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ENMG698c Lecture3

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66 views62 pages

ENMG698c Lecture3

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Lecture 3

The Risk Management Process per PMBOK Standards

ENMG 698c: Special Topics - Project Risk Management - Dr. Rayan Khraibani

Copyright © 2020-2021, American University of Beirut, All Rights Reserved


Outline
▪ Overview of the PRM processes
▪ Plan risk management
▪ Identify risks
▪ Analysis
▪ Responses
▪ Monitoring
▪ Conclusion

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Overview of the PRM Processes

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ENMG 698c: Special Topics - Project Risk Management - Dr. Rayan Khraibani
Project Risk Management - Introduction
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Project risk management
▪Objective
▪ Optimize the chance or project success
▪ Ensure that project stays on track
▪ Seize opportunities
▪Included in
▪ Planning, executing, and monitoring & controlling parts of the
project life cycle

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Seven processes

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A broad definition of risk
▪Uncertainty
▪ Positive and negative risks
▪Variability
▪Pro-activity
▪ Response plan vs. contingency reserve
▪Unpredictability
▪Issues

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A unified framework

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Plan Risk Management

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Plan risk management process
▪ Consists of defining how to conduct risk management activities

▪ Once or at pre-defined milestones during the project

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Inputs
▪Project Charter
▪ High-level description, scope and requirements
▪Project Management Plan
▪ Coordination and consistency
▪Project Documents
▪ Information (e.g. stakeholders risk attitude)

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Inputs

▪Enterprise Environmental Factors

▪Organizational Process Assets


▪ e.g. risk policy, templates (registers & reports), roles and
responsibilities, authority levels, lessons learned

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Tools and techniques
▪Expert judgement
▪Data analysis
▪Meetings, workshops

▪ Understand the context


▪ Elicit risk attitude
▪ Tailor
▪ Promote team work and communication

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Output: the risk management plan
▪ General risk strategy

▪ Methodology

▪ Roles and responsibilities

▪ Funding and contingency protocol

▪ Activities and timing

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Output: the risk management plan
▪ Risk categories

▪ Probabilities and impact definitions and matrix

▪ Reporting formats

▪ Tracking

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A risk breakdown structure
Requirements
Estimates
Technical risk
Processes
Technology
Organization
Management risk Resourcing
Risk categories Global risk Communication
Procurement
Commercial risk Suppliers
Sub-contracts
Legislation
External risk Exchange rates
Competition
ENMG 698c: Special Topics - Project Risk Management - Dr. Rayan Khraibani
Project Risk Management - Introduction
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A scale definition table

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A probability and impact matrix
Implement
Plan response response

4
Probability

Monitor 1
1 2 3 4 5
Impact

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Probability/impact scores

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Identify Risks

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Identify risk process
▪ Consists of identifying and documenting sources of risk

▪ Iterative process over the project life cycle – frequency to be


determined in the risk management plan

▪ Many participants (project manager, operations, final users,


experts…)

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Inputs
▪Identify elements that are at risk
▪ Project management plan (WBS, requirements, schedule, costs,
quality, resources, scope,…)
▪ Project documents (estimates, lessons learned)
▪ Agreements
▪ Procurement documentation
▪Use organizational history and resources
▪ Enterprise environmental factors
▪ Organizational process assets
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Tools and techniques
▪ Expert judgement
▪ Data gathering (brainstorming, checklists, interviews)
▪ Data analysis (root cause, assumptions & constraints, SWOT,
documents)
▪ Team skills
▪ Prompt lists
▪ Meetings

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Output: the risk management plan
▪ General risk strategy

▪ Methodology

▪ Roles and responsibilities

▪ Funding and contingency protocol

▪ Activities and timing

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Output: the risk register
▪Contains the details of the identified risks and the results of
their analysis at the activity level
▪Events and changes are recorded during the project life
cycle
▪ List of risks / importance
▪ Risk owners
▪ Potential responses
▪ Risk status

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Output: Project documents updates

▪Relevant project documents are updated during the life


cycle of the project, e.g.:
▪ Assumption log
▪ Issue log
▪ Lesson learned register

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Analysis

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Perform qualitative risk analysis process

▪ Consists of assessing characteristics of project risks (probability,

impact) and classifying them (priority)

▪ Helps in identifying focus

▪ Subjective assessments based on beliefs and perceptions

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Tools and techniques
▪ Expert judgment
▪ Data gathering
▪ Data analysis
▪ Team skills
▪ Risk categorization
▪ Data representation
▪ Meetings

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Example: subjective probability assessment

wet black

dry white

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Example: Graphical representation

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Perform quantitative analysis process
▪ Consists of assessing characteristics of project risks using
mathematical models
▪ Helps in assessing global exposure
▪ Provides quantitative risk information to support risk response
planning
▪ Specialized software
▪ Usually performed for large complex projects or high priority risks

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Tools and techniques
▪ Expert judgment

▪ Data gathering

▪ Data analysis

▪ Team skills

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Tools and techniques
▪Representation of uncertainty
▪ Probability distributions
▪ Probability trees
▪Data analysis
▪ Sensitivity analysis
▪ Monte-Carlo simulation
▪ Decision trees
▪ Influence diagrams

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Example: Probability distribution

Construction
costs

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Example: a Tornado diagram

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Example: a decision tree

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Example: Monte-Carlo simulation

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-800
-600
-400
-200
0
200
400
600

-1200
-1000

-1400
Cash flows / 2005
Cash flows / 2007
Cash flows / 2009
Cash flows / 2011
Cash flows / 2013
Cash flows / 2015
Cash flows / 2017
Cash flows / 2019
Cash flows / 2021
Example: trend chart

Cash flows / 2023


Cash flows / 2025
Cash flows / 2027
Cash flows / 2029
Cash flows / 2031
Cash flows / 2033
Cash flows / 2035
Cash flows / 2037
Cash flows / 2039
Cash flows / 2041
Cash flows / 2043
Cash flows / 2045
Cash flows / 2047
Cash flows / 2049
Cash flows / 2005 to Cash flows / 2060

Cash flows / 2051


Cash flows / 2053
Cash flows / 2055
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Cash flows / 2057


ENMG 698c: Special Topics - Project Risk Management - Dr. Rayan Khraibani

Cash flows / 2059


Mean
5% - 95%
+/- 1 Std. Dev.

43
Responses

ENMG 698c: Special Topics - Project Risk Management - Dr. Rayan Khraibani
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Plan risk response process
▪ Consists of developing options and deciding on actions and
strategies to address project risk (negative or positive)

▪ Responses should be adapted to the importance and impact of


risks and be cost effective (strategic decision making)

▪ May include more than one level of contingency planning

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Tools and techniques
▪ Expert Judgment
▪ Data Gathering
▪ Team skills
▪ Strategies (threats, opportunities, contingent responses)
▪ Data Analysis (alternative, cost-benefit analysis)
▪ Decision Making (risk/return, multicriteria)

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Outputs

▪Change Requests

▪Updates
▪ Project management plan
▪ Project documents

▪Risk register, risk report

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Example: risk register update

Risk Probability Impact Importance Preventive Contingency Owner


measures measures
Delay in 0.25 -2M Selection, Alternative X
procurement monitoring supplier
Devaluation 0.5 -1M hedging Additional Y
funding
Major 0.1 -50M Preventive Repairs & Z
breakdown maintenance
reschedule

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Implement risk response process
▪ Consists in implementing agreed-upon risk response plans

▪ Belongs to the execution group

▪ Can result in a change of schedule (activities, cost, resources)

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Monitoring

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Monitoring risk process
▪ Consists of tracking the identified risks, monitoring the
implementation of the response plans, and evaluating the risk
management process effectiveness

▪ Uses performance information generated during project execution

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Tools and techniques
▪Data analysis
▪ Risk reassessment
▪ Variance and trend analysis (technical performance, costs,
resources)
▪Audits
▪Meetings

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Example: burn-down chart

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Conclusion

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Specific R.M. documents
▪ Risk register
▪ In table form, contains information on individual project risks
▪ List, impact, probability, importance, responses, status, owner
▪ Risk report
▪ Higher level summary, contains strategic information
▪ Threats and opportunities, risk management results, strategies

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Organizational memory
▪ Issue log
▪ Lesson learned register

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Emergent practices
▪ Non-event risks
▪ Project resilience
▪ Value of flexibility and team work
▪ Integrated risk management
▪ Agile environments
▪ Frequent reviews – risks are identified and discussed in regular meetings
▪ Tools: risk burndown charts, Kanban boards, impact matrices

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Readings
▪ A guide to the PMBOK, Chapter 11

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Assignment
▪ Form teams for the final presentation
▪ 11 teams, 7 students per team
▪ Write a one-page proposal

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