Module 1: Project Risk Management

This course will focus on the key support functions that make the
difference between a highly successful project and an average one.
During the course, you will prepare a Qualitative Risk Analysis and
Evaluate the Cost of Quality for a provided Case Study. This course will
position you to understand the more intangible aspects of project
management to drive better overall performance.

What are your goals for this course? What skills do you hope to gain? How
will you use these skills in your personal and professional life?
Module 1
Project Risk Management
In course 2 on Scope, Time Do you recall these concepts from
course 2 on Scope, Time and Cost
and Cost Management, we management? Write your thoughts on
how these concepts can be useful in
learned about: this course.
•Creating and managing the scope
•Building an estimate
•Developing a cost baseline and
controlling it
•Creating and managing a schedule
•Tracking progress

The next step is managing the risk,

quality, human resource and
procurement processes that support this
plan.
In this course 3 on Project Risk and
Quality Management we will:
• Develop a risk management plan
including a qualitative risk Learning Objectives for
assessment
this module
• Develop a quality plan including
•Develop a Risk Management
quality standards and cause and
Plan
effect tools
•Identify positive and
• Develop a team management plan
negative risks
that includes team development,
identifying team members and •Create risks strategies
clarifying roles and responsibilities •Perform a Qualitative Risk
• Develop a procurement plan that analysis
includes contract types and •Develop contingencies and
incentives. reserves
 Module 1
Risk Management Processes
• The objectives of project risk management are to increase the likelihood
of positive events and decrease the probability of negative events.
• We do this by implementing a formal risk management strategy complete
with contingency plans.

Project Risk Management Processes

• Plan Risk Management • Control Risks

• Identify Risks
• Perform Qualitative
   Risk Analysis
• Perform Quantitative
   Risk Analysis
• Plan Risk Responses

Risk Management Process

Project Management Institute, A Guide to the Project Management Body of Knowledge, Fifth Edition, Project Management
Institute Inc., 2013, Page 309
 Module 1
Risk Management Processes
Types of Risk Analysis
For large projects, you may analyze Risks in three distinct groups:

• Cost Estimate Contingency

• Schedule Contingency
• Management Reserves or Contract and Business Risks

Cost Estimate Contingency

• Labor Productivity
• Replacing damaged goods
• Rework
• Misestimations

Schedule Contingency
Schedule Contingency is one or more allowances in the project schedule for
increases or decreases in the duration of activities on the project.

Management Reserves or Contract and Business Risks

• Unusual and unpredictable weather patterns
• Acts of God
• Unforeseen increases in scope
• Changes in law or regulations

Your Notes:
 Module 1
Developing a Risk Management Plan

Risk Management Plan

1. Part of the Project Management Organizational Process Assets
Plan
2. Documents how to conduct the
risk management activities Risk Categories
3. Aligns the project risk approach
with the risk profile of the Common definitions and
organization concepts
4. Communicates the project risk
Risk statement formats
approach to the stakeholders and
helps to gain their support
Standard templates
Key Inputs to the Risk Management Plan Roles and responsibilities
• Project Management Plan
• Project Charter Authority levels for
• Stakeholder Register decision making
• Enterprise Environmental Factors
• Organizational Process Assets Lessons learned

Typical Table of Contents Does your current organization

• Methodology currently utilize tools for risk
• Roles and Responsibilities management? If so, which?
• Budgeting
• Timing
• Risk Categories
• Definitions of risk probabilities
and impact
• Probability and impact matrix
• Risk tolerances
• Reporting formats
• Tracking

Project Management Institute, A Guide to the Project Management Body of Knowledge, Fifth Edition,
Project Management Institute Inc., 2013, Page 314-315
 Module 1
Identifying Risks

Facilitated
Check Existing Review Project Checklist
Brainstorming Inteviews
Resources Documentation Analysis
Session

Potential Existing Resources

Enterprise Environmental Factors Organization Process Assets

• Published Information • Project Files

• Academic Studies • Organizational and project process
• Benchmarking controls
• Industry Studies • Risk Statement Formats or
• Risk Attitudes templates
• Corporate Risk Lists
• Lessons Learned

Review Project Brainstorm and Checklists

Documentation
• Identify any Risk Checklists that may be
• Assumptions available
• Project • Distribute them to the Risk Team
Charters • Ask each member to brainstorm potential risk
• Contact or and submit them to the facilitator
other • Review the consolidated list and checklist in a
agreements facilitated team meeting to identify any further
• Estimates and risks based on the shared lists
schedules • Consolidate similar risks into a single item to
• Plans avoid duplication

Project Management Institute, A Guide to the Project Management Body of Knowledge, Fifth Edition,
Project Management Institute Inc., 2013, Page 323-324
 Module 1
Identifying Risks Continued

Interviews

Conduct interviews of -
• Subject Matter Experts
• Key Stakeholders
• Project Managers from Similar Projects
• Risk Managers

Consolidate the results of the interviews with the Risk

List from the previous sessions.

Risk Register
Record all of the risks generated in a
Risk Register.

Be sure to download the Risk Register

template in the Peer Review Assignment

Your Notes:

Project Management Institute, A Guide to the Project Management Body of Knowledge, Fifth Edition,
Project Management Institute Inc., 2013, Page 323-325
 Module 1
Analyze and Prioritize Risks

Perform Qualitative Risk Analysis

For each Risk identified in the Risk Register

Identify the Measure the Create a Assign priority

likelihood the impact of the severity based on the
event will occur event rating severity

Perform Qualitative Analysis and Prioritize Risks

Example Likelihood Rating Matrix

Likelihood Rating Description

5 Nearly Certain >80% Probability of occurring

4 Likely 50-80% Probability of occurring

3 Possible 21-49% Probability of occurring

2 Unlikely 1-20% Probability of occurring

1 Rare <1% Probability of occurring

Your Notes:

Project Management Institute, A Guide to the Project Management Body of Knowledge, Fifth Edition,
Project Management Institute Inc., 2013, Page 331
 Module 1
Analyze and Prioritize Risks Continued
Example of Impact Rating Matrix

Who or what
determines the
severity of risks?

Prioritize Risks

Focus on High risk If there are

Record all risks sufficient resources,
items
you can add some
Risks from the
Serious category
 Module 1
Develop Risk Responses
Four strategies for Negative Risks or Your Notes:

Threats are:

Avoid Mitigate

Transfer Accept

Avoid Strategies Mitigation Strategies

• Modify the execution plan to Mitigation Strategies are
eliminate the Risk Strategies where the project
• Change the project objectives to team acts to reduce the
avoid the Risk probability or the impact of a
• Clarify requirements given Risk.
• Obtain additional information • Conducting more tests
• Acquire expertise • More monitoring
• Improve communication • Select better suppliers
• Develop a prototype
• Add resources
Transfer Strategies
Transfer strategies move the Risk to a third
party who is better equipped to handle it.
Strategies might include: Accept Strategies
• Insurance • Typically employed for
• Bonds Risks Outside of High
• Warranties and Guarantees priority
• Hiring special expertise • Continue to monitor risks
Contracts or agreements are used to effect • Establish a contingency
the transfer reserve to handle the Risk

Project Management Institute, A Guide to the Project Management Body of Knowledge, Fifth Edition, Project
Management Institute Inc., 2013, Page 344-345
 Module 1
Develop Risk Responses Continued
Four strategies for Positive Risks or Opportunities:

Exploit Develop a strategy to make sure

the opportunity is realized

Enhance Improve the probability of

occurrence or impact

Share Assign part of the opportunity to a

third party who is better positioned
to make sure it happens

Accept Position to take advantage if it

occurs but do not pursue

Risk Responses

• Estimate the Impact of the Risk (schedule or cost) prior to the

implementation of a Risk Strategy. Add this information to the
Risk Register.
• Estimate the Impact of the Risk (schedule or cost) after the
implementation of the Risk Strategy. Add this information to the
Risk Register.

Your Notes:

Project Management Institute, A Guide to the Project Management Body of Knowledge, Fifth Edition, Project
Management Institute Inc., 2013, Page 345-346
Module 1
Summary
Quantitative Risk Assessment

Monte Carlo techniques

PERT (Program Evaluation and Review Technique)

Decision Tree

Control Risks
• Risk Reassessment
• Risk Audits
• Variance and Trend Reports
• Technical Performance Measures
• Reserve Analysis
• Cost
• Schedule
• Contract and Business Risks
• Meetings

Your Notes:

Project Management Institute, A Guide to the Project Management Body of Knowledge, Fifth Edition, Project
Management Institute Inc., 2013, Page 351-352
Module 1 Conclusion
Modules objectives:
❑ Develop a Risk Management Plan
❑ Identify positive and negative risks
❑ Create risks strategies
❑ Perform a Qualitative Risk analysis
❑ Develop contingencies and reserves

Module Assignments:
❑ Peer Review: Risk Analysis Assignment
❑ Discussion: Kaz and Tom weekly conclusion
❑ Quiz: End of Module 1 Quiz

Summarize this Module and jot down how you will personally use this material: