MANAGING

RISKS AND
CONSTRAINTS
OUTLINE

• How risks involve uncertainty and loss?

• Three common types of risks
• Risk areas
• Risk breakdown structure
• Being creative with the solutions
• Risk tolerance
• Steps in the risk management process
• The Delphi technique
• Tracking risks
• Constraint vs. risks
HOW RISKS INVOLVE UNCERTAINLY
AND LOSS?
• A project that moves beyond the initiation stage without taking
risks and constraints into account will be more likely to fail.
• How?
– Uncertainty is always there.
– If something went wrong and you didn’t have any available solution
to the problem, the project would definitely fall apart.
• What is needed to be done?
– Risk and constraint analysis
– The goal of the risk and constraint analysis is to establish the RISK is an uncertain event or condition
that, if occurs, has an effect on at least on of
feasibility study of the project within the budget, schedule, politics,
the objectives such as scope, schedule, cost,
laws, and organizational structure that limit your project. and quality. And risk always lurks in future.
THREE COMMON TYPES OF RISK

• The kind of risks you'll encounter vary with projects. The most common are;
THE KNOWN RISKS

The risks you can identify after reviewing the project scope within the context of business or
technical environment.

THE PREDICTABLE RISKS

They are anticipated risks based on work with similar projects. They have to do with things such as
staff turnover or economic changes, that can have an anticipated impact.

THE UNPREDICTABLE RISKS

Happening of something that is beyond the control of project manager or team. “The stuff that just
happens”
RISK AREAS

• Risks can be broken down into areas that may impact delivery of the defined product and services.
The primary among these are following;
• BUDGET: You may fall short of funding that your project needs.
• SCHEDULE: You might find things are taking longer than you originally planned.
• STAFFING: As the project starts, you might find that you cannot find the right staff in the
marketplace.
• STAKEHOLDERS: They might not have time to work with the project team and assist in
developing the solution to project problems.
• PROJECT SIZE AND/OR COMPLEXITY: The project is so large and complex that there are just
too many factors to attempt to control them all.
RISK AREAS

• CORPORATE POLITICS: Because of political decisions, competing work groups share

responsibilities for certain activities, potentially creating a situation where n one is assuming
accountability for decision you require.
• ORGANIZATIONAL RESISTANCE: The project makes business sense, but key stakeholder
groups are resisting the changes the project deliverables require.
• EXTERNAL FACTORS: External risk factors hover outside your control, such as new
government regulations, or shifting technologies.
DON’T FORGET BUSINESS RISKS

• MARKET ACCEPTACE: The product is good one but customer won’t buy.
• TIME-TO-MARKET: It will be a good product, and the customers will want it, but only if
you can deliver it within specific time fame
• COST OF PRODUCTION: It will be a good product, and the customers will want it, but due
to the cost of producing it, customers wont be able to afford it.
• DIFFICULT TO SUPPORT: It is a great product, but who’s going to support it? The
operations group doesn’t have the people and skills to support the product once it is in
marketplace.
• LOSS OF POLITICAL SUPPORT: A project loses support from executive management.
THE ULTIMATE RISK: ACTS OF GOD

• As humans we can do a little to prevent to prevent the acts of god

• However, we can combat any situation when we are prepared beforehand.
• You can insure project safety by keeping all this in mind at a very early stage.
RISK
BREAKDOWN
STRUCTURE

A risk break down

structure is a
systematic way to put
risks in the form of a
hierarchy so you can
identify the risks by
category and
subcategory. It
provides the pictorial
causes.
BEING CREATIVE WITH THE
SOLUTIONS
• Identify potential problems early in the planning cycle (using proactive approach) and provide
input into management decisions regarding resource allocation.
• Involve team members at all levels of the project; focus their attention on how to identify risks
and prevent them from happening.
• Avoid the problem by eliminating the cause of threat.
• Use the mitigation strategy to reduce the impact of the risk by reducing the probability of the
risk occurring
• Use a retention strategy: This means that you accept the risk as possible and you will develop a
plan if it occurs.
RISK TOLERANCE

• Before you begin to make decision about how to plan risks, consider the amount of risk (risk
appetite) you and your project sponsors are ready to tolerate.
• For example; for the management team, the project schedule may be very important. Thus, the
project manager and the steering committee might be less tolerant of the risk.
THE BASICS OF RISK MANAGEMENT

In the basic risk management, you plan the possibility that a problem
will occur by estimating the probability of the problem arising during
the project, evaluating the impact if the problem does arise, and
preparing solutions in advance to keep the risk at an acceptable level.
STEPS IN RISK MANAGEMENT
PROCESS
1. Identify the risks by listing them and describing their potential impact on the project.
– Learn from the past projects.
– Anticipate problems by looking at critical relationship or resources in the project and
anticipating what could occur if these change.
– Interview the staff, subcontractors, vendors, suppliers, service providers, management, and
customer to look at deliverables from different point of view,
– Evaluate the environment, labour practices, and availability of raw materials or
technologies.
2. Analyse the probability that the risk will occur and the potential impact of the risk.
– When you consider the impact, also consider whether the risk will impact your schedule, budget,
quality, or people.
– Assign a number on the scale 1 (lowest impact) to 5 (highest impact) to quantify the potential impact
of the risk to your project.
– Determine how likely you think this event will occur using the same 1 to 5 scale.
3. Determine the overall severity of the risk.
– You do this by multiplying the probability number by the impact number to come up with severity
level.
4. Determine which risks are most important for further action
– You usually establish a ‘risk threshold’ that determines all those that are high in both impact and
likelihood get the most attention.
– Risks with less severity are considered for further analysis.
– Come up with risk threshold that establishes the risk that require further actions.
5. Document a response plan for the risks.
You have four basic options for dealing with risks on your list:
– Accept the risk: it means you intend to do nothing special at this point.
• This is an appropriate option if the consequences for the risk are cheaper than a program to eliminate or
reduce the risk.
– Avoid the risk: it means you’ll delete the part of the project that contains the risk or break the project
into smaller subprojects that reduces the risk overall.
• Be aware that reducing or avoiding the risk in this way may change the business case for the project.
– Monitor the risk and develop a contingency plan in case the risk becomes imminent.
• Developing a contingency plan for the key risks is one of the most important aspect of risk management.
• The contingencies are alternative plans and strategies to be put into place when necessary.
• You need to be proactive rather than reactive.
– Transfer the risk:
• Insurance is an obvious option to transfer the risks like theft, fire, and flood.
• Another way is to hire someone to implement the part of the project.
 THE DELPHI
Start TECHNIQUE

You first summarize risks after

speaking to experts
Identify risks individually and then circulate
the summery. Next, ask the
experts for comments and have
them return the document to
Evaluate risks Monitor risks
you. After a few iteration, you
can often get the consensus
Develop Communicate you were hoping for. Plus, it
mitigation mitigation reduces the bias and keeps one
plan plan person from having to much
influence on your risk analysis.
Risk Analysis Risk
Management
TRACKING RISK WITH RISK
REGISTER
• Maintaining a risk register allows you to track information about the risk to the project, their
analysis, their status and the plans to deal with them.
• You could track risks in a spreadsheet, use a database, depending on the size of the project.
Some project management software programs also have register as part of their feature.
• Always review and update your risk register regularly.
• Some risks will disappear as the project progresses, and other will appear.
• Identify who owns the risk, both from monitoring and tracking.
• Risk register can be a key tool as you develop your lesson learned at the end of the project.
 MANAGING RISKS
IS A BALANCING
impacts ACT BETWEEN
Cost of and THE COST
Action likeliho A S S O C I AT E D W I T H
od PLANNING AND
MANAGING RISKS
AND THE
LIKELIHOOD AND
I M PA C T O F R I S K
OCCURRING
CONSTRAINTS VS. RISKS

• A risk is an event that may or may not happen, resulting in unwanted consequences.
• A constraint is a real-world limit on the possibilities for your project.

Six main constraints are;

• Budget
• Risks
• Schedule
• Quality
• Resources
• Scope
THE PEOPLE

• How should you deal with people issues as you build project team?
• People’s skills as well as their conflicts is project manager’s most pressing concern.
Who makes the project? The people
• Availability and affordability is the key factor.
• Availability of right people is both a risk to anticipate and constraint you must deal with.
THE REAL WORLD

• Sometimes, reality hits you hard.

• One of the reasons projects fail is that you underestimate the amount of time and effort it takes
to complete all the work.
IMPORTANT

• The constraints of your project should be well documented in your charter as a part of scope
statement.
• That we-can-do-anything attitude is good for team spirit BUT when the things get ugly and you
will have to face reality, your team members will get frustrated and management will complain.
What will you do in such times?