UFMFHA-15-2

Project Management
Lecture 9
Project Risk Management

Electronics and Telecommunication Engineering Department

Dr. Nemat El Hassan

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 Outline
Project Risk Management processes:
Plan Risk
Identify Risks
Perform Qualitative Risk Analysis
Perform Quantitative Risk Analysis
Plan Risk Responses
Control Risks

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 Risk
Project risk is an uncertain event or condition that,
if it occurs, has a positive or negative effect on one
or more project objectives such as scope, schedule,
cost, and quality.
Overall
Project Risk
Risk
Project Risk Project Risk

Known Unknown Individual

risk
Individual
risk
Individual
risk

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 Risk
Known risks
Have been identified and analysed
Possible to plan responses for those risks.
.
Unknown risks
Cannot be managed proactively
May be assigned a management reserve
Unknown risks that cannot be managed proactively,
should be assigned a contingency reserve

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 Risk Attitudes
Organizations and stakeholders are willing to accept
varying degrees of risk depending on their risk attitude.
 Risk appetite
Risk appetite is the level of risk that an organization is prepared to accept in pursuit of
its objectives, before action is deemed necessary to reduce the risk. It represents a
balance between the potential benefits of innovation and the threats, that change
inevitably brings
An example of a risk appetite statement would be when a company says it does not
accept risks that could result in a significant loss of its revenue base.
 Risk tolerance
With any type of investment, there is always risk, but how much risk one is able to withstand is
their risk tolerance. For example, if you have a low risk tolerance, you may sell your stocks the
very first time they start to dip

Risk threshold
• Below that risk threshold, the organization will accept the risk.
• Above that risk threshold, the organization will not tolerate the risk.
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 Plan Risk Management
Plan Risk Management is the process of defining how to conduct risk
management activities for a project.
The key benefit of this process is it ensures that the degree, type, and
visibility of risk management are commensurate with both the risks and
the importance of the project to the organization.

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 Plan Risk Management: Outputs
Risk Management Plan
The risk management plan includes the following:
Methodology
Defines the approaches, tools, and data sources that will be used to perform risk
management on the project.
Roles and responsibilities
Defines the lead, support, and risk management team members for each type of
activity in the risk management plan, and clarifies their responsibilities.
Budgeting.
Establishes protocols for application of contingency and management reserves.
Timing.
Defines when and how often the risk management processes will be performed,
and establishes risk management activities for 1.Brainstorming
inclusion in the project schedule.
2.Root Cause Analysis
3.SWOT Analysis
Definitions of risk probability and impact 4.Risk Assessment Template for IT
5.Probability and Impact Matrix
6.Risk Data Quality Assessment

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 Plan Risk Management: Outputs
Risk Management Plan
Probability and impact matrix

of little value or importance.

Revised stakeholders’ tolerances

Reporting formats

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 Identify Risks
Identify Risks is the process of determining which risks may affect the
project and documenting their characteristics.
The key benefit of this process is the documentation of existing risks and
the knowledge and ability it provides to the project team to anticipate
events.

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 Identify Risks: Tools and Techniques
Documentation reviews
Information gathering techniques
 Brainstorming.
 Delphi technique/ Expert group opinion
 Interviewing
 Root cause analysis
Checklist analysis
Assumptions analysis
Identifies risks to the project from inaccuracy, instability, inconsistency, or
incompleteness of assumptions
SWOT analysis
Strengths, Weaknesses, Opportunities, and Threats
Expert judgment
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 Identify Risks: Tools and Techniques
Diagramming techniques

Influence Diagram Cause and Effect Diagram

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 Identify Risks: Outputs

Risk Register:
List of identified risks
List of potential responses

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Perform Qualitative Risk Analysis
Perform Qualitative Risk Analysis is the process of prioritizing risks for
further analysis or action by assessing and combining their probability of
occurrence and impact.
The key benefit of this process is that it enables project managers to
reduce the level of uncertainty and to focus on high-priority risks.

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 Perform Qualitative Risk Analysis
Tools and Techniques
Risk Data Quality Assessment
 Risk data quality assessment is a technique to evaluate the degree to
which the data about risks is useful for risk management.
 It involves examining the degree to which the risk is understood and
the accuracy, quality, reliability, and integrity of the data about the
risk.
Risk Categorization by:
 sources of risk
 the area or phase of the project affected
 common root causes

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 Perform Quantitative Risk Analysis
Perform Quantitative Risk Analysis is the process of numerically
analyzing the effect of identified risks on overall project objectives.
The key benefit of this process is that it produces quantitative risk
information to support decision making in order to reduce project
uncertainty.

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 Perform Quantitative Risk Analysis
Tools and Techniques
Quantitative Risk Analysis and Modeling Techniques
Sensitivity analysis

 Helps to determine which risks have the

most potential impact on the project.
 Helps to understand how the variations in
project’s objectives correlate with
variations in different uncertainties.
 Examines the extent to which the
uncertainty of each project element affects
the objective being studied when all other
uncertain elements are held at their
baseline values.
Tornado Diagram
 https://www.youtube.com/watch?
v=6ojHXG27w-s
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 Plan Risk Responses
Plan Risk Responses is the process of developing options and actions to
enhance opportunities and to reduce threats to project objectives.
The key benefit of this process is that it addresses the risks by their
priority, inserting resources and activities into the budget, schedule and
project management plan as needed.

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 Plan Risk Responses: Tools and Techniques

Strategies for negative risks or threats

 Avoid
risk response strategy whereby the project team acts to eliminate the threat or
protect the project from its impact.
 Transfer
a risk response strategy whereby the project team shifts the impact of a threat
to a third party, together with ownership of the response. E.g. insurance.
 Mitigate
risk response strategy whereby the project team acts to reduce the probability
of occurrence or impact of a risk e.g. designing redundancy into a system
 Accept
a risk response strategy whereby the project team decides to acknowledge the
risk and not take any action unless the risk occurs. Can be Passive “only
documenting” or Active “add contingency reserve” acceptance.

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 Plan Risk Responses: Tools and Techniques

Strategies for Positive Risks or Opportunities

 Exploit
seeks to eliminate the uncertainty associated with a particular upside risk
by ensuring the opportunity definitely happens.
 Enhance
used to increase the probability and/or the positive impacts of an
opportunity.
 Share
allocating some or all of the ownership of the opportunity to a third
party who is best able to capture the opportunity for the benefit of the
project. Examples joint ventures
 Accept
being willing to take advantage of the opportunity if it arises, but not
actively pursuing it.
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 Control Risks
Control Risks is the process of implementing risk response plans,
tracking identified risks, monitoring remaining risks, identifying new
risks, and evaluating risk process effectiveness throughout the project.
The key benefit of this process is that it improves efficiency of the risk
approach throughout the project life cycle to continuously optimize risk
responses.

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 Reading
A guide to the project management body of
knowledge 5th edition.
Chapter 11: Project Risk Management

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