RISK MANAGEMENT PROCESS PREPARED BY: MUHAMMAD SULAIMAN ( )

Risk Management 2  “The process involved with identifying, analyzing, and responding to risk. It includes maximizing the results of positive risks and minimizing the consequences of negative events”  Project problems can be reduced as much as 90% by using risk analysis  Positives:  More info available during planning  Improved probability of success/optimum project  Negatives:  Belief that all risks are accounted for  Project cut due to risk level

How Do We Manage Risk?  Use the six risk management processes  Risk Management Planning  Risk Identification  Qualitative Risk Analysis  Quantitative Risk Analysis  Risk Response Planning  Risk Monitoring and Control Risk Management Planning Risk Identification Qualitative Risk Analysis Quantitative Risk Analysis Risk Response Planning Risk Monitoring and Control 3

Risk Management Planning Project Scope Statement Enterprise Environmental Factors Organizational Process Assets Project Management Plan Risk Management Plan  Planning Meetings and Analysis Inputs Outputs Tools & Techniques Risk Management Planning Risk Identification Qualitative Risk Analysis Quantitative Risk Analysis Risk Response Planning Risk Monitoring and Control 4

What is a Risk Management Plan?  Methodology – Approach, tools, & data  Roles & Responsibilities  Budgeting – Resources to be put into risk management  Timing – When and how often  Risk Categories – Risk Breakdown Structure (RBS)  Definitions – Risk probabilities and impact 5

Risk Identification Project Scope Statement Enterprise Environmental Factors Organizational Process Assets Risk Management Plan Risk Register  Documentation Reviews  Information Gathering Techniques  Checklist Analysis  Assumption analysis  Diagramming techniques Inputs Outputs Tools & Techniques Risk Management Planning Risk Identification Qualitative Risk Analysis Quantitative Risk Analysis Risk Response Planning Risk Monitoring and Control Project Management Plan 6

Diagramming Techniques  Cause and Effect Diagrams  Also known as Ishikawa or fishbone Product Delivered Late Bad SpecsInsufficient Resources Inadequate Time Project Prioritization Testing Materials Potential CausesEffect Personnel 7

Risk Management Planning Risk Management Plan Organizational Process Assets Project Scope Statement Risk Register Risk Register (UPDATED)  Risk probability and impact statement  Probability and impact matrix  Risk data quality assessment  Risk categorization  Risk urgency assessment Inputs Outputs Tools & Techniques Risk Management Planning Risk Identification Qualitative Risk Analysis Quantitative Risk Analysis Risk Response Planning Risk Monitoring and Control 8

Probability and Impact Matrix  Define Probability Scale & Impact Scale Likelihood Class Likelihood of Occurrence (events/year) Not Likely (NL) <0.01% chance of occurrence Low (L) % chance of occurrence Moderate (M) % chance of occurrence High (H) % chance of occurrence Expected (E)>10% chance of occurrence ConsequenceHealth and Safety Extreme Fatality or multiple fatalities expected High Severe injury or disability likely; or some potential for fatality Moderate Lost time or injury likely; or some potential for serious injuries; or small risk of fatality Low First aid required; or small risk of serious injury NegligibleNo concern Probability ScaleImpact Scale 9

Risk Register 10

Quantitative Risk Analysis Risk Management Plan Organizational Process Assets Project Scope Statement Risk Register Risk Register (UPDATED)  Data gathering  Quantitative risk analysis and modeling Inputs Outputs Tools & Techniques Risk Management Planning Risk Identification Qualitative Risk Analysis Quantitative Risk Analysis Risk Response Planning Risk Monitoring and Control Project Management Plan (Schedule & Cost Plans) 11

Quantitative Risk Analysis  Analyze numerically the probability and consequence of each risk  Monte Carlo analysis popular  Decision Tree analysis on test  Diagram that describes a decision and probabilities associated with the choices  Expected Monetary Value Analysis (EMV) 12

Decision Tree Analysis Build or Upgrade Plant New Plant -$120 Upgrade Plant -$50 Strong Demand Weak Demand Strong Demand Weak Demand 65% $200 35% $90 65% $120 35% $60 $80 -$30 $70 $10 Decision Definition Decision Node Chance Node Net Path Value EMV of New Bldg Node = $41.5! EMV of Upgrade Node = $49! 13

Risk Response Planning Risk Management Plan Risk Register Risk Register (UPDATED)  Strategies for negative risks or threats  Strategies for positive risks or opportunities  Strategy for both threat and opportunity  Contingent response strategy Inputs Outputs Tools & Techniques Risk Management Planning Risk Identification Qualitative Risk Analysis Quantitative Risk Analysis Risk Response Planning Risk Monitoring and Control Project Management Plan (UPDATE) Risk-related contractual agreements 14

Risk Monitoring and Control Approved Change Requests Risk Management Plan Risk Register Work Performance Information Risk Register (UPDATED)  Risk reassessment  Risk audits  Variance and trend analysis  Technical performance measurement  Reserve analysis  Status meetings Inputs OutputsTools & Techniques Risk Management Planning Risk Identification Qualitative Risk Analysis Quantitative Risk Analysis Risk Response Planning Risk Monitoring and Control Performance Reports Requested Changes Recommended Corrective Actions Recommended Preventive Actions Org Process Assets (Update) Project Management Plan (Update) 15

Risk Management Summary  Risk Management Planning – New  Risk ID – Develop categories & types  Risk Qualitative – Probability & Impact Analysis  Risk Response – Mitigation & contingency plans  Risk Monitoring and Control – Recurring evaluations Risk Management Planning Risk Identification Qualitative Risk Analysis Quantitative Risk Analysis Risk Response Planning Risk Monitoring and Control 16

THANK YOU 17