Project Risk

Management

By Tushar B. Kher
BE, MBA, PMP
Certified Trainer for PMP Certification Training
Project Risk Management
 It includes the processes of conducting risk management planning,
identification, analysis, response planning, response implementation, and
monitoring risk on a project.
 The objectives of project risk management are to increase the probability
and/or impact of positive risks and to decrease the probability and/or impact of
negative risks, in order to optimize the chances of project success.
 Risk is an uncertain event or condition that, if it occurs, has a positive or
negative effect on one or more project objectives. If effect is positive it is called
Opportunity. If effect is negative it is called Threat.
 Risk Trigger is an event or situation that indicates that a risk is about to occur.
 Risk Threshold is the maximum amount of risk, and the potential impact of that
risk occurring, that a project manager or key stakeholder is willing to accept.
Risk Management Processes
• There are seven processes in Risk Management
Initiate Plan Execute Monitor & Control Close

• Plan Risk • Implement • Monitor and

Management Risk Control
• Identify Risks Response Resources
• Perform Qualitative
Risk Management
• Perform Quantitative
Risk Management
• Plan Risk Responses
Plan Risk Management
• It is a process of defining how to conduct risk management activities for a project
• The key benefit of this process is that it ensures that the degree, type, and
visibility of risk management are proportionate to both risks and the importance
of the project to the organization and other stakeholders.
Risk Management Plan
• Risk strategy and Methodology
• Roles and responsibilities
• Funding
• Timing.
• Risk categories.
• Stakeholder risk appetite:
• Definitions of risk probability and impacts
• Probability impact matrix
• Reporting Format and
• Tracking: how risk activities will be recorded and how risk management processes
will be audited
Risk Categorisation
• Risk can be categorise depending on project objective it is affecting . e.g. scope
related risk, Schedule related risk, financial risk or quality related risk.
• Risk can be categorise depending on the source of risk. e.g Technical non
technical, internal external, industry specific general etc.
Probability and Impact definition
• Definitions of risk probability and impact levels are specific to the project context
and reflect the risk appetite and thresholds of the organization. These scales can
be used to evaluate both threats and opportunities.
Probability Impact Matrix
Identify Risk
• It is the process of identifying individual project risks as well as sources of overall
project risk and documenting their characteristics.
• The key benefit of this process is the documentation of existing individual project
risks and the sources of overall project risk
Risk identification Techniques
Risk Register
• It is a document in which information related to Risk are recorded.
• After identify risk Process it will have
• List of identified risks. A unique identifier is assigned to each risk.
Risks are described in enough detail to ensure unambiguous
understanding. A structured risk statement may be used to distinguish
risks from their cause(s) and their effect(s).
• Potential risk owners. If a potential risk owner has been identified the
same is recorded in the risk register.
• List of potential risk responses. If a potential risk response has been
identified it is recorded in the risk register
Perform Qualitative Risk Analysis
• It is the process of prioritizing individual project risks for further analysis or action by
assessing their probability of occurrence and impact on objectives as well as other
characteristics.
• The key benefit of this process is that it focuses efforts on high-priority risks. This process is
performed throughout the project.
• Other Characteristics
• Urgency. The period of time within which a response to the risk is to be implemented in
order to be effective.
• Proximity. The period of time before the risk might have an impact on one or more project
objectives.
• Dormancy. The period of time that may elapse after a risk has occurred before its impact is
discovered
• Manageability. The ease with which the risk owner can manage the occurrence or impact of
a risk. Where management is easy, manageability is high.
• Controllability. The degree to which the risk owner is able to control the risk’s outcome.
Where the outcome can be easily controlled, controllability is high.
Perform Qualitative Risk ITTO
Perform Quantitative Risk Analysis
• It is the process of numerically analyzing the combined effect of
identified individual project risks and other sources of uncertainty on
overall project objectives.
• It is generally used for large or complex projects or strategically
important projects, as it is very costly process
• The process is the only reliable method to assess overall project risk
through evaluating the aggregated effect on project outcomes of all
individual project risks and other sources of uncertainty.
• The key benefit of this process is that it quantifies overall project risk
exposure, and it can also provide additional quantitative risk
information to support risk response planning
Perform Quantitative Risk Analysis
ITTO
Simulation: Monte Carlo Analysis
• Quantitative risk analysis uses a model that simulates the combined effects of
individual project risks and other sources of uncertainty to evaluate their potential
impacts.
• Simulations are typically performed using a Monte Carlo analysis.
• Typical outputs include a cumulative probability distribution (S-curve) representing
the probability of achieving any particular outcome or less.
Decision Tree Analysis
Plan Risk Response
• Plan Risk Responses is the process of developing options, selecting strategies, and
agreeing on actions to address overall project risk exposure, as well as to treat
individual project risks.
• A contingency reserve is often allocated for time or cost. If developed, it may
include identification of the conditions that trigger its use.
• The key benefit of this process is that it identifies appropriate ways to address
overall project risk and individual project risks. This process also allocates
resources and inserts activities into project documents and the project
management plan as needed.
Plan Risk Response ITTO
 Plan Risk Response
 Assign a person to implement that action.
 Develop options, select strategies, and agree
on actions to address overall risk exposure
and response
 Address risks by priority–greatest to least.
 Add resources and activities to the budget,
schedule, and project management plan to
support risk responses. Assign a response to
each risk.
 Choose from various risk response strategies
to determine a response for each risk.
 Develop a fallback plan in case the primary
strategy is not effective.
 Review secondary risks - These are risks that
could occur as a result of implementing a risk
response.
Secondary and Residual Risk
Implement Risk Response
Monitor Risk Response
Objectives of Monitoring
The Monitor Risks process uses performance information generated during
project execution to determine if:
• Implemented risk responses are effective,
• Level of overall project risk has changed,
• Status of identified individual project risks has changed,
• New individual project risks have arisen,
• Risk management approach is still appropriate,
• Project assumptions are still valid,
• Risk management policies and procedures are being followed,
• Contingency reserves for cost or schedule require modification, and
• Project strategy is still valid
Case Study
• Identify Risk and Plan Risk Response
Project 1: Construction of a stadium
Project 2: Developing a Website for sharing information among MBA
classes of SPM
Project 3: Construction of a Chemical Plant
Project 4: Starting a new course in PDEU