top

Tools and Techniques
The plan has parts that are really useful for managing the risk
Bunch of categories that are used to classify the risk. Eg:
Technical, External, Organizational, Project Management
Risk Breakdown structure (RBS) similar to WBS (Work
Breakdown Structure)
Guidelines to help figuring out how big is risk impact
A scale to figure out probability of the risk
10

Risk Breakdown Structure
Project Risks
Technical
Project
Management
External
Organizational
Requirements
Supplier
Resources
Estimating
Technology
Regulatory
Funding
Attrition
Quality
Market
Prioritization
Funding
Performance
and reliability
Weather
11

Output of Risk Management Planning
Methodology- Defines how risk management will be done
Roles and responsibilities- Defines the risk management team
and their responsibilities for risk management activities
Budgeting- Assigns budget for risk management activities
Timing- When and how often risk management activities appear
in the project schedule
Risk Categories- Defines types and sources of the risks
Definitions- Operational definitions for the project team to use to
ensure consistency in the assessment of risks and opportunities
Probability and impact Matrix- Specifies combinations of impact
and probability, which lead to risk ratings such as high, medium12

Output of Risk Management Planning
Revised Thresholds- Revised or validated descriptions that
trigger taking action; scope, quality, cost, and time thresholds
may be different from each other
Reporting formats- How to communicate risk activities and their
results
Tracking- How to document risk monitoring and management
activities
13

Sample definition of impact on Project Objectives
Project
Objective
Very Low
Low
Moderate
High
Very High
Cost - Budget
Insignificant
Increase
< 10%
increase
10%-20%
increase
20%-40%
increase
>40% increase
Time- Schedule
Insignificant
Increase
<5% increase
5%-10%
increase
10% to 20%
increase
>20% increase
Scope
Deliverable(s)
Scope
decreases
barely
noticeable
Minor areas of
scope are
affected
Major areas of
scope are
affected
Reduction in
quality is
unacceptable
End item has

limited use if
any
Quality
Deliverable(s)
Quality
decreases
barely
noticeable
Only few
applications
are affected
Reduction in
quality to this
level requires
approval
Reduction in
quality is
unacceptable
End item has

limited use if
any
14
What is Risk?
Risk Identification
Risk Identification
15
Risk Identification Process

Risk Identification process out put is Risk Register
Inputs
Organizational Process
Assets
Enterprise Environmental
Factors
Project Management Plan
Learnings from similar
projects
Risk Management Plan
Create an atmosphere where team members are

comfortable bringing up potential risks
Team must be able to identify potential risks
without evaluation
All ideas should belong to the team, not
individual
Include the right people
16

How to do effective risk identification?
Brain Storming- Using the project team and other experts to generate list of
risk events. BS sessions always have a facilitator, without her its just a
disorderly meeting
Delphi Method- Developing consensus through a polling technique in multiple
rounds, moderated by a facilitator. Identity of each expert is kept anonymous to
get honest feedback.
Interviews- Interviewing SMEs (Subject Mater experts) or other experienced in
projects
SWOT Analysis- Lets you analyse strengths, weaknesses, opportunities and
threats.
Root Cause Identification- Analyse each risk and figure out whats actually
behind it.
17

Checklist Analysis- Checklists are usually developed based on
historical information and previous project team experience. A
lowest level of RBS of some other project can be used as
checklist.
Assumptions Analysis- It is a matter of validating the
assumptions that you identified and documented during the
course of the projects.
Strength of assumption.
Consequences if assumption turns out to be false.
Diagramming Techniques- Cause and affect diagrams, process
flow charts, and influence diagrams
18

Cause
Process
Material
Material
Defects
Wrong Order
Incompatible
No Training
Availability
Staff
Effect
Problem or
Defective Statement
Damaged
Hardware
Cause and effect Diagram

19

Cause
Arranged
Marriage
Low
acceptance
in society
Love
Marriage
Need to
compromise
on many
things
Effect
Highly
Educated
Will not obey
orders
Unhappy person
Will not mix
with others
Parents are
not happy
Low
Education
Cause and effect Diagram

20

Attrition
Customer
Satisfaction
Frequent Scope
Changes
Delivery time
Defects
Revenue
Reduction in
Testing budget
Influence Diagram
21

Identify the Trigger on time.

Observe what is happening
around
22

Brain power
What is the difference between Brainstorming and
the Delphi method technique?
Can you think of a situation where one would be
more useful than the other?
23

What technique is used?

Your project requires that you setup a campsite on the edge of a
cliff. You gather your team members, including a geologist, a
meteorologist, a tracker, and three campsite workers, and lead
them a direct discussion where they identify as many risks as
possible.
You meet individually with many different people: the sponsor,
stakeholders, team members and experts. You ask each of them
detailed questions about what they think could go wrong on the
project
24

Sample risk register
Identified
Risks
Potential
Responses
Root Causes
Landslide caused by
loose gravel and dirt on
the nearby mountain
Put up barrier or dig trench
Geological data review found

loose topsoil nearby
High winds can lead to

cliff disaster
Reinforce tent stakes; obtain

weather proof equipment
National weather service

predicts 35% chances of high
winds
Truck rental is
unavailable
Pay to reserve equipment at a

second company
Higher than expected demand

for equipment in the are this
season
Equipment failure during

project
No responses were found by team
Recent industry report cites

higher-than-expected failure
rates for critical equipment
25
What is Risk?
Risk Identification
26

Inputs
Assets
Risk Register
Make sure that the information in Risk Register

is absolutely right
Examine carefully how likely risks are to happen
and how bad it will be if they do
If a risk is going to occur early in the project, its
a good idea to think of response strategy early
too
27

Inputs
Assets
Risk Register
Make sure that the information in Risk Register

is absolutely right
Examine carefully how likely risks are to happen
and how bad it will be if they do
If a risk is going to occur early in the project, its
a good idea to think of response strategy early
too
28

How to do Qualitative Risk Analysis?
Risk Probability and Impact Assessment- Investigate the likelihood and
effect on project objectives for each risk
Probability and impact Matrix- A look up table that integrates probability
and impact combinations into risk ratings such as high, medium, or low.
Risk Data Quality Assessment- Examining the data used to evaluate
risks to determine whether it is accurate and reliable, including the
distinction between fact and opinion
Risk Categorisation- Sources and location of project risks
Risk Urgency Assessment- Designation of critical nature of risk for
warning signs, severity, and time to implement a response
29

The outputs of Qualitative Risk Analysis include the
updated risk register with some or all of the following
Output
Priority- Each individual risk is ranked according to significance and
increased chance of meeting project objectives (scope, cost, time, or
quality) from a risk response.
Category- Looking at the cause or location of risks can lead to an
understanding of root cause and hence more effective responses
Near-term response- Risks that require an immediate response are
grouped so that they can be addressed in a timely fashion
Additional Analysis- Risks that require more analysis and response.
Low priority risks for watch lists- Risks that are low priority but that
should be watched
Trends in Qualitative Risk Analysis- Trends that require additional
analysis that may point the team to a potential problem area
30
_______ and ________ are assessed for each identified

risk in the Qualitative Risk Analysis process
Probability and Impact
Probability and Impact
Impact and Priority
Probability and Cost
Priority and Impact
31

Example of Qualitative Risk Analysis
Risk Event
Priority
(High,
Mediu
m,
Low)
Category of
risk
Nearterm
Respons
e
Additional
Analysis
Required
Watch List
Trends
Project
personnel
reassigned
before end
of project
Low
Organizational
None
No
Communicate with
functional
managers on a
monthly basis
Ask
sponsor
for
additiona
l
observati
ons
Vendor
delivery
date of
hardware
High
ExternalSupplier
Expeditin
g
activities
Yes-explore
alternatives
with other
vendors
If the inspection
date is delayed by
the vendors
schedules this must
be noted in the
status reports
Other
purchas
e orders
are
delayed
32

Probability and Impact analysis
Probability
P&I
10%
30%
15 21 27
50%
15 25 35 45
70%
21 35 49 63
90%
Impact
27 45 63 81
10 30 50 70 90
Probability: Likely
hood that an event
will occur
Impact: Amount of
pain or gain the risk
event poses to the
project
33

Probability and Impact analysis
Probability
P&I
10%
30%
15
21
27
50%
15
25
35
45
70%
21
35
49
63
90%
27
45
63
81
Impact
10
30
50
70
90
Risk
Proba
bility
Impact
P&I
1. Illness
10%
70
2. Weather
50%
90
45
3. No Power
30%
90
27
4. Attrition
50%
70
35
5. Suppliers
30%
90
27
34
Inputs to Qualitative Risk Analysis process include

H: A, B, C and D
A . Risk Register
E: Probability and Impact
B: project Scope Statement
F: All (A to E)
C: Risk Management Plan
G: A, B, C and E
D: Org process Assets
H: A, B, C and D
35
Which one of the following is not an information

gathering technique for risk management.
Probability and Impact Matrix
A . Interviews
B: Delphi Method
C: Probability and Impact

Matrix
D: Root Cause Analysis
36
What is Risk?
Risk Identification
37

Inputs
Risk Register
Tips
Without discipline of previous risk management
processes, project teams may tempted to run
into developing responses, which is not correct
Understanding of the causes and impact is
important before response planning
38

If your project requires
that you stand on the
edge of a cliff, then
there is a risk that you
could fall.
If its very windy or the

ground is slippery and
uneven, then falling is
more likely
39

How to deal with risk?
Avoid
The best thing that you can do is to
avoid it. Also called as eliminate
The easiest way to avoid this risk

is to walk away from the cliff.but
that may not be an option on this
project
Eg: Not flying in order to not take the risk that
the airplane were to be hijacked.
Avoidance most of the times mean loosing the
business
40

Mitigate
Also called as reduction.
Take some action that will cause little impact to the
project. Reduces the probability of risk.
Eg: Fire extinguishers kept

onsite to reduce the risk in
case of fire.
41

Transfer
Pay someone else to accept it for you. The
most common way to outsource or buy
insurance
42

Accept
When you accept the risk, at least you
have looked at all the alternatives and you
know what will happen if it occurs
Looks like
falling is
the best
option
43

Tip
US Department of Defense calls these categories as ACAT Avoid, Control, Accept, or Transfer
Some of these strategies may involve trade-offs that are not
acceptable to the person of organization which makes the
decisions difficult
44

Dealing with Positive Risk or Opportunities
Exploit
Directly exploit the risks with positive impacts to take advantage of
an opportunity for improved performance
Share
Allocate ownership of the risk to a third party more
capable of capturing the positive risk or opportunity
Enhance
Identify and maximize key drivers for opportunities, thereby
strengthening the impact or increasing the positive risk event
45

Dealing with threats and opportunities
Passive Acceptance
Do nothing. Used when there is no possibility of
elimination or when the costs are prohibitive
Active Acceptance
Contingency Planning
Contingency planning involves, planning alternatives, to deal with risk

if it occurs.
Contingency comes into play only when the risk event occurs.
Contingency reserves is a common contingency response.
Contingency reserves include project funds that are held to offset any
un avoidable threats that may occur for project scope, schedule, cost
46
or quality

Risk Response Strategies
Strategy
Type or risk
Example
Avoid
Negative, Threat
Revise the schedule so that if the risk occurs, the

project completion date is not missed
Transfer
Negative, Threat
Outsource or insure
Mitigate
Negative, Threat
In process inspection or review
Exploit
Positive,
Opportunity
Shorten the project duration by increasing number of

people in the team
Share
Positive
Opportunity
Join Venture
Enhance
Positive,
Opportunity
Increase probability of a positive risk
Accept
Positive or
Negative
Add enough time or money into contingency reserve to

handle the risk if it occurs
Contingency Positive or
Negative
Additional money in reserve in case schedule or quality

47
objectives are missed.
Name the strategies for negative risks?

Avoid, Mitigate, Transfer, Contingency, Accept
Avoid, Mitigate, Transfer, Contingency, Accept
Avoid, Mitigate, Transfer
Avoid, Mitigate, Transfer, Accept
None of the above
48

Updated Risk Register
Risk Event
Priorit
y
Risk
Owner
Category
of risk
Approve Contingenc Continge Secondar

d
y reserve
ncy Plan y Risk
Respon
and
se
Triggers
Strategy
Late
delivery of
hardware
High
Ravindra External Contin

gency
Supplier
3 weeks to
schedule
$3000 for
additional
effort,
travel, and
expediting
shipping
Additio
nal
meeting
s with
vendor
if
immedi
ate
milesto
nes are
missed
Taking
active
part in
vendor
manage
ment
might
impact
other
delivery
activitie
s 49
Risk register is updated periodically throughout the

project life cycle. The risk register is initiated during the
______________ and further updated based on the
information developed in the ____________________
Risk Identification, Qualitative Risk Analysis
Risk Management Planning, Qualitative Risk Analysis
Risk Identification, Risk Management Planning
Risk Identification, Qualitative Risk Analysis
Risk Management Planning and Risk Identification
50
Mitigation as a response strategy will always add time and/or

money to the project. True or False?
False
51
Risks may have one or more causes and one or more impacts.
True or False?
True
52
Project Management
Competency Center
53

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Project Risk Management

Project Risk Management

Risk Management should be completed ________ the

Project Risk Management

Project risk is the uncertainty that an event or condition

A . Project performance as measured by the functional managers

Not all the risks are negative

Risk Management Planning

Risk Management Planning

When the risk planning happens?

Roles and Responsibilities

Organizational Process Assets

Risk Management Planning

Do all your risk planning

Risk Management Planning

Risk Management Planning

Risk Management Planning

Risk Management Planning

Risk Management Planning

End item has

End item has

Risk Identification Process

Create an atmosphere where team members are

Risk Identification Process

Risk Identification Process

Risk Identification Process

Cause and effect Diagram

Risk Identification Process

Cause and effect Diagram

Risk Identification Process

Risk Identification Process

Identify the Trigger on time.

Risk Identification Process

Risk Identification Process

What technique is used?

Risk Identification Process

Put up barrier or dig trench

Geological data review found

High winds can lead to

Reinforce tent stakes; obtain

National weather service

Pay to reserve equipment at a

Higher than expected demand

Equipment failure during

No responses were found by team

Recent industry report cites

Qualitative Risk Analysis

Qualitative Risk Analysis

Make sure that the information in Risk Register

Qualitative Risk Analysis

Make sure that the information in Risk Register

Qualitative Risk Analysis

Qualitative Risk Analysis

Risk Response Planning

_______ and ________ are assessed for each identified

Priority and Impact

Qualitative Risk Analysis

Qualitative Risk Analysis

Qualitative Risk Analysis

Qualitative Risk Analysis

Inputs to Qualitative Risk Analysis process include

E: Probability and Impact

B: project Scope Statement

C: Risk Management Plan

_ and __ are assessed for each identified