day 3 - project management methodology with pmp exam preparation ver 1
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ro ec anagemen e o o ogy w
Exam Preparation Day 3
PMP, Prince2 Practitioner, ITIL, CGEIT
July 14, 2012
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Agenda
Plan Risk Management
TEA BREAK
Perform Qualitative Risks
Perform Quantitative Risks
Risk Exercises
LUNCH BREAK
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Agenda
Plan Risk Responses
Develop Human Resource Plan
TEA BREAK
Acquire Project Team
Develop Project Team
Manage Project Team
Plan Procurement
Day 3 Quiz
PMP Exam Tips and Tricks
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PROJECT RISK MANAGEMENT
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Project Risk Management
ro ec s anagemen
Processes of conducting risk management planning,identification, analysis, response planning, and monitoring and
control on the ro ect
Project Risk Management Objective
To increase the robabilit and
impact of positive events
(Opportunities)
Decrease the probability and impact
of negative events in the project
Risks
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Introduction to RiskRisk
Uncertain Events or Condition that may have positive ornegative effect on the project. Risks are Inherent in ProjectManagement.
Risk Key Features
Has im act on at least one ro ect
objective
(Time / Cost / Scope / Quality)
Should be approached and planned early
in the planning phase can help to,
positive risks
Minimize the consequences ofadverse risks
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Introduction to Risk
Types of Risk
Known Risks - Planning is possible
Unknown Risks - Cant be managed
proactively add contingencies
s o erance an u es
Amount or degree of risk acceptable
Influencing the way Risks are respondedby Individuals or Stakeholders.
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Project Risk Management
Monitoring &Controllin Processes
PlanningProcesses
Enter phase/Start project
Exit phase/End project
InitiatingProcesses
ClosingProcesses
Executing
Processes
Knowledge
Area
Process
Initiating Planning Executing Monitoring & Control Closing
Risk
Plan Risk Management
Identify Risks
Perform Qualitative Risk Analysis
Perform Quantitative Risk Analysis
Plan Risk Responses
Monitor and Control Risks
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PLAN RISK MANAGEMENT
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Plan Risk Management
an s anagemen
Process of deciding how to approach & plan the riskmanagement activities for a project. Planning also important to
rovide sufficient resources & time for risk mana ement
Risk Management Planning KeyPoints
activities
Ensure that the degree, type and
visibility of risk management arecommensurate with the si nificance
of the project.
Establish an agreed-upon basis for
evaluatin risk. This process should be initiated at the
early stages of project planning.
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Plan Risk Management
Inputs
Project scopeStatement
Tools and Techniques
Planning Meetingsand anal sis
Outputs
Risk ManagementPlan
Cost Management Plan
Schedule Management
Communications
Management Plan
Enterpr se
environmental factors
Organizational process
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Plan Risk Management
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Inputs - Plan Risk Management
Attitude towards Risk and Risk Tolerance
Expressed in policy statements or Revealed in actions
Organizational Process Assets
Risk Categories
Common Definition of concepts and terminologies
Defined roles, responsibilities and authority levels fordecision-making
Lessons Learned Stakeholder Registers
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Inputs - Plan Risk Management
Deliverables and a common understanding amongstakeholders
r ves ramewor or s anagemen e or
Cost Management Plan
Describes how risk budgets, contingencies, andmanagement reserves will be communicated and accessed.
Schedule Management Plan
Describes how schedule contingencies will be
communicated and assessed.
Communication Management Plan
Hel s to determine who will be available to share information
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on various risk and responses
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Tools & Techniques - Plan Risk Management
Project team hold planning meetings to develop riskmanagement plan.
Attendees include
ro ec anager
Project Team Leaders
Key Stakeholders nyone respons e or p ann ng an
executing activities
activities will be developed for inclusion in theproject budget and schedule respectively.
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Outputs - Plan Risk Management
The risk management plan is responsible for
determining
How quantitative analysis will becompleted
completed
How risk response planning willhappen
How risks will be monitored
How ongoing risk management activities
will happen throughout the project lifecycle
The Risk Management Plan does not detail the plannedres onses to individual risks within the ro ect : this is the
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purpose of the risk response plan
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Outputs - Plan Risk Management
Risk Management Plan includes Methodology defines the approaches, tools, and data sources that
may be used to perform risk management. Roles & Responsibilities defines the lead, support, and risk
management team membership for each type of action in the plan. Budget Assigns resources and estimate costs needed for risk
management for inclusion in cost baseline. Timing Describes when and how often the risk management process
will be performed throughout the project life cycle. Risk Categories
Provide a structure that ensures a comprehensive process ofsystematically identifying risk to a consistent level of detail.
a structure.
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Outputs - Plan Risk Management
Risk Breakdown Structure - Example
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Outputs - Plan Risk Management
Risk Breakdown Structure - Example
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Risk Mana ement Plan includes
Outputs - Plan Risk Management
Definition of Risk Probability and Impact General definitions ofprobability levels and impact levels are tailored to individual projects.
Probability and Impact Matrix Risk prioritization using combination
of probability and impact.
ev se ta e o er s o erances ta e o ers to erances may
be revised in the Risk Management Planning process, as they apply to
the specific project.
Reporting formats Defines how the results of the risk management
processes will be documented, analyzed, and communicated to the
project team and stakeholders.
Tracking Documents how all facets of risk activities will be recorded.
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audited.
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Outputs - Plan Risk Management
Probability and Impact Matrix - Example
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Outputs - Plan Risk Management
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IDENTIFY RISKS
Id tif Ri k
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Identify Risks
Identif Risks
Iterative process for determining which risks are likely toaffect the project and documenting the characteristics of eachrisks.
s en ca on ey o n s
Types of Risks Internal risks Things that the project team
can control or influence
External risks Things beyond the control or
influence of the project team
Identify Risks is an iterative process because new risks evolve or
become know as the project progresses through its life cycle.
Triggers : Early warning signs or indications that a risk to your
project is about to occur.
Identify Risks is concerned with opportunities (positive
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Identify Risks
Project Manager, Project Team Members Customers , End Users Sub ect Matter Ex erts outside ro ect Risk Management Experts
External, unpredictable: Regulatory, etc.
External, predictable: Market risks
n erna , non- ec n ca : anagemen
Technical : Design
Legal : Contractual
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Identify Risks
Inputs
Risk Management Plan
Tools and Techniques
Documentation
Outputs
Risk Register
Activity Cost estimates
Activity Duration estimate
Sco e baseline
ev ews
Information GatheringTechniques
Stakeholder register
Cost Management plan
Checklist analysis
Assumptions Analysis
DiagrammingSchedule Management plan
Quality Management Plan
Project Documents
Techniques
SWOT Analysis
Ex ert Jud mentEnterprise environmental
factors
Organizational process assets
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Id if Ri k
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Identify Risks
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Inputs Identify Risks
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Enterprise Environmental Factors
Inputs Identify Risks
Published information including commercial databases
Academic studies or other industry studies. Published checklist, Benchmarking. Risk attitudes.
Organizational Process Assets Project files including actual data
Organizational and project process controls Lessons learned
Activity Cost Estimates
Indicative of likely cost to complete the scheduled activity expressed as a range
Width of range is indicative of degree of risk involved
Scope Baseline
Uncertainty in Project Assumptions
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WBS
I t Id tif Ri k
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Inputs Identify Risks
Schedule estimates risks
Stakeholder list/inputs
Customer interviews / participation in risk identification
Risk Management Plan Assignment of Roles and Responsibilities Provision of Risk Management Activities in the Budget and Schedule
Schedule Management Plan
Cost Management Plan Risk related to cost management approach
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I t Id tif Ri k
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Inputs Identify Risks
Quality management approach may generate or alleviate the risks.
Assumption log
Work Performance reports
Earned Value reports
Network Diagrams
Baselines
Other project information proven to be valuable in identifying risks
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T l & T h i Id tif Ri k
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Documentation Reviews
Tools & Techniques Identify Risks
A structured review may be performed of project documentation.
Information Gathering Techniques
ra nstorm ng oa s to ent y compre ens ve st o pro ect r s s
using frameworks like RBS Delphi technique Way to reach a consensus of experts
Interviewing SME, Experienced project stakeholders
Root Cause analysis
Organized by Source of Risk
Not a complete and final list of Risk
Needs to be updated at the closure for future project use
Whats the big difference between Brainstorming and the DelphiTechni ue? Can ou think of a situation where one would be more
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useful than the other?
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Tools & Techniques Identify Risks
Examines the validity of assumptions
Identifies risks to the project from inaccuracy, inconsistency, or
Diagramming Techniques
Cause and Effect Diagrams also known as Ishikawa or Fishbone
diagrams
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T l & T h i Id tif Ri k
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Tools & Techniques Identify Risks
agramm ng ec n ques
System or process flow charts - that
shows the relationship between
componen s an ow e overa process
works.
Influence diagrams graphical
represen a on o s ow ng causa
influences, time ordering events and
other relationships among variables
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Tools & Techniques Identify Risks
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Expert Judgment
Tools & Techniques Identify Risks
Experts with relevant experience of similar projects can help identify risks.
SWOT Anal sis
Strengths, weaknesses, opportunities, and threats (also known as SWOT
analysis) is a technique that examines the project from each of theseperspectives to increase the breadth of identified risks by including
internally generated risks. Examples,
Strengths : The technology to be installed in the project has been.
Weakness : We have never installed this technology before.
time for time-to-market on new products.
Threats : The time to complete the training and simulation may overlap
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technology portfolio.
Outputs Identify Risks
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Outputs Identify Risks
s eg s er
Document that identifies and categorizes risks, potential risk
responses, and their triggers, or warning signs.
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PERFORM QUALITATIVE RISK ANALYSIS
Perform Qualitative Risk Analysis
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Perform Qualitative Risk AnalysisPerform Qualitative Risk Analysis
by assessing and combining their probability of occurrence andthe Impact
Qualitative risk qualifiesthe risks that have been
identified in the project.
It examines and prioritizes the risks based on their
probability of occurring and the impact on the projectif the risks did occur.
Improves project performance by focusing on High-
Priorit risks.
Rapid and cost-effective means of establishing priorities
forPlan Risk Res onses and foundation forPerform
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Quantitative Risk Analysis.
P f Q lit ti Ri k A l i
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Perform Qualitative Risk Analysis
Inputs
Organizational process
assets
Tools and Techniques
Risk probability &
impact assessment
Outputs
Risk register updates.
Project scope
statement
Risk Management Plan
Probability and impact
matrix
Risk data quality
Risk registerassessment
Risk categorization
assessment
Expert Judgment
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Perform Qualitative Risk Analysis
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Inputs Perform Qualitative Risk Analysis
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Inputs Perform Qualitative Risk Analysis
Risk Database Information on prior, similar completed projects.
Project Scope Statement
Kind of work determines the amount of risk
Common or recurrent t e have less risk
State-of-the-art, first time technology, orhighly complex
projects have more uncertainty
Risk Management Plan
s eg s er
Identified Risks Evaluation of risks identified during the
Identify Risks process and their potential impacts on the project
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Tools & Techniques Perform Qualitative
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Tools & Techniques Perform QualitativeRisk Analysis
Risk Probability and Impact Assessment Risk probability - is the likelihood that a risk
. Probability and Impact are assessed for each
risk. Risk consequences is the effect on projectob ectives if the risk event occurs; done ateach risk level
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Tools & Techniques Perform Qualitative RiskAnalysis
Risk / Impact Risk Rating Matrix - Examples Risk Probability Scale falls between 0.0 (no probability) and 1.0 certainty) ,
Ordinal scale ranked-order scale, such as very low, low, moderate, high, and very
high Cardinal scale assign values to these impacts. These values are usually linear
(.1/ .3/ .5/ .7/ .9) or nonlinear (.05/ .1/ .2/ .4/ .8/)
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Tools & Techniques Perform QualitativeRisk Analysis
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Risk Data Quality Assessment
Tools & Techniques Perform Qualitative Risk Analysis
ec n que o eva ua e e egree o w c e a a s use u
Extent of understanding of the risk Data available about the risk Quality of the data Reliability and integrity of the data
Risk Categorization
Sources of Risks Area of the project affected
Project Phase
Risk Urgency Assessment
Risks requiring near-term responses may need to be urgently addressed.
Expert Judgment
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ANALYSIS
Perform Quantitative Risk Analysis
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Perform Quantitative Risk Analysis
er orm uan a ve s na ys s
Measuring numerically the effect of identified risk on overallproject objectives.
Quantitative Risk Analysis Key Points
Performed on risks that have been prioritizedb the Perform Qualitative Risk Anal sis
process as substantially impacting project
objectives.
Analyzes the effect of risk events and assignsnumerical rating to those risks individually
or to evaluate the aggregate effect of all risks
affecting the project.
Perform Quantitative analysis is a more time-consumingprocess as compared to Qualitative analysis, and is therefore
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also more expensive.
Perform Quantitative Risk Analysis
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Perform Quantitative Risk Analysis
Quantitative Risk Analysis Goals
To ascertain the likelihood of reaching projectsuccess.
To ascertain the likelihood of reachin a articular
project objective.
To determine the risk exposure for the project.
To determine the likel amount of the contin enc
reserve needed for the Project.
To determine the risks with the largest impact on the
ro ect.
To determine realistic time, cost, and scope targets.
This process should be repeated afterPlan Risk
if overall project risk has been satisfactorily decreased.
Generally this is done afterPerform Qualitative Risk
Anal sis rocess. In some cases this rocess ma not
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be required to develop effective risk responses.
P f Q tit ti Ri k A l i
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Perform Quantitative Risk Analysis
Inputs
Risk register
Tools and Techniques
Data gathering and
Outputs
Risk register updates.
Risk Management Plan
Cost management plan
Schedule mana ement
techniques
Quantitative risk
plan
Organizational process
techniques
Expert Judgment
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Inputs Perform Quantitative Risk Analysis
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Inputs Perform Quantitative Risk Analysis
Risk Database Information on prior, similar completed projects.
Risk Management Plan discussed earlier
Schedule Mana ement Plan discussed earlier
Cost Management Plan discussed earlier
Risk Register
Identified Risks Evaluation of risks identified durin theIdentify Risks process and their potential impacts on the project
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Data Gathering and Representation Techniques
q y
Interviewing
With project stakeholders and subject-matter experts to quantify
the probability and consequences of risks on project objectives.
Refers to Historic data too.
The information needed depends upon the type of probability distributionsthat will be used.
.
Probability Distributions
Continuous probability distributions represent the
uncertainty in values, such as durations of schedule
activities and costs of project components.
Discrete distributions can be used to represent uncertain events, such as
e ou come o a es or a poss e scenar o n a ec s on ree.
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Quantitative Risk Anal sis and Modelin Techni ues
q Q y
Sensitivity Analysis
Helps to determine which risks have the most
potential impact on the project.
Tornado Diagram is one typical display ofsensitivity analysis, useful for comparing
re a ve mpor ance an mpac o var a es.
Calculates the average outcome when the future includesscenarios that may or may not happen.
EMV calculates the expected monetary value of a decisionbased on its risk event probability and monetary value
EMV = probability ( in %) X consequences or impact
EMV ofopportunities are expressed as positive values, while
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Decision Tree / EMV Example
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Modeling and Simulation
Uses a model or copy of the system to analyze the behavior orperformance of the system.
Monte Carlo Simulation
Perform project many times to provide a statistical distribution of
calculated results Uses results to quantify the risk of various schedule alternatives, different
pro ec s ra eg es, eren pa s roug e ne wor .
Can be used to assess the range of possible cost options
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Modeling and Simulation Example
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Ex ert Jud ment
Subject matter experts internal or external to theorganization, such as engineering or statisticalexperts, validate data and techniques.
Interpretation of data.
Tools evaluation for performing quantitative analysisgiven organization culture.
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Outputs Perform Quantitative Risk Analysis
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Risk Re ister U dates
Probabilistic Analysis of the project Forecasts potential project schedule and cost results
Lists the ossible com letion dates or ro ect duration and costswith their associated confidence levels
Probabilit of achievin cost and time ob ectives
Under the current project plan and with the current knowledge of therisks facing the project
Prioritized list of quantified risks
Risks that pose greatest threat or present the greatest opportunityto the project together with a measure of their impact
Trends in Quantitative Risk Analysis results
As anal sis is re eated a trend of results ma become a arent
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Plan Risk Responses
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p
an s esponses
Process of developing options and determining actions toenhance opportunities and reduce threats to the projects
ob ectives
Plan Risk Responses Key Points
.
Cost effective in meeting the challenge
Timely to be successful. Realistic within the project context.
Agreed upon by all parties involved.
Owned by a responsive person.
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Plan Risk Responses
Inputs
Risk management planTools and Techniques
Strategies for negative
Outputs
Risk register updates
Strategies for positive
risks or opportunities
decisions
Project managementlan u dates
ont ngent response
strategies
Expert Judgment
Project documentupdates
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Plan Risk Responses
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Inputs Plan Risk Responses
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p p
Risk Management Plan (described earlier)
Risk Register Identified Risks
Evaluation of risks identified during theIdentify Risks process and their potential
impacts on the project
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Avoidance
eliminate the threat posted by an adverse risk.
To isolate the ro ect ob ectives from the risksimpact, or to relax the objective that is in
jeopardy.
Examples:
Change the Implementation strategy
Do it ourselves (do not subcontract)
Reduce scope to avoid high risk deliverables
Adopt a familiar technology or product
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Tools & Techniques Plan Risk Responses
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q p
Mitigate
impact of an adverse risk event to an
acceptable threshold.
Be proactive: Take early actions to reduceimpact/probability and dont wait until the
risk hits your project
Examples:
Staging - More testing Prototype
Redundancy planning
Use more qualified resources
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Implementing new course of action
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Response Strategies for Threats
Accept This strategy indicates that the project team has decided not to change
,
any other suitable response strategy. Used when project plan cannot
be changed & other risk response strategy cannot be used
Develop a contingency plan to execute if the risk occur
Contingency plan = be ready with Plan B
Passive Acceptance
Deal with the risks as they occur = No Plan B prepared
Established amount of reserve (e.g.: time and/or money) to account for
the identified known risks.
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moun s ec e ase on pro a y an mpac .
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Outputs Plan Risk Responses
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Risk Re ister U dates
A description of the risk, what area of the project it mayaffect, the causes of the risk, and its impact on project objectives
The outputs of qualitative and quantitative analysis
Agreed upon response strategy
The budget and schedule for risk responses
Both the contingency and fallback plans
Contingency Reserves
Risk related Contractual Decisions
Such as agreements for insurance, services, and other items asappropriate, can be prepared to specify each partys responsibility for
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spec c r s s, s ou ey occur.
Outputs Plan Risk Responses
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Pro ect Mana ement Plan u dates
All sections of project management plan needs to be revisited andupdated as applicable as per changes required as per risk response
lannin or information that was made available as art of risk
response.
Schedule, Cost and quality management plans Procurement and Human resource management plans
Work breakdown structure
Cost performance baseline
Schedule baseline
Project Document Updates
Assum tion lo u dates As new information is available as art of riskresponse, assumption log needs to be revisited.
Technical documentation update - technical approaches and physical
deliverables might change as per risk response planned., so this needs to
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be updated.
Plan Risk Response
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Monitor & Control Risks
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Tools & Techniques Monitor & Control Risks
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Identification of new risks and reassessment of identified risks and
closing of outdated ones.
Examine and document the effectiveness of risk responses
Examine and document the effectiveness of the Risk management
Variance and Trend Analysis Earned Value Analysis (discussed later)
Compares technical accomplishments during project execution
to the project plan schedule of technical achievement
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Project Human Resource ManagementMonitoring &
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Monitoring &Controllin Processes
Planning
Processes
Enter phase/
Start project
Exit phase/
End project
Initiating
Processes
Closing
Processes
ExecutingProcesses
Knowledge Area
Process
Initiating Planning ExecutingMonitoring &
ControlClosing
Human
ResourceDevelop Human
Resource Plan
Acquire Project Team
Develop Project Team
Manage Project Team
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DEVELOP HUMAN RESOURCE PLAN
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Develop Human Resource Plan
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oo s an ec n ques
Organization charts
and position
u pu s
Human resource plan
npu s
Activity resource
requirements
Networking
Organizational theory
Enterprise
environmental factors
Organizational processasse s
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Tools & Techniques Develop Human Resource Plan
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Role and responsibility definitions or reporting relationship formats Hierarchical
Text oriented
Project Management Responsibilities from
Communication Plan
Quality Plan
Whatever methods are used, the objective is to Ensure that each work package has an unambiguous owner
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responsibilities
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Human Resource Plan
Outputs Develop Human Resource Plan
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Roles & Responsibilities
Define roles and responsibilities clearly using the following four elements
Role
Authority
Responsibility
Competency
Graphic display of project reporting relationships
Staffing Management Plan Describes
Staff Acquisition Internal ,External or contracted,
Staff Locations, Cost associated with the acquisition
Resource Calendars - Resource On-boarding andOff-boarding criteria and timelines Resource Histogram
Staff release Plan & Training needs
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ecogn on an ewar s
Compliance strategies and safety related policies and procedures
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Acquire Project Team
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cqu re ro ec eam
Process of confirming Human Resource availability andobtaining human resources required to complete the project
Acquire Project Team Key Points
Effective negotiation to obtain required.
Identifying risks on the availability of
human resources and update of
.
Identifying alternative resources in case
of constraints.
The project management may or may not have control overteam members selected for the project based on various
factors such as organizational structure, collective bargaining
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agreemen s ,ex erna env ronmen a ac ors e c
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Pro ect Mana ement Plan described
Inputs Acquire Project Team
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Pro ect Mana ement Plan described
earlier) Human Resource Plan
Identifying, staffing, managing
controlling and release criteria Roles and Responsibilities
Project organization charts
Staffing management plan with resource
histo ram
Identifies the time periods eachproject team member will be needed
Re uires use of ro ect schedule
information also to determine theabove
A graphical representation of the time periods each project
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team member will be needed is known as Resource Histogram
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Virtual Teams
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Virtual Teams
Groups of people with a sharedgoal with no time spent
meetin face to face.
Increased importance for
communications plan.
Setting up expectations
Developing protocols for
conflict resolution Including people in decision-
making
Sharing credit for successes
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DEVELOP PROJECT TEAM
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Tools & Techniques Develop Project Team
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Soft skills such as empathy,influence, creativity and group
.
Training
All activities for improvement of teammembercompetencies &
performance.
Scheduled training as per the project
plan.
Unplanned training as a result of
observation, conversation
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and project performance appraisals.
Ground Rules
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Clear expectations regarding acceptable behaviorby project team
members.
Responsibility lies with team members for enforcing the rules once
they are established.
Co-location
temporarily or for the full project duration.
Rewards and Recognition Recognizing and rewarding the desirable behaviors
Plans to reward are developed during the Develop HR Plan process.
Award decisions are made while managing the project team by using
the performance
Only desirable behavior should be rewarded. Win-Lose rewards
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Rewarding win-win behavior tends to increase the cohesiveness
Team Building Activities
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Activities that enhance the cohesiveness
amongst the team members.
Could be an informal 5 minute item or a well
planned offsite experience.
Five stages of development that teams may gothrough:
Forming
Storming
Normin Performing
Adjourning
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Tools & Techniques Manage Project Team
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ForcingCollaborating
Pushing ones viewpoint at theexpense of others; Offers only win-
lose solutions.
Incorporating multiple viewpointsand insights from differing
perspectives; Leads to consensus
and commitment.at
self
Compromising
Searching for solution that bringsome degree of satisfaction to allB
ehaviorst
focused
on
Confronting & Problem Solving
Treating conflict as problem to besolved by examining alternatives;Withdrawing/Avoiding Smoothing/Accommodating
.
Requires a give and take attitudeand open dialogue.
Retreating from an actual orpotential conflict situation. Emphasizing areas of agreementrather than areas of difference.
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focused on others
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Conflict Management Techniques
Tools & Techniques Manage Project Team
Collaborating I win, you win
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Co abo at g , you
Incorporating multiple viewpoints and insights from differing perspectives;leads to consensus and commitment.
Fundamental premise: Teamwork and cooperation help everyone achievetheir goals while also maintaining relationships
on ron ng ro em o v ng o v ng e rea pro em
It seems to me that the real problem here is not a lack of communication, buta lack of knowledge of what each activity costs. Here is a copy of the WBS
.know.
Problem Solving Process:
Define the cause of the roblem not ust the s m toms
Analyze the problem
Identify solutions
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Review the decision and confirm that the decision solved the problem
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Outputs Manage Project Team
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Items such as Staffing changes
ona ra n ng sc p nary ac ons
Rewards and Recognitions etc.
Cross-training
ona ro e c ar ca on
Added personal time in anticipation ofextra work
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Plan Procurements
Tools and TechniquesInputs Inputs
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oo s d ec ques
Make or Buy Analysis
p
Scope baseline
p
Procurement
Expert Judgment
Contract Types
Requirements documentation
Teaming agreements
Risk re istr
Procurement Statement
of Work (SOW)
Risk-related contract decisions
Activity resource requirements
Procurement
documents
Project schedule
Activity cost estimates
Cost erformance baseline
Source Selection
criteria
Change requests
Enterprise environmental factors
Organizational process assets
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Inputs - Plan Procurements
Scope Baseline
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Scope Baseline
Scope Statement
, ,deliverables, acceptance criteria
WBS
project deliverables.
WBS Dictionary
within each WBS
equ remen s ocumen a on Information about Project requirements that is
considered during procurement planning
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Requirements with contractual and legal implications
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Inputs - Plan Procurements
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To evaluate the rationale of the bids or proposals
Cost Performance Baseline
Detail on the Planned budget over time
Enterprise Environmental Factors
Conditions of market place
Products, services or results that are available in the market place
Suppliers, including past performance or reputation.
Terms and conditions
Unique local requirement
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Tools & Techniques Plan Procurements
Make or Buy Analysis
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Make or buy results
Purchase or rent
Should consider Life cycle costs for the analysis
Budget constraints influence make-or-buy decisions
Expert Judgment
Expert technical judgment
Ex ert urchasin ud ment
Expert legal judgment
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Tools & Techniques Plan Procurements
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Cost plus Incentive Fee (CPIF) contracts This is the type of contract in which the buyer reimburses the seller
or e se er s a owa e cos s an nc u es an ncen ve or exceeding the performance criteria laid out in the contract.
Contract = Cost + Incentive Fee
Example : Suppose you have a CPIF contract with the incentive feepegged on the final cost of the contract. The pre negotiated savings
share of the incentive bonus formula is 85/15 85 ercent for thebuyer and 15 percent for the supplier).The expected cost of a projectis $100,000 and the fee is $10,000. Suppose the final cost of theproject is $80,000. What would be the total payment to the
con rac orThe final payment to the contractor will be:
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Tools & Techniques Plan Procurements
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Time and Material contracts
(i.e. costs not to exceed and time limits) andCost reimbursable (value of agreement not
defined).
Priced on per hour or per item basis plus afixed price for materials
e uyer ears e gges r s n s ype ocontract.
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Tools & Techniques Plan Procurements
.
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Fixed Price
FFP
HighLow
FPIF
Time and Materials
SELLER
RISK
BUYER
RISK
Cost Reimbursable
CPIFT&M can be a high risk for buyer
if contract does not include atotal not-to-exceed (NTE)
CPF
CPPC
LowHigh
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Tools & Techniques Plan Procurements
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Outputs - Plan Procurements
Procurement Management Plan
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Describes how the procurement processes will be
. ,
Types of contracts to be used
Estimate preparation and evaluation
Coordinating procurement with scheduling andperformance reporting
Identifying performance bonds or insurance
contracts to mitigate project risks
Format to be used for contract statement of work
Procurement metrics to be used to managecontract and evaluate sellers
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Outputs - Plan Procurements
Procurement Statement of Work
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Describes the procurement items in
determine if they are capable of providing
the item ,
to be supplied by seller
Includes specifications, quantity desired,
Should include a description of any
collateral services required for the procured
item
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Outputs - Plan Procurements
Make-or-Buy decisions
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What project products, services or results
by project team.
Make-or-buy decisions document includes.
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Outputs - Plan Procurements Procurement Documents
Used to seek proposals from prospective sellers.,
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Bids, tender, quotation when sellerselection decision is based on price.
Proposal When seller selection is done
based on technical skill or approach
Common names for different types of procurement
documents are
Invitation for bid (IFB)
Request for proposal (RFP) / quotation (RFQ)
Tender notice
Invitation for negotiation
Contractor initial response Procurement Contract T e
Procurement documents should include: The relevant statement of work
Descri tion of the desired res onse
document
RFP CR
IFB FP
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Required contractual provisions RFQ T&M
Outputs - Plan Procurements Exercise Contract Calculation
In this cost plus incentive fee contract, the cost is estimated at $210,000
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and the fee at $25,000. The project is over, and the buyer has agreed thatthe costs were, in fact, $200,000. Because the seller's costs came in lower
an e es ma e cos s, e se er s ares n e sav ngs: percen o
the buyer and 20 percent to the seller. Calculate the final fee and final
price.
Target cost
Target fee
Tar et rice
210,000
25,000
235 000Sharing Ratio
Actual cost
80/20
200,000
na ee , , = ,10,000 x 20% = 2,000