1. Project
Risk
Management
“Those who cannot remember the past are condemned to repeat it” – George
Santayana
2. Project
Risk
• Project is a temporary endeavor undertaken to
create a unique product, service or result.
• Risk is “Loss” multiplied by “Likelihood”
• Risk Types: Macro-risk & Micro-risk
3. Successful
Project
Leaders
! Aware
of
lessons
learned
from
prior
projects
! Plan
the
work
thoroughly
" to
understand
challenges
ahead
" to
an=cipate
poten=al
problems
! Make
team
understand
sources
of
varia=on
" minimizes
where
ever
possible
4. Project
Failures
! They
are
impossible
! Objec=ves
lies
outside
capabili=es
! Possible
deliverable
but
other
objec=ves
are
unrealis=c
! Feasible
deliverable,
plausible
objec=ves
but
insufficient
effort
put
into
planning
5. Use
of
Risk
Data
! Lower
cost/less
chaos
! Project
priority/management
support
! Project
porJolio
management
! Tuning
plans
to
reduce
risks
! Project
communica=on
&
control
! Establishing
management
reserve
6. Data
for
Project
Management
! Achieving
delivery
! Managing
budgets
! Managing
schedule
! Delivering
business
value
8. Project
Selec=on
! Proper
mix
of
risk
and
benefits
consistent
with
business
objec=ves
! Frequent
reviews
! Revisit
assump=ons
! Re
balance
project
load
9. Project
Planning
! Without
planning
no
one
knows
whether
something
is
going
wrong
! Regular
reviews
of
methods
and
processes
used
! Adopt
and
use
a
project
management
process
10. Project
Scope
! Change
&
defects
- Creep
in
scope
- Gaps
- Dependencies
! Minimized
by
- planning
and
WBS
- Scope
documenta=on
using
IS/IS
NOT
technique
11. Project
Deliverables
! Documented
deliverable
defini=on
process
! Use
a
straw
man
defini=on
document
! Adopt
a
rigorous
evolu=onary
methodology
! Key
project
contribu=on
from
start?
12. Reduce
Risk
! Dollar
Ac=ons?
- Scope
with
sufficient
details
&
limits
! WBS:
any
sec=on
resis=ng
breakdown
is
risky
! WBS:
Lack
of
ownership
is
risky
! WBS:
size
of
more
than
200
entries
is
risky
- Sequence
or
collec=on
of
projects
13. Other
Risk
! Scope
risks
can
bring
out
- Market
risks
- Confiden=ality
risks
14. Risk
Documenta=on
! Define
scope
and
iden=fy
challenges
! Set
limits
based
on
value
of
deliverable
! Decompose
work
into
small
pieces
! Iden=fy
work
not
well
understood
! Assign
ownership
and
look
into
reason
for
reluctance
! Note
risks
from
expected
project
dura=on
or
complexity
18. Risk
Documenta=on
! Long
dura=on
ac=vi=es
! Significant
worst
case
es=ma=on
! High
uncertainity
es=ma=on
! Overly
op=mis=c
es=mate
! All
cri=cal
&
near
cri=cal
path
ac=vi=es
! Mul=ple
cri=cal
paths
! Convergence
points
in
logical
network
! External
dependencies
and
interfaces
19. Risk
Documenta=on
! Deadlines
further
out
than
the
planning
horizon
! Cross
func=onal
and
subcontractor
work
20. Project
Resource
! People
- A^ri=on
- late
joining
- Not
dedicated
! Outsourcing
! Budget
21. Project
Team
Environment
! Team
building
- Forming
- Storming
- Norming
- Performing
! 20
minutes
to
get
back
to
concentra=on
! Delega=ng
to
dedicated
staff
is
low
risk
! Outside
dependency
delay
>
7
weeks
22. Project
Procurement
! Solicita=on:
RFP
- One
resource
for
planning
and
procurement
- Clear
scope
defini=on
in
RFP
- Clear
criteria
to
evaluate
responses
! Risks
- non
contac=ng
suppliers
- bidders
asking
trivial
ques=ons
23. Source
Selec=on
! Risks
during
- decision
making
- nego=a=ons
- contrac=ng
process
! Turnover
due
to
outsourcing
! Rela=onship
with
outsourcing
partners
24. Contract
! Clear
defini=on
of
scope
of
work
! Measurable
deliverables
! Payments
with
achievements
of
results
! Process
to
be
used
for
any
change
! Should
specify
responsibili=es
! Should
include
“not
to
exceed”
limita=on
! Terms
that
aligns
with
goals
26. Document
Resource
Risk
! Ac=vi=es
with
unknown
staffing
! Un-‐staffed
ac=vi=es
! Work
that
is
outsourced
! Contract
risks
! Ac=vi=es
requiring
a
unique
resource
! Part
=me
and
remote
team
members
! Impact
of
work
environment
! Budget
exceeding
project
objec=ves
! Over
commi^ed
staff
28. Risk
Framework
! Technology
(the
work)
! Marke=ng
(the
user)
! Manufacturing
(Produc=on
&
delivery)
29. Risk
Complexity
Index
! Index
=
(Tech+Arch+System)
*
Scale
! Assessment
against
experience
and
capability
- 0
=
only
exis=ng
technology
required
- 1
=
minor
extension
- 2
=
significant
extension
- 3
=
possible
with
innova=on
- 4
=
probably
feasible
- 5
=
new,
feasibility
in
doubt
30. Risk
Complexity
Index
(cont..)
! Scale
signifies
the
number
of
people
- 0.8
for
up
to
12
- 2.4
for
13
to
40
- 4.3
for
41
to
100
- 6.6
for
greater
than
100
! Index
- <
20
low
risk
- <
40
medium
risk
- >
40
high
risk
31. Es=ma=on
Techniques
! Using
historical
data
! Experts
and
expert
judgment
! Experience
based
rules
and
func=ons
! Delphi
group
es=ma=on
32. Es=ma=on
Process
History
Base
Effort
Es.mate
Dura.on
Es.mate
Calendar
Es.mate
Project
Factors
Other
Factors
Resource
Factors
33. Es=ma=on
for
Uncertainty
! Program
Evalua=on
and
Review
Technique
! PERT
te
=
(to
+
4tm
+
tp)/6
! Standard
devia=on
=
(tp
-‐
to)/6
35. Staff
Acquisi=on
! Skills
requirements
! Staff
availability
- 2
projects
is
op=mal
! Outside
of
project
responsibility
is
a
risk
36. Qualifying
&
Analyzing
Risk
! Separate
parts
that
are
well
understood
from
that
are
not
! Making
a
project
impossible
to
possible
is
to
isolate
and
schedule
most
risky
work
early
! Qualita=ve
and
quan=ta=ve
risk
assessment
! Qualita=ve
is
less
effort
but
quan=ta=ve
assessment
strives
for
precision
37. Qualifying
&
Analyzing
Risk
! “loss”
in
=me,
money
etc
! “likelihood”
based
on
sta=s=cs,
probability
! Risk
probability
is
0
or
1
at
project
end
! Uncertainty
in
the
beginning
! Qualita=ve
assessment
divides
choices
into
ranges
! Quan=ta=ve
assessment
assigns
each
risk
a
specific
frac=on
38. Qualifying
&
Analyzing
Risk
! Probability
- Experiments
e.g.
tossing
a
coin
- Historical
and
empirical
data
- Guessing
or
gut
feel
! Most
of
the
project
risks
are
in
this
category
! Illusion
of
precision
can
be
a
risk
! Measurement
based
probabili=es
can
help
trend
analysis
39. Quan=ta=ve
Risk
Assessment
! Difference
of
the
mean
of
the
distribu=on
and
measured
90%
point
! Can
be
expressed
as
a
single
value
or
a
histogram
of
possibili=es
- High
–
project
objec=ve
at
risk
- Medium
–
objec=ves
are
OK,
significant
re-‐planning
- Low
–
No
major
plan
changes,
risk
is
a
inconvenience
40. Quan=ta=ve
Risk
Assessment
! Unit
of
impact
and
max
value
are
risk
specific
! More
ranges
the
be^er
the
precision
but
harder
to
achieve
agreement
! Cost
impact
is
easier
compared
to
effort/
schedule
! Increase
in
effort
may
not
translate
directly
into
schedule
impact
41. Quan=ta=ve
Risk
Assessment
! Over=me
or
lower
morale
! Rela=onships
with
customers,
suppliers
and
others
connected
to
the
project
! Increased
stress,
worry
and
extra
mee=ngs
! Concerns
about
health
and
safety
42. Qualita=ve
Risk
Assessment
! Minimum
outcome
- risk
list
ordered
by
severity
- simple
sort,
Delphi
technique
! Shows
only
the
rela=ve
risk
and
not
the
project
exposure
each
risk
represent
43. Qualita=ve
Risk
Assesment
! Risk
assessment
table
Risk
Probability
Impact
Overall
Risk
! Risk
assessment
matrices
! Alternate
assump=on
tes=ng
! Data
precision
ranking
! Decide
list
of
risks
that
require
further
a^en=on
44. Qualita=ve
Risk
Assessment
! Sensi=vity
Analysis?
! Risk
assessment
tables
- Select
one
type
of
impact
- Several
tables
for
each
type
of
impact
! Two
dimensional
qualita=ve
analysis
- X
axis
probability
- Y
axis
impact