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Project Risk Management

The document outlines the concept of project risk management, emphasizing the identification, assessment, and response planning for risks that may affect project objectives such as scope, schedule, cost, and quality. It details the processes involved in risk management, including risk identification, qualitative and quantitative analysis, and response planning, along with various strategies for managing both negative and positive risks. Additionally, it highlights the importance of monitoring and controlling risks throughout the project lifecycle.

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Bulcha Melaku
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15 views28 pages

Project Risk Management

The document outlines the concept of project risk management, emphasizing the identification, assessment, and response planning for risks that may affect project objectives such as scope, schedule, cost, and quality. It details the processes involved in risk management, including risk identification, qualitative and quantitative analysis, and response planning, along with various strategies for managing both negative and positive risks. Additionally, it highlights the importance of monitoring and controlling risks throughout the project lifecycle.

Uploaded by

Bulcha Melaku
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Project Risk Management

Outline
• Meaning of Risk
• Concept of project risk management
• Project risk management processes
• Risk identification and mitigation s
• Activity 9

5/11/2023 1
Meaning of Risk

• an uncertain event or condition that, if it occurs,


has an effect on at least one project
objective
– Objectives can include scope, schedule, cost, and
quality
– risk may have one or more causes and, if it occurs, it
may have one or more impacts
-A cause may be a requirement, assumption,
constraint, or
condition that creates the possibility of negative or
positive outcome.

5/11/2023 2
Project Risk Management

➢ Task of identifying and assessing risks, and then


planning and implementing risk responses.
➢ The scope of risk management for projects includes
:Business risks, market, industry, technology, economic
and financial factors,
Project risk: those risks that impact on the cost,
schedule or quality of the project.
➢ Operations and processing risks: impact the design,
procurement, construction, commissioning, operations
and maintenance, hazards and catastrophic events.
5/11/2023 3
Project Risk Management

Processes
➢ Plan risk management
➢ Identify risks
➢ Perform qualitative risk analysis
➢ Perform quantitative risk analysis
➢ Plan risk responses
➢ Monitor and control risks

5/11/2023 4
Plan Risk Management Process

➢ The process of defining how to conduct risk


management activities for a project.
➢ The project team should review project
documents and understand the organization’s
and the sponsor’s approach to risk and attitude
towards risks: Risk Averse, Neutral, Risk Seeking

5/11/2023 5
Plan Risk Management Process

Inputs
➢ Project management plan
➢ Project charter
➢ Stakeholder register
➢ Enterprise environmental factors
➢ Organizational process assets

5/11/2023 6
Plan Risk Management Process

Tools & Techniques


➢ Analytical techniques
➢ Expert judgment
➢ Meetings

5/11/2023 7
Plan Risk Management Process

Outputs
➢ Risk management plan

5/11/2023 8
Identify Risks Process

➢ Is when we determine which risks might affect


the project and document the characteristics of
those risks.

5/11/2023 9
Identify Risks Process
Inputs
➢ Risk management plan
➢ Cost management plan
➢ Schedule management plan
➢ Quality management plan
➢ Human resource management plan
➢ Activity cost estimates
➢ Activity duration estimates
➢ Stakeholder register
➢ Project documents
➢ Procurement documents
➢ Enterprise environmental factors
➢ Organizational process assets
5/11/2023 10
Identify Risks Process

Tools & Techniques


➢ Documentation reviews
➢ Information gathering techniques
➢ Checklist analysis
➢ Assumption analysis
➢ Diagramming techniques
➢ SWOT analysis
➢ Expert judgment
5/11/2023 11
Potential Risk Conditions Associated with Each
Knowledge Area (Internal)
Knowledge Area Risk Conditions
Integration Inadequate planning; poor resource allocation; poor integration
management; lack of post-project review
Scope Poor definition of scope or work packages; incomplete definition
of quality requirements; inadequate scope control
Time Errors in estimating time or resource availability; poor allocation
and management of float; early release of competitive products
Cost Estimating errors; inadequate productivity, cost, change, or
contingency control; poor maintenance, security, purchasing, etc.
Quality Poor attitude toward quality; substandard
design/materials/workmanship; inadequate quality assurance
program
Human Resources Poor conflict management; poor project organization and
definition of responsibilities; absence of leadership
Communications Carelessness in planning or communicating; lack of consultation
with key stakeholders
Risk Ignoring risk; unclear assignment of risk; poor insurance
management
Procurement Unenforceable conditions or contract clauses; adversarial relations
External..
• Market risk: Will the new product be useful to
the organization or marketable to others?
Will users accept and use the product or
service?
• Financial risk: Can the organization afford to
undertake the project? Is this project the best
way to use the company’s financial resources?
• Technology risk: Is the project technically
feasible? Could the technology be obsolete
before a useful product can be produced?
Identify Risks Process
Outputs :Risk register

5/11/2023 14
Perform Qualitative Risk Analysis
Process
➢ Qualitative methodologies concern themselves
with how management decisions
are actually made
➢ Placing decisions in the context of alternative
future environments permits the
opening up of discussions about threats and
opportunities.

5/11/2023 15
Perform Qualitative Risk Analysis
Process
Inputs
➢ Risk management plan
➢ Scope baseline
➢ Risk register
➢ Enterprise environmental factors
➢ Organizational process assets

5/11/2023 16
Perform Qualitative Risk Analysis
Process
Tools & Techniques
➢ Risk probability and impact assessment
➢ Probability and impact matrix
➢ Risk data quality assessment
➢ Risk categorization
➢ Risk urgency assessment
➢ Expert judgment

5/11/2023 17
Perform Qualitative Risk Analysis
Process
Outputs
➢ Project documents updates

5/11/2023 18
Perform Quantitative Risk Analysis
Process
➢ Process of numerically analyzing the effect of
identified risks on overall project objectives.
➢ Does not always have to be performed.
Founded on this assumption:
Risk = Probability of event X Magnitude
of loss/gain

5/11/2023 19
Perform Quantitative Risk Analysis
Process
Inputs
➢ Risk management plan
➢ Cost management plan
➢ Schedule management plan
➢ Risk register
➢ Enterprise environmental factors
➢ Organizational process assets

5/11/2023 20
Perform Quantitative Risk Analysis
Process
Tools & Techniques
➢ Data gathering and representation techniques
➢ Quantitative risk analysis and modeling
techniques
➢ Expert judgment

5/11/2023 21
Perform Quantitative Risk Analysis
Process
Outputs
➢ Project documents updates

5/11/2023 22
Plan Risk Responses Process

➢ A process used to develop options and actions to


enhance opportunities and to reduce threats to
the project objectives.

5/11/2023 23
Risk Response Planning
• After identifying and quantifying risks, you must
decide how to respond to them
• Four main strategies for negative risk
• :
– Risk avoidance: eliminating a specific threat or risk,
usually by eliminating its causes
– Risk acceptance: accepting the consequences should a
risk occur
– Risk transference: shifting the consequence of a risk
and responsibility for its management to a third party
– Risk mitigation: reducing the impact of a risk event by
reducing the probability of its occurrence
Strategies for positive risk/opportunity

• Exploit: Possibility of reducing completion


time by hiring more staff
• Share: forming a joint venture to tap
upcoming opportunities
• Enhance: convincing the customer to enlarge
the size of the project, adding more activities
to the scope, or repeating the project again to
gain cost reduction benefits organization.

5/11/2023 25
General Risk Mitigation Strategies for Technical,
Cost, and Schedule Risks
Risk Response, Monitoring & Control
• Risk response control involves executing the risk
management processes and the risk management
plan to respond to risk events
• Risks must be monitored based on defined
milestones and decisions made regarding risks
and mitigation strategies
• Sometimes workarounds or unplanned responses
to risk events are needed when there are no
contingency plans
Activity 9

Identify all possible risks that your project might


involve.

5/11/2023 28

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