Module nine by Regis University

Module Nine

11.0 Project Risk Management “Includes the processes of conducting risk management planning, identification, analysis, response planning, response implementation, and controlling risk on a project.” PMBOK® Guide 2017, Glossary

11.0 Project Risk Management Learning Outcomes

• Explain the Risk Identification. Quantification, Response. and Control processes. • Identify risk sources and possible mitigation strategies based on type of risk. • Describe the use of Expected Monetary Value, Decision Trees, PERT Approximation, and a Qualitative Rating System to analyze and categorize risks. • Identify appropriate Risk Response strategy and monitor performance to assure success.

11.0 Project Risk management Knowledg Initiating Planning e Area

Executing

Monitoring and Control

Risk

11.6

11.7

11.1 11.2 11.3 11.4 11.5

Name the main processes in the Project Risk knowledge area.

Closing

11.0 Plan Risk Management Why use risk management? • Necessary to maintain position in an environment where “uncertainty” continues to increase • Planning tends to focus on the past • Uncertainty rarely addressed explicitly and formally • Too many surprises • Types of risks: Event and Non-Event • Variability risks • Ambiguity risk

11.1 Plan Risk Management • Knowledge Area: Risk • Process Group: Planning “Process of defining how to conduct risk management activities for a project.” PMBOK® Guide 2017, Glossary

11.1 Plan Risk Management ITTOs Fill out the ITTOs below and check your answers in the PMBOKÂ® Guide 2017, pg. 401

Inputs What do you need beforehand?

Tools & Techniques How is it done?

Outputs What are the results?

11.1.1.1-5 Plan Risk Management Inputs 1. Project charter (4.1.3.1) 2. Project management plan (4.2.3.1) – Scope statement, cost plan, schedule plan, communication plan, …

3. Project documents 1. Stakeholder register (13.1.3.1)

4. EEFs - Attitudes and tolerances that describe a degree of risk that an organization will endure 5. OPAs - Risk categories, glossary, risk statement formats, standard templates

11.1.2.1-3 Plan Risk Management T&T

•

Expert judgment – Sr. management, experiences project managers, consultants, industry groups

• • • • • •

Data analysis • Stakeholder register – Stakeholder risk profile analysis, strategies risk scoring sheets Meetings - Attendees may hold a planning meeting to develop a risk management plan: Project Manager Team members Stakeholders, Others

11.1.3.1 Plan Risk Management Outputs Risk Management Plan • • • • • • • • • •

A methodology that defines the approaches, tools, and data sources Roles and responsibilities Funding Timing Risk categories - RBS Define different levels of the risks’ probabilities and impacts Probability and impact matrix Revised stakeholders’ tolerances Reporting format Communication methods/Tracking

11.1.3.1 Plan Risk Management Outputs Sample Risk Breakdown Structure - RBS

11.1.3.1 Plan Risk Management Outputs Example of Definitions for Probability and Impacts

11.2 Identify Risks • Knowledge Area: Risk • Process Group: Planning “Identifying individual project risks as well as sources of overall project risks, and documenting their characteristics.” PMBOK® Guide 2017, Glossary

11.2 Identify Risks ITTOs Exercise Fill out the ITTOs below and check your answers in the PMBOKÂ® Guide 2017, pg.. 409

Inputs What do you need beforehand?

Tools & Techniques How is it done?

Outputs What are the results?

11.2.1.1-6 Identify Risks Inputs 1.Project management plan 2.Project documents 3.Agreements 4. Procurement documentation 5.EEFs - Benchmarking, risk attitudes, academic studies, published checklists

6.OPAs: Lessons learned, project files, risk templates Project Management Institute , A Guide to the Project Management Body of Knowledge, (PMBOKÂŽ Guide) - Sixth Edition, 2017 Project Management Institute, Inc. All rights reserved. Page 407. 413

11.2.2.1-6 Identify Risks T&T •Expert judgment •Data gathering • Brainstorming • Checklists • Interviews

•Data analysis •Interpersonal and team skills •Prompt list; predetermined list of risk categories that give rise to certain project risks over others.

•Meetings

11.2.2.2 Identify Risks T&T Data Gathering Techniques • Brainstorming • Delphi Technique- anonymous questionnaire • Interviewing Subject Matter Experts (SMEs) • Checklists are developed based on historical information and knowledge

11.2.2.3 Identify Risks T&T Data Analysis • Root cause analysis (8.2.2.2) • SWOT analysis • Project risks are conceived and developed based on a set of hypotheses, scenarios, or assumptions • Documents analysis (5.2.2.3)

11.2.3.1 Identify Risks Outputs Risk Register • List of identified risks • Potential risk owners • List of Potential responses

http://www.thepensionsregulator.gov.uk/

11.2.3.2-3 Identify Risks Outputs Risk report/ Project documents updates • Risk report • •

Sources of overall project risks Summary information on identified project risks

• Project documents updates • • •

Assumption log Issue log Lessons learned register

11.3 Perform Qualitative Risk Analysis Knowledge Area: Risk Process Group: Planning

“Process of prioritizing individual project risks for further or action analysis or action by assessing their probability of occurrence and impact as well as other characteristics.” PMBOK® Guide 2017, Glossary

SUBJECTIVE analysis

11.3 Perform Qualitative Risk Analysis ITTO Fill out the ITTOs below and check your answers in the PMBOKÂ® Guide 2017, pg. 419

Inputs What do you need beforehand?

Tools & Techniques How is it done?

Outputs What are the results?

11.3.1.1-4 Perform Qualitative Risk Analysis Inputs •Project management plan • Risk management plan

•Project documents • Assumption log • Risk Register • Stakeholder register • EEFs – Industry studies, risk databases • OPA - Company’s policies or procedures which assist in understanding project risks –information on prior projects, studies of similar projects, and risk databases

11.3.2.1-7Perform Qualitative Risk Analysis T&T

•Interpersonal and team skills

•Expert judgment

• Facilitation

• Data gathering

•Risk categorization

• Interviews

•Data representation

• Data analysis • Risk data quality assessment • Risk probability and impact assessment • Probability & Impact matrix

• Probability and impact matrix • Hierarchical charts

•Meetings

• Assessment of other risk parameters

11.3.2.1Perform Qualitative Risk Analysis T&T Expert Judgment

â&#x20AC;˘ Assess the impact and the probability of each risk â&#x20AC;˘ Use risk facilitation workshops or interviews

11.3.2.3 Perform Qualitative Risk Analysis T&T

Data Analysis - Risk probability and impact assessment •

Investigates the likelihood that each specific risk will occur and potential effect on a project objective (cost, schedule, quality, or scope) • Risk is < 100% -- future • Issue is 100% -- present ***You define probability and impact values***

11.3.2.3 Perform Qualitative Risk Analysis T&T

Data Analysis - Risk probability and impact assessment

Probability

Threats

0.900

0.045

0.090

0.180

0.360

0.720

0.700

0.035

0.070

0.140

0.280

0.560

0.500

0.025

0.050

0.100

0.200

0.400

0.300

0.015

0.030

0.060

0.120

0.240

0.100

0.005

0.010

0.020

0.040

0.080

Impact

0.050

0.100

0.200

0.400

0.800

http://www.anticlue.net/archives/000817.htm

11.3.2.3 Perform Qualitative Risk Analysis T&T Data Analysis - Risk Data Quality Assessment Evaluates the accuracy and reliability of the information source; • • • • •

Clear Availability Quality Integrity and Reliability Unbiased

11.3.2.3 Perform Qualitative Risk Analysis T&T Data Analysis - Risk Urgency Assessment

Qualitative Risk Rating System •

High • Significant disruption to schedule • Increase in cost, or degradation of performance

•

Moderate • Cause some disruption • Special supplier emphasis and close customer monitoring • Probably overcome difficulties

•

Low •

Has little potential to cause disruption to schedule, increase in cost, or degradation of performance

11.3.2.5 Perform Qualitative Risk Analysis T&T Risk Categorization â&#x20AC;˘ Groups risks by different categories; source, area impacted, or project phase

http://www.uq.edu.au/internal_audit_office/

11.3.2.6 Perform Qualitative Risk Analysis T&T Data presentation â&#x20AC;&#x201C; Probability and impact matrix

11.3.2.6 Perform Qualitative Risk Analysis T&T Data presentation - Hierarchical charts (more than two parameters)

11.3.3.1 Perform Qualitative Risk Analysis Outputs Project documents updates • Assumptions log updates – Accommodate new information • Issue log (4.3.3.3) • Risk Register Updates • • • • • • •

Relative ranking or priority of project risks Risks grouped by categories Causes of risk or areas requiring attention List of risks requiring quick response List of risks requiring additional analysis Create watch lists for low-priority risks Trends in qualitative risk analysis results

• Risk report

11.4 Perform Quantitative Risk Analysis Knowledge Area: Risk Process Group: Planning

“Process for numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives.” PMBOK® Guide 2017, Glossary

OBJECTIVE or Numerical analysis

11.4 Perform Quantitative Risk Analysis ITTOs Fill out the ITTOs below and check your answers in the PMBOKÂ® Guide 2017, pg.. 428

Inputs What do you need beforehand?

Tools & Techniques How is it done?

Outputs What are the results?

11.4.1.1-4 Perform Quantitative Risk Analysis Inputs •

Project management plan • • • • •

• •

Project documents EEFs • •

•

Risk management plan Scope baseline Schedule baseline Cost baseline Project documents

Risk databases Industrial studies

OPAs • •

Is it a new project with a significant change in process? Information from previous, similar projects

11.4.2.1-4 Perform Quantitative Risk Analysis • Expert judgment • Data gathering - Direct, diagrammatic, Delphi • Interpersonal and team skills • Facilitation

• Representations of uncertainty • Data analysis • Sensitivity analysis • Decision tree- Expected monetary value analysis • Modeling and simulation – Influence diagrams

T&T

11.4.2.1 Perform Quantitative Risk Analysis

T&T

Expert Judgment

• Translating information on individual risks • Select most appropriate representation of uncertainty to model particular risks • Selecting tools • Interpret data by identifying weakness/strength of the tools

11.4.2.5 Perform Quantitative Risk Analysis T&T Data Analysis - Simulation

11.4.2.5 Perform Quantitative Risk Analysis

T&T

Data Analysis - Sensitivity analysis

Which risks have the most potential impact on the project?

•Tornado diagram (plot, chart) (PMBOK® Guide figure 11-14) • • • •

A form of a bar chart Compares relative importance of and impact of variables that have a high degree of uncertainty Data categories are presented horizontally instead of vertically Largest bars appear at the top of the chart The larger the bar the greater the sensitivity

11.4.2.5 Perform Quantitative Risk Analysis

T&T

Data Analysis â&#x20AC;&#x201C; Tornado diagram

11.4.2.5 Perform Quantitative Risk Analysis

T&T

Data analysis – Decision tree analysis

Expected monetary value analysis (EMV) Future outcomes of scenarios that might occur or not • Decision tree analysis (PMBOK® Guide, Figure 11-15) • EMV= value of each possible outcome multiplied by the its probability of occurrence and adding the products together

EMV = (Value X Probability of occurrence) +(Value X Probability of occurrence)+…

11.4.2.5 Perform Quantitative Risk Analysis T&T Decision Tree Analysis Exercise

11.4.3.1 Perform Quantitative Risk Analysis Outputs Project Documents Updates Risk register • Assessment of overall project risk exposure • Probabilistic analysis of the project • Prioritized list of quantified risks • Trends in quantitative risk analysis results • Recommended risk responses

11.5 Plan Risk Responses Knowledge Area: Risk Process Group: Planning

“Process of developing options and actions to enhance opportunities and to reduce threats to project objectives.” PMBOK® Guide 2013, Glossary

11.5 Plan Risk Responses ITTOs Exercise Fill out the ITTOs below and check your answers in the PMBOKÂ® Guide 2017, pg. 437

Inputs What do you need beforehand?

Tools & Techniques How is it done?

Outputs What are the results?

11.5.1.1-4 Plan Risk Responses Inputs •

Project management plan • •

Risk management plan Cost baseline

•

Project documents

• •

• Lessons learned register • Project schedule • Project team assignments • Resource calendars • Risk Register • Risk report • Stakeholder register EEFs OPAs

11.5.1. Plan Risk Responses Inputs Risk Ownership The risk owner is: • The person responsible (optimization) for certain risks • Identified in the risk management plan • A stakeholder: team member or possibly from management

11.5.2.1-9 Plan Risk Responses T&T • • • • • • • • •

Expert judgment Data gathering Interpersonal and team skills Strategies for negative risks or threats Strategies for positive risks or opportunities Contingent response strategies Strategies for overall project risk Data analysis – Alternatives, Cost/benefit Decision making Project Management Institute , A Guide to the Project Management Body of Knowledge, (PMBOK® Guide) - Sixth Edition, 2017 Project Management Institute, Inc. All rights reserved. Page 441-446.

11.5.2.1 Plan Risk Responses T&T

Expert Judgment • Knowledgeable parties in establishing risk responses

• Threat response strategies • Opportunity response strategies • Contingent Response Strategies • Use only if certain events occur

• Overall project risk response strategies

What is an event trigger?

11.5.2.4 Plan Risk Responses T&T Negative Risks-Threats Strategies for negative risks or threats: • Escalate – Escalated risks are managed at the program level • Avoid -- eliminate threat entirely • Transfer – shift some or all of the risk to third party • Mitigate – reduce the probability and/or impact of a risk occurring • Accept • Passive • Establish a contingency reserve

What is a secondary risk?

11.5.2.5 Plan Risk Responses T&T Positive Risks - Opportunities Strategies for positive risks or opportunities • • • • •

Escalate – Outside project scope Exploit — Ensure the opportunity definitely happens Share — Allocate all or some of the opportunities to a third party Enhance — increase the probability of the opportunity to occur Accept — take advantage when it comes along

11.5.3.1-3 Plan Risk Responses Outputs •Change requests •Project management plan updates: •Schedule, cost, quality, resource, procurement, scope baseline, schedule baseline, coast baseline

•Project documents updates • • • • • • •

Assumption log Cost forecasts Lessons learned register Project schedule Project team assignments Risk register updates Risk report

Plan Risk Responses is the most ignored task in the risk management process!

11.6 Implement Risk Responses Knowledge Area: Risk Process Group: Executing “The process of implementing agreed-upon risk response plans.” PMBOK® Guide 2017, Glossary

11.6 Implement Risk Responses ITTOs Exercise Fill out the ITTOs below and check your answers in the PMBOKÂ® Guide 2017, pg. 449

Inputs What do you need beforehand?

Tools & Techniques How is it done?

Outputs What are the results?

11.6.1.1-3 Implement Risk Responses Inputs •Project management plan •Risk management plan

• Project documents • Lessons learned register • Risk register (11.2.3.1) • Risk report (11.2.3.2)

• OPAs

11.6.2.1-3 Implement Risk Responses T&T Expert judgment (4.1.2.1) •Interpersonal and team skills (9.5.2.1) •Influencing

• PMIS (4.3.2.2)

11.6.3.1-2 Implement Risk Responses • Change requests (4.3.3.4) • Project documents updates • • • • •

Issue log (4.3.3.3) Lessons learned register (4.4.3.1) Project team assignments (9.3.3.2) Risk register (11.2.3.1) Risk report (11.2.3.2)

Outputs

11.7 Monitor Risks Knowledge Area: Risk Process Group: Monitoring and Controlling “The process of implementing of agreed-upon risk response plans, tracking identified risks and analyzing new risks, and evaluating risk process throughout the project.” PMBOK® Guide 2017, Glossary

11.7 Control Risks ITTOs Exercise Fill out the ITTOs below and check your answers in the PMBOKÂ® Guide 2017, pg. 453

Inputs What do you need beforehand?

Tools & Techniques How is it done?

Outputs What are the results?

11.7.1.1-4 Control Risks Inputs • Project Management Plan - Risk management plan • Project documents • Issue log • Lessons learned register • Risk register

•

Work performance data - Symptoms and warning signs of

•

risk residual and secondary risks Work performance report - Watch list of low priority risks, time and cost contingency reserves

11.7.2.1-3 Control Risks T&T • Data analysis •

Technical performance analysis - identifies deficiencies in meeting system requirements - achievements

•

Reserve analysis - compares up-to-date contingency reserves to the remaining risks

•

Risk audits - Examine and document the

effectiveness of the

planned risk response

• Meetings Project Management Institute , A Guide to the Project Management Body of Knowledge, (PMBOK® Guide) - Sixth Edition, 2017 Project Management Institute, Inc. All rights reserved. Page 456-457.

11.7.3.1-5 Control Risks Outputs

1. 2.

Work performance information Change requests are completed and submitted to the Perform Integrated Change Control process, corrective and preventive actions Updates to the project management plan occurs if any approved changes have an impact on the risk management process

4. Project documents updates - Assumption log, issue log, lessons learned register, risk register updates, risk reports 5. OPAs updates- Templates, Risk Breakdown Structure, and lessons learned, information gained can be used for future projects

11.0 Project Risk Management Summary • • • • •

Certainty, risk and uncertainty Identification based on source Qualitative -- Subjective Quantitative -- Objective Response strategies

11.0 Project Risk Management Notes • Write down your personal goals to enhance your project time management knowledge and skills. • Write down any newly acquired knowledge that you might be able to apply in your workplace. • Identify additional resources. •

Read

• PMBOK® Guide 2017, Ch.. 11 (Project Risk Management) • Rita: Ch.. 11 (Project Risk Management) • Kerzner, Ch.. 17 (Risk Management) - Optional

Tests • Rita’s practice exam – Ch.. 11