PROJECT

MANAGEMENT
V2.9

Mar 2024
Agenda
• Project Management Overview
• PMI Framework & Knowledge Areas
• Project Manager Roles & Responsibilities
• Project Lifecycle (Project Planning, Estimation, Scheduling, Networks)
• Project Risk Management
• Metrics in Project Management
• Project Tracking and Monitoring
• Project Management Techniques
• Project Methodologies
• Project Management Challenges
• References

2
PROJECT MANAGEMENT
 What is a Project?
What is a Project?
• A project is defined as a “temporary endeavour with a beginning and an end and it
must be used to create a unique product, service or result”
• End results have specific goals – Time, Cost, Performance & Quality

4
 Attributes of a Project?
Attributes of a project:
• An established Objective
• A defined life span with a beginning and an end
• Creation of a unique product, service or a result
• Involvement of several professionals and departments
• Typically doing something that has never been done before (Solve a problem,
address a pain area)
• Constraint on resources – Budget
• Specific need for project risk analysis and management
• End results have specific goals – Time, Cost, Performance & Quality

5
 What is Project Management?
What is Project Management?
• Project Management involves the Planning, Monitoring, and control of the
People, Process and the Events that occur as project evolves from a preliminary
concept to an operational implementation

Knowledge
Project
Management
Profitability

Project
Manager
People
Customer
Management
Satisfaction

Quality Management &

Operational Focus

6
 Project Management & the 4 P’s
Effective Project Management focuses on the 4 Ps:

The People
• People must be organized into effective teams, motivated to do high quality
work
The Product
• The requirements / pain areas must be communicated from Customer to
developer, partitioned into logical parts, and positioned for work by the project
team
The Process
• A common framework with an appropriate process engineering paradigm to
come up with a set of tasks
The Project
• The project needs to be organized in a manner that enables the team to
succeed

7
 PMI and Framework Overview
About PMI?
• The PMI was founded by Ned Engman (McDonnel Douglas Automation), James Snyder and Susan Gallagher
(SmithKline & French Laboratories), Eric Jenett (Brown & Root) and J Gordon Davis (Georgia Institute of
Technology) at the Georgia Institute of Technology in 1969 as a non-profit organization
PMI Objectives:
• Foster recognition of the need for professionalism in project management
• Provide a forum for the free exchange of project management problems, solutions and applications
• Coordinate industrial and academic research efforts
• Develop common terminology and techniques to improve communications
• Provide interface between users and suppliers of hardware and software systems
• Provide guidelines for instruction and career development in the field of project management
PMI Services:
• Development of standards, research, education, publication, networking-opportunities in local chapters,
hosting conferences and training seminars, and providing accreditation in project management
• PMI has recruited volunteers to create industry standards, such as "A Guide to the Project Management
Body of Knowledge", which has been recognized by the American National Standards Institute (ANSI). In
2012 ISO adapted the project management processes from the PMBOK Guide 4th edition
PMI India:
• PMI India office was established with the sole goal of advancing project management profession and
inculcating a project management culture within the establishments across government, academia, and
industry -- https://pmi.org.in
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PMI Framework -- Key Knowledge Areas

Integration Stakeholder Procurement

Management Management Management

Scope Risk
Management Management

PMI

Time Communication
Management Management

Human
Cost Quality
Resources
Management Management
Management
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Integration Management
Develop Project Charter
• Authorization for the project
• Provide Authority to the PM to apply organization resources to the project
Develop Project Management Plan
• Define, prepare, coordinate, and integrate all subsidiary plans into a comprehensive Project
Management Plan
Direct & Manage Project Work
• Leading and performing the work defined in the PM plan to achieve project objectives

Monitor & Control Project Work

• Track, Review and report project progress against performance objectives defined in the PM plan

Perform Integrated Change Control

• Review, Approve and Manage all change requests to deliverables, update and communicate to all
stakeholders
Project Closure
• Finalizing all activities across all Process Groups to formally complete the project

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Scope Management
Plan Scope Management
• Creation of a Scope Management Plan that documents how the scope will be defined, validated , and
controlled
Collect Requirements
• Process of determining, documenting, and managing stakeholder needs and requirements to meet
project objectives
Define Scope
• Detailed description of the project and product

Create WBS
• Subdivision of project deliverables and project work into smaller, more manageable components

Validate Scope
• The process of formalizing acceptance of the completed deliverables

Control Scope
• Monitoring the Scope and managing changes to the scope baseline

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Time Management
Plan Schedule Management
• Process of planning, developing, managing, executing and controlling the project schedule

Define Activities
• The process of identifying and documenting specific actions to be performed to produce the project deliverables

Sequence Activities
• The process of identifying and documenting relationships among the project activities

Estimate Activity Resources

• The process of estimating the type and quantities of material, human resources, equipment, or supplies required to
perform each activity

Estimate Activity Durations

• The process of estimating the work periods needed to complete individual activities with estimated resources

Develop Schedule
• The process of analysing activity sequences, durations, resource requirements, and schedule constraints to create the
project schedule model

Control Schedule
• The process of monitoring the status of project activities to update project progress and manage changes to the schedule
baseline to achieve the plan

12
Cost Management

Plan Cost Management

• The process of planning, managing, expending and controlling project
costs
Estimate Costs
• The process of developing an approximation of the monetary resources
needed to complete project activities
Determine Budget
• The process of aggregating the estimated costs of individual activities
or work packages to establish an authorized cost baseline
Control Costs
• The process of monitoring the status of the project to update the
project costs and managing changes to the cost baselines
13
Quality Management

Plan Quality Management

• The process of identifying quality requirements and/or
standards for the project and its deliverables and documenting
compliance with quality requirements

Perform Quality Assurance

• The process of auditing the quality requirements and the results
from quality control measurements to ensure quality standards
Control Quality
• The process of monitoring and recording results of executing the
quality activities to assess performance and recommend
necessary changes
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Human Resource Management

Plan Human Resource Management

• The process of identifying and documenting project roles, responsibilities,
required skills, reporting relationships, and creating a staffing management plan

Acquire Project Team

• The process of confirming human resource availability and obtaining the team
to complete the project activities

Develop Project Team

• The process of improving competencies, team member interaction, and overall
team environment to enhance project performance

Manage Project Team

• The process of tracking team member performance, providing feedback,
resolving issues, and managing changes to optimize project performance

15
Communications Management

Plan Communications Management

• The process of developing an appropriate approach and plan
for project communications
Manage Communications
• The process of creating, collecting, distributing, storing,
retrieving, and distribution of project information as per the
Communications plan
Control Communications
• The process of monitoring and controlling communications
throughout the entire project life cycle to ensure information
needs of stakeholders are met
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Risk Management

Plan Risk Management

• The process of defining how to conduct risk management activities for a project

Identify Risks
• The process of determining which risks may affect the project and documenting their characteristics

Perform Qualitative Risk Analysis

• The process of prioritizing risks for further analysis or action by assessing and combining their
probability of occurrence and impact
Perform Quantitative Risk Analysis
• The process of numerically analysing the effect of identified risks on overall project objectives

Plan Risk Responses

• The process of developing options and actions to enhance opportunities and to reduce threats to
project objectives
Control Risks
• The process of implementing risk response plans, tracking identified risks, monitoring residual risks,
identifying new risks, and evaluating risk process effectiveness throughout the project

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Procurement Management

Plan Procurement Management

• The process of documenting project procurement decisions, specifying the
approach, and identifying potential sellers
Conduct Procurements
• The process of obtaining seller responses, selecting a seller, and awarding a
contract
Control Procurements
• The process of managing procurement relationships, monitoring contract
performance, and making changes and corrections as appropriate
Close Procurements
• The process of completing each project procurement

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Stakeholder Management

Identify Stakeholders
• The process of identifying the people, groups, or organizations that could impact the
project and analysing and documenting relevant information regarding potential
impact on the project success

Plan Stakeholder Management

• The process of developing appropriate management strategies to effectively engage
stakeholders throughout the project life cycle

Manage Stakeholder Engagement

• The process of communicating and working with stakeholders to meet their needs/
expectations and foster appropriate engagement in project activities throughout the
project life cycle

Control Stakeholder Engagement

• The process of monitoring overall stakeholder relationships and adjusting strategies
and plans for engaging stakeholders

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 Project Initiation
Project Life Cycle:

Initiating Planning

Monitoring
& Executing
Control

Closing

Components of Project Initiation:

• Project Charter
• Project Management Plan
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 Project Management Structures…..1
Functional Organization:
• The project is executed within the existing functional organization (hierarchy) of the
organization
• Different segments of the projects are delegated to the respective functional units with each
unit responsible for completing its segment of the project
• Coordination is maintained through normal management channels
Advantages:
• No change – projects are completed within the basic functional structure
• Flexibility – Maximum flexibility in the use of the staff. Appropriate specialists can be
temporarily assigned to work on the project
• In-depth expertise of the specialists can be leveraged for crucial aspects of the project
• Easy post project transition – Normal career paths are maintained

Disadvantages:
• Lack of Focus – sometimes project responsibilities can be pushed aside to meet primary
objectives
• Poor Integration across functional units
• Slow pace – It may take longer to complete
• Motivation could be low due to temporary assignment on the project
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 Project Management Structures…..2
Dedicated Teams:
• To create separate dedicated project teams which operate independent to the parent
organization
• A full time Project Manager is assigned to the project
• The Project Manager recruits necessary personnel from both within and outside the parent
organization

Advantages:
• More focus due to dedicated teams
• Fast pace – Response time is quicker
• Cohesive, High motivation and good synergy within the project teams
• Better cross functional integration as different specialists work together and no conflicts

Disadvantages:
• Overall the arrangement is expensive. Could result in duplication of efforts
• Internal strife and conflicts between teams and rest of the organization
• Self contained teams may inhibit maximum technical expertise to be leveraged on problems
• Difficult post project transition

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 Project Management Structures…..3
Matrix Structure:
• One of the biggest innovations to emerge in the last 50 years
• Hybrid organization form – A horizontal project management structure is overlaid on the
normal functional hierarchy
• Two chains of command – one along functional and the other along project lines
• Instead of delegation of project segments to different units, project resources report
simultaneously to both functional and project managers
Advantages:
• Efficient Management – Greater productivity
• Good focus due to strong hybrid structure
• Flexibility in the utilization of resources
• Easy post project transition – Normal career paths are maintained

Disadvantages:
• Dysfunctional Conflict – tension between Functional and Project Managers
• Infighting on sharing of resources and competition
• Stressful – Matrix Management violates management principle of unity of command
• Slow – Decision making can be delayed
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 What is the Right Project Management
Structure?
The best system balances the needs of the project with those of the parent organization. A
number of issues need to be considered at both the Organization and Project level

Organization Considerations:
• How important is Project Management. What percentage of core work involves projects?
• If over 75% of work is projects – a fully projectized organization can be considered
• If there are both standard products and projects – a matrix organization can be looked at
• Resource Availability?
• Where critical personnel cannot be tied up on individual projects, a matrix system would
be appropriate
• Need to access current practices and what changes are needed to more effectively manage
projects

Project Considerations:
• Size of the Project
• Strategic importance, novelty and need for innovation
• Environmental complexity (No. of external interfaces)
• Budget and Time constraints
• Stability of resource requirements
24
 What is the Right Project Management
Structure?
Organization Culture:
• Member Identity – Degree to which employees identify with the organization as a whole
rather than at a personal level
• Team emphasis – Degree to which work activities are organized around groups rather than
individuals
• Management Focus – Degree to which management decisions take into account the effect of
outcomes on people of the organization
• Unit Integration – Degree to which units within the organization are encouraged to operate in
a coordinated or independent manner
• Control – Degree to which Rules, Policies, and direct supervision are used to oversee and
control employee behaviour
• Risk Tolerance – Degree to which employees are encouraged to be aggressive, innovative, and
risk seeking
• Reward Criteria – Degree to which rewards are based on performance rather than other
criteria
• Conflict Tolerance – Degree to which employees are encouraged to air conflicts and criticism
openly
• Means v/s end orientation – Degree to which management focuses on outcomes rather than
on techniques and processes used to achieve those results
• Open-system focus – Degree to which organization responds to changes in the external 25
environment
 Project Initiation
Project Execution Approach:
• Need to establish a structured approach
• A disciplined and structured approach will ensure:
• Meet the needs of the stakeholders (Customer, Project Manager……)
• Measure performance against the strategic plan of the organization

Steps involved:
• Define Project Scope
• Establishing project priorities
• Creating the WBS
• Integrating the WBS with the Organization

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 Defining Project Scope
Project Scope:
• Defining the project scope sets the stage for developing a project plan
• Project scope is a definition of the end result or mission of the project, a product or service

Scope definition checklist:

• Project Objective
• Deliverables
• Milestones
• Technical Requirements
• Limits and Exclusions
• Reviews with Customer

27
 Establishing project priorities
Project Priorities:
• Important to manage the trade-offs among
Time, Cost , and Performance
• Imperative to establish priorities
• Set up a priority Matrix

Priority Matrix:
Consider a project for developing a new WiFi
Router: Time Performance Cost
• Time to Market is important to sales –
Time can be enhanced – reduce Constrain
completion time Enhance
• In doing so, project going over budget is
acceptable Accept
• But original performance specifications
cannot be compromised
28
 Work Breakdown Structure
What is a WBS?:
• A WBS is a deliverables oriented collection of project components
• It is a Categorization and Decomposition of the Project Scope Statement
• Breaking down the massive project scope statement into smaller more manageable components

What is a Work Package?:

• A work package is the smallest element of the WBS
• A WBS element that you can schedule, estimate the costs, and monitor and control

Create a Milestone List

Why do you need a WBS?:

• It serves as an input to 5 key Project Management Activities:
• Cost Estimate
• Resource Planning
• Risk Management Planning
• Activity Definition
• Defines the work required to be done
• Helps in working towards the deliverables – create, manage and control tasks
• Help prevent scope change
29
 Integrating the WBS with the Organization
WBS and OBS Integration:
• The WBS is used to link the organizational units responsible for performing the actual work
• The OBS depicts how the company / firm has organized to discharge work responsibility
• Identify organization units responsible for work packages and tie the organizational unit to cost
control accounts
• The integration of work packages and the organization units creates a project control point
(cost account) that integrates work and responsibility

30
 Integrating the WBS with the Organization
1 Laptop

2 Hardware CPU More Items……

3 Power Flash ROM I/O Controller

Supply
Lowest
Manageable Sub
deliverables
USB Internet Touch Screen
4
Slots

Organization Frame Camera Speakers Antenna Keyboard Touch Back Resolution

5 Sensors Light

Design Cost Account Cost Cost Account Cost

Account Account
QC Test Cost Account Cost Account Cost Cost Account Cost
Account Account
Production
Cost Account Cost A/C
Outsourcing Cost Account Cost Account Cost Cost Account Cost Account Cost Account
Account

31
 Coding the WBS. Process Breakdown Structure
Coding the WBS:
• To achieve max usefulness of a Breakdown Structure, a coding system is needed
• The codes are used to define levels and elements of the WBS, organization elements, work
packages, and budget and cost information
• The codes allow reports to be consolidated at any level in the structure
Process Breakdown Structure:
• The project is organized around processes
• Typical Information System projects

32
 Responsibility Matrix
Linear Responsibility chart which summarizes the tasks to be accomplished and who is responsible for
what to achieve the project goals
Conveyor Belt Project:
Deliverables Design Development Assembly Testing Purchase Quality Manufacturing

Architectural
R S S C C
Design
Hardware
S R S C
Specifications
Prototypes A R C C C N
Integrated
A S R A A
Acceptance

Legend:
* R – Responsible
* S – Support
* C – Consult
* N – Notification
* A -- Approval 33
 Project Planning -- Estimation
What is Estimation?
Estimation is a process of forecasting or approximating the time and cost of completion of the project

Why Estimating Time and Cost are important?

• Estimates are needed toEstimation
Project support goodis decisions
indeed a yardstick for
• Estimates are needed
projecttocost control.
schedule If the yardstick is faulty,
work
• Estimates are needed toyou start onhow
determine the long
“wrong Foot”should take and its cost
a project
• Estimates are needed to determine whether the project is worth doing
Do to
• Estimates are needed not Underestimate
develop the Estimate!!
cash flow needs
• Estimates are needed to determine how well the project is progressing
Consider this:
• Inaccurate Estimates lead to false expectations and Customer dissatisfaction
• Accuracy is improved with greater efforts, but is it worth the time and costs? Estimating costs
money!
• Project Estimates become a trade-off balancing the benefits of better accuracy against the
costs for securing increased accuracy
• Cost, Time, and Budget estimates are the lifeline for control

34
Project Planning -- Estimation

Project Estimation is indeed a yardstick for

project cost control. If the yardstick is faulty,
you start on the “wrong Foot”

Do not Underestimate the Estimate!!

35
 Factors Influencing the Quality of Estimates
• Planning Horizon:
• Estimates of current events are close to 100% accurate but are reduced for more distant
events
• Project Duration:
• Longer the project it is difficult to estimate accurately
• People:
• Accuracy of estimates depends on the skills of the people making the estimates
• Project structure and Organization:
• Estimates are influenced by the project structure and Organization culture
• Padding Estimates:
• Estimates are padded for safety and Risks. The project costs and schedule may be seriously
overstated
• Other Factors:
• Equipment down time
• National Holidays
• Vacations
• Legal Limits
• Industry specific Standards and Guidelines
36
 Estimating Guidelines
• Responsibility:
• Estimates should be done by people most familiar with the task. Draw on their expertise
• Several people to Estimate:
• Better chance of being reasonable and realistic when several people with relevant experience
and knowledge of the task are used (Crowdsourcing)
• Normal Conditions:
• Estimates should be based on normal conditions, efficient methods and a normal level of
resources
• Time Units:
• Need to have consistent time estimates (PD, MM, etc......)
• Independence:
• Treat each task as independent of the other tasks
• Contingencies:
• Do not include allowances for contingencies in work package estimates
• Add Risk Assessment:
• Include Risk assessment and plan for them to increase accuracy

37
 Estimation – Top Down v/s Bottom Up
Top Down Approach: These are usually derived from someone who uses experience and /or
information to determine project duration and total costs
Bottom up Approach: Done at the work package level and then rolled up to major deliverables

Top Down Different Approaches:

1. Consensus Methods:
This method uses the pooled experience of senior and/or middle managers to estimate the total
project duration and costs
2. Ratio Methods
This method uses ratios or surrogates to estimate project times and costs (Rate per sq. Ft.)
3. Apportion Methods:
This is an extension to the Ratio Method. Refer to historical data with customization for variations
4. Function Point Method:
Function point analysis is the process of sizing software based on the number of business
functions an application must accomplish. Derive costs based on the unit costs
5. Learning Curves:
For repetitive tasks, the productivity is expected to improve

38
 Estimation – Top Down v/s Bottom Up
Bottom Up Different Approaches:
1. Template Methods:
Templates based on past projects are used. Differences in the new project can be noted and costs
and times are adjusted
2. Parametric Procedures
Similar to Ratio Method. Past data for specific tasks can be leveraged
3. Range Estimation:
This method is used when work packages have significant uncertainty associated with the time
and cost to complete the tasks. Three time estimates are used (Low, Average, High) to give a range
within which the average estimate will fall
Hybrid – Phase Estimation:
• This approach begins with a top down estimate for the project and then refines the estimates for
phases of the project as it is implemented.
• Phase estimating is used when an unusual amount of uncertainty surrounds a project and it is
impractical to estimate times and costs for the entire project
Level of Detail: Depends on several factors:
• Complexity
• Need for control
• Project size, cost, schedule 39
 Estimation – Size by Function Points
Measurements Parameters Examples

1.Number of External Inputs(EI) Input screen and tables

2. Number of External Output (EO) Output screens and reports

3. Number of external inquiries (EQ) Prompts and interrupts.

4. Number of internal files (ILF) Databases and directories

5. Number of external interfaces (EIF) Shared databases and shared routines.

• Weighting Factors
• Unadjusted FP
• Complexity Adjustment Factor

FP = UFP * CAF

40
 Planning by Use of Baselines
Projects Size (FP) Actual Efforts Defects
(PDs)

Pr1 100 118 (0.84) 200

Pr2 150 183 (0.81) 330
Pr3 175 224 (0.78) 420
.
Pr4 200 267 (0.74) 540 Effort .
Pr5 250 329 (0.75) 725
Pr6 500 602 (0.83) 1000
.
Pr7 750 1071 (0.70) 2250 .
Pr8 1000 1471 (0.67) 3200
Pr9 1500 2419 (0.62) 5250
. PDs = 1.559*FP – 28.85
Pr10 4000 7273 (0.54) 14400

Size
Pr1 100/118 = 0.847 Pr7 750/1071 = 0.7
Pr2 150/183 = 0.819 Pr10 4000/7273 = 0.549

If the Size is 1200 FPs, How many PDs will I need?

Regression Equation
PDs = 1.559*FP – 28.85 = (1.559*1200 – 28.85)
= 1890 PDs
41
Estimation – Size by Function Points
International Function Points Users Group IFPUG
Size = 1000 FPs

Productivity = Size / Efforts = FP / PD

0.7 FP in 1 PD of effort = 0.7/1 FP / PD Baselines (Historical Data)

Effort = Size / Productivity

= 1000 / 0.7
= 1428.57 = 1429 PDs (Efforts spread across the life cycle)

42
Planning by Use of Baselines
Productivity
10000
5000
118 7273
0 100 150 183 224
175 200 267 329 602 1071 1471 2419
250 500 4000
Pr1 Pr2 750 1000
Pr3 Pr4 1500
Pr5 Pr6 Size
Pr7 Pr8 Pr9
Pr10

Pr1 Pr2 Pr3 Pr4 Pr5 Pr6 Pr7 Pr8 Pr9 Pr10
Size 100 150 175 200 250 500 750 1000 1500 4000
Actual Efforts 118 183 224 267 329 602 1071 1471 2419 7273

Size Actual Efforts

Defect Density
15000
10000 14400
5000 200 330 420
0 100 150 175 540 725 1000 2250 5250
200 3200
250 500
Pr1 Pr2 750 1000 4000
Pr3 Pr4 1500
Pr5 Pr6 Pr7 Size
Pr8
Pr9
Pr10

Pr1 Pr2 Pr3 Pr4 Pr5 Pr6 Pr7 Pr8 Pr9 Pr10
Size 100 150 175 200 250 500 750 1000 1500 4000
Defects 200 330 420 540 725 1000 2250 3200 5250 14400

Size Defects
43
 Estimation – Type of Costs & Refining
Cost Breakdown:
1. Direct Costs:
Cost of Labour, Material, Equipment, Others. These costs are clearly chargeable to a specific work
package
2. Direct Project Overhead Costs
Costs tied to project deliverables or work packages. Salaries….usually a ratio of the dollar value of
the resources
3. General & Administrative Overhead Costs:
These represent organization costs which are not directly linked to the project. These costs are
carried for the duration of the project. (Advertising, Accounting, Senior Management. Generally a
% of the total direct costs
Refining Estimates: Generally a % of adjustment is done over the original estimates
1. Interaction Costs: Time spent on interaction between departments for queries and issues
2. Normal conditions do not apply: Costs associated when project demonstrates variations from
normal assumed conditions
3. Things go wrong on the project: Design flaws, Extreme weather conditions, unplanned leaves……
4. Changes in Scope and plans: Major changes during execution and change management process
5. Overly optimistic: Tendency to overestimate completion of tasks and underestimate duration
6. Strategic misrepresentation: Underestimation of costs and overestimation of benefits in order to
win proposals 44
 Risk Management Overview
What is a Risk?:
• An uncertain event or a condition that, if it occurs has a positive or negative impact
on one or more project objectives such as Scope, Schedule, Cost, and Quality
• A risk is a potential problem – It might happen, it might not

What is Risk Management?:

• Risk Analysis and Management are a series of steps that help a project team to
understand and manage uncertainty

• Regardless if the Risks materializes, we need to:

• To identify it
• Assess its probability of occurrence
• Estimate its impact
• Establish a contingency plan

• If you know the enemy and know yourself, you need not fear the result of a hundred battles – Sun Tzu, a
Chinese general
• For the Project Manager, the enemy is the Risk!
45
 Risk Management Process and Event Graph

Step 1 Risk Identification

Analyse the project to identify sources

of Risks

Step 2 Risk Assessment

New Risks
Assess Risks in terms of:
• severity of impact
• Probability of occurring
• Controllability

New Risks Step 3 Risk Response Development

• Develop a strategy to reduce

possible damage
• Develop Contingency Plans

Step 4 Risk Response Control

New Risks
• Implement Risk Strategy
• Monitor and adjust plans for
new Risks
• Change Management
46
 Risk Management Plan
Inputs to help plan Risk Management:
• Project Scope Baseline
• Cost Management Plan
• Schedule Management Plan
• Communications Management Plan
• Enterprise Environment Factors
• Organizational Process Assets

The Project Manager will work with the Project Team, Key Stakeholders, SME’s, and Management to plan and
handle the Risks

Key Activities of Risk Management:

• Identify the Risks
• Analyze the Risks
• Creating Risk Responses

47
 Risk Management Tasks
Identifying the Risks:
• Review Project Documents
• Brainstorming
• Assumption Analysis
• Root Cause Analysis
• SWOT Analysis
• Delphi Technique
Analyze the Risks:
• The Risks have to be analyzed to determine how probable the risks are to occur and,
if the risks do occur, what is the impact of the risk
Qualitative Analysis:
• This is a high level approach and is subjective. The predicted probability and impact can be based on
past experience, gut instinct, and other subjective inputs
• It uses a Risk Matrix, also called Probability Impact Matrix to score the Risks on an ordinal scale
Quantitative Analysis:
• This approach quantifies the risk
• The risks are tested in a controlled environment whenever possible
Risk Responses:
• Avoidance – Create workarounds by changing schedule, reducing scope, etc.
• Transference – Transfer the Risk to a third party, usually for a fee
• Mitigation – To act in order to reduce the Risk probability and impact (Prototype Development 48
 Risk Breakdown Structure

Project

Technical Project
External Organization
Management

Subcontractor Project
Requirements Estimating
s & Suppliers Dependencies

Technology Regulatory Resources Planning

Complexity Market Funding Controlling

Performance Prioritization
Customer Communication
& Reliability

Quality Weather Project

 Risk Assessment
Conditions for impact scales of a Risk on major project Objectives
Relative or Numerical Scale

1 2 3 4 5
Project Objective
Very Low Low Moderate High Very High
Insignificant cost < 10% Cost 10-20% cost 20-40% cost increase > 40% cost
Cost
increase Increase increase increase
Insignificant time < 5% time 5-10% time increase 10-20% time increase > 20% time
Time
increase increase increase
Scope decrease Minor areas of Major areas of Scope reduction Project end item
Scope barely noticeable scope affected scope affected unacceptable to is effectively
sponsor useless
Quality degradation Only very Quality reduction Quality reduction Project end item
barely noticeable demanding requires sponsor unacceptable to is effectively
Quality
applications are approval sponsor useless
affected
Risk Assessment Form

Risk Event Probability Impact Detection difficulty When

Interface problems 4 4 4 Conversion
System freezing 2 5 5 Start-up
User backlash 4 3 3 Post installation
Hardware
1 5 5 Installation
malfunctioning 50
 Risk Severity Matrix
• The Risk Severity Matrix provides a basis for prioritizing which risks to address
• Red Zone risks receive first priority followed by yellow zone risks
• Green Zone risks are typically considered inconsequential and ignored unless status changes
• Impact is considered more important than Probability (1 10% probability of losing $ 1,000,000 is usually considered a more severe risk
than a 90% probability of losing $ 1000)

4 User Interface
Backlash problems

Probability
3

2 System
freezing

Hardware Red Zone (Major Risk)

1 Malfuncti Yellow Zone (Moderate Risk)
oning
Green Zone (Minor Risk)
1 2 3 4 5
Impact

• Failure Mode and Effects Analysis extends the Risk Severity Matrix by including ease of detection in the equation
• Impact * Probability * Detection = Risk Value
51
 Risk Management Quantification and Impact
Risk Exposure:

Risk Probability (%) Damage ($) Risk Exposure

Resource 40 50000 20000

Availability
Defects in 30 100000 30000
Requirements
Gathering

Delays from 20 70000 14000

Client
Approvals
Data Loss 10 60000 6000

• SAFETY IS NOT A RESULT OF LUCK; IT COMES FROM PREPARATION

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 Risk Contingency Planning
• A contingency plan is an alternative plan that will be used if a possible foreseen risk event becomes a
reality
• The Contingency plan represents actions that will reduce or mitigate the negative impact of the risk
event
• Contingency plans answers questions of What, Where, When, and How much action will take place
• Contingency planning evaluates alternative remedies for possible foreseen events before the risk
event occurs and selects the bet plan among alternatives. This early contingency planning facilitates a
smooth transition to the remedy or work around plan
• The contingency plan should include a cost estimate and identify the source of funding
Contingency Funding and time buffers :
• Contingency Funds are established to cover project risks
• The size and amount of contingency reserves depend on uncertainty inherent in the project
• The contingency reserve fund is typically divided into budget and management reserve funds for
control purposes
• Since all risks are probabilistic, the reserve funds are not included in the baselines. They are only
activated when a risk occurs
• If an identifies risk does not occur and its chance of occurring is past, the fund allocated to the risk
should be deducted from the budget reserve
• Time buffers are sometimes added to the end of the project. This would not appear on the schedule, 53
it is available if needed
 Risk Response Control
• The Risk Register details all identified risks, including description, probability, impact, contingency
plans, owners and current status
• Project Managers need to monitor risks just as they monitor project progress
• The Risk register needs to be updated at every specified interval

Change Control Management :

• Most changes fall into the following three categories:
• Scope changes in the form of design or addition in functionality
• Implementation of contingency plans, when risk events occur, represent changes in baseline
costs and schedules
• Improvement changes suggested by project stake holders

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Thank You