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2016/7/2 (C) 2016 MORIWAKI Yuichi All rights reserved. 1 Project Risk Management Chapter 1 – Identifying Risks Yuichi MORIWAKI

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Page 1: Basic knowledge about project risk and risk management

2016/7/2 (C) 2016 MORIWAKI Yuichi All rights reserved. 1

Project Risk Management

Chapter 1 – Identifying Risks

Yuichi MORIWAKI

Page 2: Basic knowledge about project risk and risk management

2016/7/2 (C) 2016 MORIWAKI Yuichi All rights reserved. 2

Chapter 1

Identifying Risks

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Section 1: Inside Risk

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A Project Risk

� A project risk• A project risk is a thing or a matter which bothers the project completion.

o In a software development there are some major processes like “Requirement Analysis”, “Specification Definition”, “Software Design”, “Coding, Debugging, Testing” and “Joint Testing”…. If any of those processes are bothered, it makes some harmful effects on entire project.

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A Risk & a Risk factor

� A risk and a risk factor• When we consider about eliminating a risk, we need to clarify if the thing or the matter is “a risk” or “a risk

factor”. We can’t directly remove a risk, but we can remove a risk factor instead.

Risk: breaking a window pane

Risk factor: a ball

Risk factor: a hitter

Risk factor: a Baseball game

Risk factor: a bat

As you can see, as far as we are playing baseball, we can’t remove the risk of breaking a window pane.But if we can remove one of those risk factors, we can remove the risk of breaking a window pane.

So the correct recognition of risk and risk factor is very important. And by the correct identification of risk factor, we can think of risk mitigation.

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A Risk & a Risk factor

� A risk and a risk factor• Consider if we are asked to carry a cargo from Princeton Univ. to Brown Univ in 10 hours, what will be the risk and what

will be the risk factor?• What are the risk factors?

Princeton Univ.

Brown Univ.

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A Risk & a Risk factor

� A risk and a risk factor• If we can identify the risk factors, it is easy to consider about the risk. This is the risk analysis.

Risk Factor Possible Risk Possible Result of Risk

Necessary preparation

Feasibility of preparation

Consideration on schedule planning

Truck Engine broke down Delivery failure Prepare another truck Too costly. Not feasible

If broke down happens, it may take 3 hours to prepare alternative truck , take 30 minutes on transshipment.

Run out of gas Large delay in delivery

Check before startBring reserved gasoline

Feasible Check before start is enough.To ensure it check previous night will be enough.

Flat tire Medium delay in delivery

Check before startCheck the availability of spare tireDrill tire changing

FeasibleTakes time for training

Assuming possible occurrence of puncture is once, then consideration on schedule will be maximum one hour.

People who has no experience about transport of cargos, it may be difficult to complete this sheet. But people who has a lot of experience, can consider more about risks, necessary preparations and other points. If someone who has the long distance driving experience, he/she may give us more precise risks.

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A Risk & a Risk factor

� A risk and a risk factor• What sort of risk does this risk factor have?

Risk Factor Possible Risk Possible Result of Risk

Necessary preparation

Feasibility of preparation

Consideration on schedule planning

Route

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Summary until this slide

� A project risk• What we have learned about a risk here is;

1. We can’t remove a risk directly2. To avoid a risk, we need to remove the risk factor.3. It is very easy to find risk factors if people have experience on a certain activity.

(It may be difficult to find if people have less experience. )4. Risk analysis in general is to consider about risk factor, possible risk, possible result of risk, necessary

preparation, feasibility of preparation and consideration on schedule planning

Those risk factors are almost fixed and constant on a casual business activity. When considering about transporting cargos, a truck, cartons, drivers, route are mandatory. Those risk analysis can be almost standardized.

The reason why those can be standardized is as those activities can be completed by the team only. The activity doesn’t involve other parties.

The risks come from a company or a team, we call it “Inside Risk”.

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Section 2: Task dependent risk

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A Risk due to task dependency

� If two teams need to collaborate to accomplish a work. There will be a dependency risk.

Process A Process BProcess B needs to wait until the completion of process A

Case #1

Process A

Process BProcess B needs to wait for the start of process A.And also process B needs to wait for the closure of process A to close B itself.Process B has a large dependency on A.

Case #2

C

Process BIn some cases, independent process C may interrupt process B. Case #3

B

B

Serial dependency risk

Parallel dependency risk

External Accident risk

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A Risk due to task dependency

How we can find the dependency risk?To find the dependency risk, we need to break down the high level process definition to details.

Preparation of omelet

“Preparation of omelet” is more concrete than “Breakfast preparation”. We can see what exactly need to prepare. But still the dependency risk is not unclear to us.

Why Breakdown?

Food preparation

Breakfast Preparation

“Food Preparation” is one of the highest level of process definition. The objective is very clear, and it us a clear goal.But we can’t see what to prepare, when to prepare. “Breakfast Preparation” is

one of the example of high level process definition.You can find what to prepare, when to prepare.But we can’t see the dependency risk. We need more breakdown on this.

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A Risk due to task dependency

Process break down.The purpose of break down is to find the disturbance of process.

If the process is broken down to cooking procedures, it’s much easier to find the disturbance. If you can identify the disturbances, we can make the risk elimination plan.

Preparation of omelet

Prepare eggs Break eggs add salt Mix well

Heat the pan

Fry at weak head level

Serve on a plate

If the eggs are too old?Enough eggs for 5 people?

If the bowl is too small?Salt is available?

If the size is OK?Butter is prepared?

Oven works well? If the serving plate is ready and clean?

Check the expire date and available number every day.

Define maximum size of omelet and prepare a bowl for it.

Define maximum size of omelet and prepare a pan for it.

Check the condition of oven every night

Check the washing machine and the stock of detergent everyday.

Those are the risks which will disturb making omelet

Those are the processes which have dependency on the preceding process.If preceding process is stopped, you can never get the omelet. So each process will be the risk factor, the risk is the disturbance of each process.

These are the risk preventive actions.Necessary manuals, documents, trainings will be made from them

If we break down the preparation of omelet more into recipe level, we can see

the risk and risk factor.

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A Risk due to task dependency

Preparation of omelet

Prepare eggs Break eggs add salt Mix well

Heat the pan

Fry at weak head level

Serve on a plate

On what process, external accidental risk may arise?

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A Risk due to task dependency

� Risk • What sort of risk does this risk factor have?

High level Process Process breakdown

Identified risk on this process

Preventive actions Feasibility of preventive actions

Consideration on inevitable risks

Prepare eggs If the eggs are too old?Enough eggs for 5 people?

Check the expire date and available number every day

Easy to implement by adding this action as daily checking

Break eggs and add salt

If the bowl is too small?Salt is available?

Define maximum size of omelet and prepare a bowl for it.

Once it is fixed, no risk will raise up.

Mix it well Breakage of beater may happen

Give instruction of handling beater to avoid the breakage

Easy to implement. Even if the breakage happens, easy to find alternative way.

Heat a frying pan If the size is OK?Butter is prepared?

Define maximum size of omelet and prepare a pan for it.

Once it is fixed, no risk will raise up.

Fry at weak heat level

Break down of oven may happen

Check the condition of oven every night

Easy to implement by adding this action as daily checking

Sudden Power failure may happen

Prepare the backup power supply like self power generation system

Not feasible. To tell customer we are not able to deliver. And propose alternative dish menu.

Serve on a plate If the serving plate is ready and clean?

Check the washing machine and the stock of detergent everyday.

Easy to implement by adding this action as daily checking

Preparation of omelet

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Section 3: Outside risk

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A Risk from outside

� Dependency is not only within inside activity. Dependency has various cases including inside and outside tasks.

Weather is the typical outside risk factor from the view point of picnicking.

Risk: cancellation of picnicRisk factor: Weather

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High level Process Process breakdown

Identified risk on this process

Preventive actions Feasibility of preventive actions

Consideration on inevitable risks

A Risk from outside

� Let’s consider about the task to transporting a cargo from Princeton Univ. to Brown Univ.

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A Break

End of Chapter 1

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Chapter 2

Managing Risks

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Section 1: Scope of risk management

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Managing risks

•We have learned about the risk and risk factor in the previous chapter, so on the risk management activity what do we have to manage?

On risk management, what we have to manage is a Risk factor

If we try to manage only risk itself, our risk management activity will be always “delayed”.Because, the most important point on risk management is “prediction”. If you work with risk, that means the risk is already arisen. That activity is the supportive action to the arisen risk. It requires time & money to solve. From the project management point of view, those time and money should be minimized.

A fire is a risk, oil and matches or lighter will be the risk factor. If we can avoid a fire, we don’t lose our time, money and property. We need to recognize the management is to avoid the occurrence of a fire, so what we have to manage is the risk factor.

and

If there happens a fire, we need to extinguish. The entire activity to put it down as soon as possible is the management of risk.

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Managing risks

•What we want to do against risk is;

To make it not to happen

RiskTo minimize the impact of risk.To detour

To predict the occurrence

To include it in the project planTo prepare countermeasure against its occurrence

Risk factor analysis

Risk analysis

Mostly for risk prevention

Mostly for risk impact mitigation

- Removal of risk factor (Before project start or during the project).

- Add considerable task on project plan.- Monitor risk factor to see unexpected behavior

of internal & external risk factors.- Take necessary action for the risk factor when

some signs or bodement are seen.

- Prepare procedure for the risk occurrence.- Add necessary consideration for the counter action

of risk occurrence on project plan. - Catch the occurrence & immediate address.- Proceed the project by minimizing or

removing the risk. (including detouring) - Detour the risk and proceed the project.- Hold the process or freeze the project until the risk

is solved.

Preventive action against the occurrence of risk:

Counter action against the occurrence:

Scope of risk management

The counter action may include some part of project management. But the role of risk management is to give correct information to let the project manager chosen the correct action.

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Section 1: Managing Risks

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Managing risks

Risk management starts before project start. the necessary task should be included in the project plan.

Before project start

- Analyze risk and risk factor- Remove risk factor- Add necessary consideration on project plan- Protect by contract- Define what to monitor- Define how to watch risk factor- Define the communication line & escalation path- Prepare procedure for the risk occurrence

- Monitor internal & external risk factors- Take necessary action on the risk factor- Catch the occurrence - Take necessary & immediate action- Give proper info to determine

� Solve the issue and proceed the project� Detour the risk and proceed the project.� Hold the process � Freeze the project

After project start

Risk factor analysis

Risk analysis

Mostly for risk prevention

Mostly for risk impact mitigation

- Removal of risk factor (Before project start or during the project).

- Add considerable task on project plan.- Monitor risk factor to see unexpected behavior

of internal & external risk factors.- Take necessary action for the risk factor when

some signs or bodement are seen.

- Prepare procedure for the risk occurrence.- Add necessary consideration for the counter action

of risk occurrence on project plan. - Catch the occurrence & immediate address.- Proceed the project by minimizing or

removing the risk. (including detouring) - Detour the risk and proceed the project.- Hold the process or freeze the project until the risk

is solved.

Preventive action against the occurrence of risk:

Counter action against the occurrence:

Scope of risk management

Risk management task

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Managing risks

Before the project starts or during the project, the most important point on risk management is prediction, “Before risk occurs”.

To remove the risk, Risk Management needs to manage the cigarette lighter and the oil in a proper manner.�Store those with a distance.�Keep the oil under cooler place.�Keep the cigarette lighter in a safe place. (reach out of kids)�Completely remove them.

The risk of a fire

To remove the risk, Risk management needs to keep on watching them. How they are used, how they stored back to the original place. �Check who uses them �Check the location�Check the store place to be returned.�Check the leakage of oil from the can�Check the environmental temperature�Check if there are a fire near the storage place

To extinguish the fire before it expands, prepare a bucket of water, immediately address to the place and extinguish.

Risk management duty is;Keep monitoring if there are a fire.Inform the project team if it occurs.

Risk management previously can;�Define the place to monitor�Define the procedure of water preparation�Define the communication line�Define the report format

To extinguish the fireCall fire fighter, stop working, escape from the danger, evacuate the place, follow the instruction of fire fighter.

Risk management duty is analyze the impact and inform the project team to let them prepare a revised plan.

Risk management previously can;�Define the emergency manual�Define the procedure of a

0 Risk = No impact 0 Risk = No impact

Small impact by occurred risk

Large impact to project activity

Before project start After project started

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Managing risks

In our specification definition activity, what are the risk and risk factor?

Risk factor

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Managing risks

Successful risk management activity is;

To take necessary preventive action against risk factors

To monitor external & internal risk factor

To predict risk occurrence To take preventive immediate action against risk occurrence

To analyze the risk and risk factor

Analyze Isolate Monitor Predict Prevent

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End of the entire Chapter