05 project planning - risk management
TRANSCRIPT
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Principles of Project Management
Hisham Rafik,MBA, PMPPresented By:
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Principles of Project Management 2 Knowledge 2008
Course Outline1. Project Management Framework
2. Project Initiation3. Project Planning - Scope Definition
4. Project Planning - Schedule Development5. Project Planning - Risk Management6. Project Planning - Budgeting
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Principles of Project Management 3 Knowledge 2008
Section 5
Managing Risk in projects
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Principles of Project Management 4 Knowledge 2008
Project Planning Process
Scope Definition
Schedule Development
Risk Management Plan
BudgetingPlan Compilation and Approvals
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Principles of Project Management 5 Knowledge 2008
Risk = An uncertain event or condition that, if it
occurs, has a Positive or Negative effect on aproject objective
The severity of any risk can be defined in terms oftwo parameters:
Likelihood (Probability): The extent to whichthe risk effects are likely to occur.Impact (Consequence): The effect that a risk
will have on the project if it occurs.
Risk defined
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Principles of Project Management 6 Knowledge 2008
Is the systematic process of Identifying, Analyzing,
and Responding to project risks
Maximizing the probability and consequences of
positive events (Opportunities ) to ProjectObjectives
AND
Minimizing the probability and consequences of
adverse events ( Threats ) to Project Objectives
Project risk management
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Principles of Project Management 7 Knowledge 2008
Project Risk Management Processes
11.3
QualitativeRisk Analysis
11.4QuantitativeRisk Analysis
11.2Risk Identification
11.5Risk ResponsePlanning
Planning Controlling
11.6Risk Monitoring& Control
11.1Risk ManagementPlanning
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Principles of Project Management 8 Knowledge 2008
11.1. Risk Management PlanningThe process of deciding how to approachand conduct the risk management activitiesfor a project
Should be completed early during projectplanning
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Principles of Project Management 9 Knowledge 2008
Risk Management Planning
Inputs1. Enterprise
environmental
factors2. Organizations
process assets
3. Project scope
statement
4. Project
management plan
Tools &Techniques
1. Planned meetings
& analysis
Outputs1. Risk Management
Plan
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Principles of Project Management 10 Knowledge 2008
Risk Management PlanningDescribes how risk identification, qualitative
and quantitative analysis, response planning,monitoring, and control will be structured and
performed during the project life cycle
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Principles of Project Management 11 Knowledge 2008
Risk Management PlanMethodology
Approaches, tools, and data sources that might be used to perform risk management
Roles & ResponsibilitiesLead and support roles for each type of action in the plan
Budgeting:Established budget for Risk Management
TimingWhen and how often risk management process will be performed
Definitions of risk probability & impact
Reporting FormatsDescribes contents and format of Risk Response Plan
Tracking
Describes how risk activities will be recorded for current project and lessons learned
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Principles of Project Management 12 Knowledge 2008
11.2. Risk IdentificationInvolves determining which risk events might affect
the project and documenting their characteristics.
Everyone should be involved in risk identification
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Principles of Project Management 13 Knowledge 2008
Risk Identification
Inputs Enterprise
environmental factors
Organizationsprocess assets
Project scope
statement Risk Management Plan
Project management
plan
Tools & Techniques1. Documentation reviews
2. Information-gathering
techniques3. Checklists analysis
4. Assumptions analysis
5. Diagramming technique
Outputs1. Risks register
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Principles of Project Management 14 Knowledge 2008
Risk Identification Tools &
Techniques: Information-Gathering TechniquesThe Company Experience
Lessons LearnedPersonal experience
PM and project teamInterviews with:
Project managers in and out of theorganizationExperts: Technological, regional
Delphi techniqueCollect and manipulate inputs fromexperts located in different places
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Principles of Project Management 15 Knowledge 2008
Risk Identification Tools &
Techniques: Information-Gathering TechniquesBrain Storming sessions
PM, team and stakeholdersThe most frequently used
SWOT Analysis
(WT) Mitigation(ST) stabilityThreats (T)
(WO) Cooperate(SO) GrowthOpportunities (O)
Weaknesses (W)Strengths (S)External factors
Internal Factors
Ri k Id ifi i
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Principles of Project Management 16 Knowledge 2008
Risk Identification
More Tools & TechniquesChecklists analysis
Sample of high level risks (or risk areas) based on historical
information and knowledge that has been accumulated fromprevious similar projects.Actual risks should be more specific and clear
Assumptions analysisBased on a set of Hypotheses, Scenarios and Assumptions.What assumptions have been made and if they are valid
Diagramming techniqueCause and effect diagramSystem or process flow charts.
Influences diagram
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Principles of Project Management 17 Knowledge 2008
Risk SourcesSchedule
Tasks on the critical/near-critical path
Optimistically estimated tasksTasks reliant on external dependenciesResources
Tasks with one individual working alone or many people
Tasks using scarce resources or Under-skilled peopleIllness and turnover
BudgetUncertainty of fundsShifts in budget prioritiesUncertain resource costs
ScopeUncertainty of new product developmentDynamics of customer requirements
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Principles of Project Management 18 Knowledge 2008
Risk Sources (another view)INTERNAL
FinancialResearch andDevelopmentProductionHuman ResourcesAdministrative
Strategic Preference
EXTERNAL
EconomicalCompetition
Social/Cultural
RegulatoryPolitical
Project Risk Management
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Principles of Project Management 19 Knowledge 2008
Risk registerList of identified riskList of potential responses
Root causes of riskUpdated risk categories (for use of future
projects)
Project Risk Management
Risk Identification, Outputs
11 3/4 Qualitative and
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Principles of Project Management 20 Knowledge 2008
Method for prioritizing the identified risks for
further actions.
The process of assessing the impact and
likelihood of identified risks.
Should be revised during the project life cycle.
11.3/4. Qualitative and
Quantitative Risk Analysis
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Principles of Project Management 21 Knowledge 2008
Inputs
1. Organizationsprocess assets
2. Project scope
statement3. Risk Management
Plan
4. Risk register
Tools & Techniques1. Risk probability &
impact assessment
2. Probability & impact
matrix
3. Risk data quality
assessment4. Risk categorization
5. Risk urgency
assessment
Outputs1. Risk register
(updated)
Qualitative Risk Analysis
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Principles of Project Management 22 Knowledge 2008
Qualitative Risk Analysis - Example
Vendor does not ship order
Vendors ships more thanordered
Vendor order is incomplete or
misses critical parts
Vendor Ships early
Risk Event
HL
LL
HH
LM
ImpactProbability
Pl tti g Ri k E t th
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Principles of Project Management 23 Knowledge 2008
Plotting Risk Events on the
Risk Event Matrix
Risk Probability
Risk Impact
L M H
L
H
M
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Principles of Project Management 24 Knowledge 2008
Risk register (updates)
Relative ranking or priority list of project risks.
Risks grouped by categories.
List of risks requiring response in the near-term.
List of risks for additional analysis and response.
Watch lists of low priority risks (residual risks).
Trends in qualitative risk analysis results.
Qualitative Risk Analysis, Outputs
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Principles of Project Management 25 Knowledge 2008
Quantifying project riskImpact
value $$
Total risk value
Risk event
$
Risk value
$$
Prob.
%
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Principles of Project Management 27 Knowledge 2008
Inputs1. Riskmanagement
plan2. Risk register
Tools & Techniques1. Strategies for negative
risk or threats
2. Strategies for positive
risk or opportunities3. Strategies for both
threats and opportunities
4. Contingent responsestrategy
Outputs1. Risk management
plan
2. Risk register
3. Risk-related
Contractual
agreements
Risk Response Planning
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Principles of Project Management 28 Knowledge 2008
Risk Response Planning Tools & Tech.Strategies for Negative risks (Threats)
Avoidance
MitigationTransferAcceptance (valid for threats and opportunities)
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Principles of Project Management 29 Knowledge 2008
Response Strategies for ThreatsAvoidance :
Risk preventionChanging the plan to eliminate a risk by avoiding thecause/source of risk
Protect project from impact of riskExamples:
Change the implementation strategy
Do it ourselves (do not subcontract)Reduce scope to avoid high risk deliverablesAdopt a familiar technology or product
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Principles of Project Management 30 Knowledge 2008
Response Strategies for ThreatsMitigation
Seeks to reduce the impact or probability of the riskevent to an acceptable thresholdBe proactive: Take early actions to reduce
impact/probability and dont wait until the risk hits yourprojectExamples:
Staging - More testing - PrototypeRedundancy planningUse more qualified resources
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Principles of Project Management 31 Knowledge 2008
Response Strategies for ThreatsTransfer
Shift responsibility of risk consequence to another partyDoes NOT eliminate riskMost effective in dealing with financial exposure
Examples:Buy/subcontract: move liabilitiesSelecting type of Procurement contracts: Fixed PriceInsurance: liabilities + bonds + Warranties
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Principles of Project Management 32 Knowledge 2008
AcceptanceUsed when it is not possible to change project plan orunable to use other risk response strategy (i.e. when it is notpossible to avoid/mitigate/transfer a risk)Active Acceptance
Develop a contingency plan to execute if the risk occurContingency plan = be ready with Plan B
Passive AcceptanceDeal with the risks as they occur = No Plan B prepared
Contingency allowance/ reserveEstablished amount of reserve (e.g.: time and/or money) toaccount for the identified known risks that couldn't beavoided, mitigated or transferredAmount is decided based on probability and impact
Response Strategies for Threats
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Principles of Project Management 34 Knowledge 2008
Outputs of Risk Management1. Risk response plan
List of critical risks and the plan towards them
Budget required to mitigate/transfer/avoidContingency plans and the needed contingency reserve
2. List of residual risksThose neglected risks will be reviewed throughout theproject execution (in case impact/probability increases)
3. Secondary risksThose new risks that arise from implementing a riskresponse.They should be revisited and re-incorporated in the risk
response plan
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Principles of Project Management 35 Knowledge 2008
Risk Response Plan (process output)Riskresponse
cost
Riskvalue Risk Response
Early WarningSignsProb.
ImpactRisk event
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Principles of Project Management 36 Knowledge 2008
Risk reservesContingency ReserveKnown unknowns expectable risks
Accounts for:Amounts dedicated for contingency plans identified in the riskmanagement processResidual risks that we decided to put aside when developing the
risk management plan
Management ReserveUnknown Unknowns un-expectable risksAccounts for items that we did not or could not identify in the riskmanagement process
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Principles of Project Management 37 Knowledge 2008
Risk register (updates)Identified RiskRisk ownerResults from qualitative and quantitative riskanalysis processes
Agreed responseSpecific action to implement the chosen responsestrategy
Residual and secondary riskBudget and time of responsesContingency plan and triggers
Risk Response Planning, Outputs
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Principles of Project Management 38 Knowledge 2008
Risk Management: SummaryProcess: Identification, Assessment, ResponseDevelopment and ControlRisk Sources: Internal and externalRisk Event Plotting; Risk Matrix
Threat Responses: Avoid, Mitigate, Transfer andAcceptContingency Planning
Risk planning Outputs Risk Response Plan + listof residual risks + secondary risks