P.I.I.M.T American University of Leadership Ahmed Hanane, MBA, Eng, CMA, Partner email: ahanane360@gmail.com

Chapter 7 Risk Management

Chapter 7 Learning Objectives After completing this chapter, students will be able to: Define project risk. Recognize four key stages in project risk management and the steps necessary to manage risk. Understand five primary causes of project risk and four major approaches to risk identification. Recognize four primary risk mitigation strategies. Explain the Project Risk Analysis and Management (PRAM) process.

Risk Risk management - the art and science of identifying, analyzing, and responding to risk factors throughout the life of a project and in the best interest of its objectives. Project risk – any possible event that can negatively affect the viability of a project

Historical Damaging Tsunamis along Japanese Coast (in last 150 years) Name (Magnitude) Year Dead or Missing Meiji-Sanriku Earthquake and Tsunami (M8.5) 1896 22,000 Showa-Sanriku Earthquake and Tsunami (M8.1) 1933 3,064 Tonankai Earthquake (M7.9) 1944 1,251 1) Nankai Earthquake (M8.0) 1946 1,443 1) Chile Earthquake (Mw9.5) 2) 1960 142 Tokachi-Oki Earthquake (M7.9) 1968 52 1) Nihonkai-Cyubu Earthquake (M7.7) 1983 104 1) Hokkaido-Nansei-oki Earthquake (M7.8) 1993 230 1) 1) The number includes dead or missing from earthquakes. 2) Tsunami generated at far off Japanese coast. 8

Tsunami Warning System Elements Communication & Transmission of Tsunami Warning to Localities & Civil Defense Authorities Signboard Tsunami TSUNAMI ＷＡＲＮＩＮＧ Local government Central Government TSUNAMI ＷＡＲＮＩＮＧ Radio TSUNAMI ＷＡＲＮＩＮＧ ＴＶ/Radio Station TV（Telops, Warning maps） 13

Promoting Basic Knowledge about “TSUNAMI” Disaster + Safe Evacuation Route Early Warning = Understanding of Hazardous Areas Appropriate Risk Awaweness of Local Communities Safe Evacuation 16

Pictogram on Tsunami Safe place/hill for evacuation against Tsunami. Tsunami Hazard Area Tsunami Evacuation Area Tsunami Evacuation Building Safe place/hill for evacuation against Tsunami. Building for evacuation against Tsunami. There is a high possibility to be flooded in this area when earthquake occurs. 21

Risk versus Amount at Stake: Challenge in Risk Management Figure 7.2

Process of Risk Management What is likely to happen? What can be done? What are the warning signs? What are the likely outcomes? Project Risk = (Probability of Event)(Consequences of Event)

Four Stages of Risk Management Risk identification Analysis of probability and consequences Risk mitigation strategies Control and documentation

Risk Clusters Financial Technical Contractual/Legal Commercial Execution Common Types Absenteeism Resignation Staff pulled away Time overruns Skills unavailable Ineffective Training Specs incomplete Change orders

Risk Factor Identification Brainstorming meetings Expert opinion Past history Multiple (or team based) assessments

Risk Impact Matrix

Project Risk Scoring Identify factors and assess the probability (Pf ) and consequences (Cf) of failure Calculate overall probability & consequence Calculate overall risk factor Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Risk Mitigation Strategies Accept Minimize Share Transfer Contingency Reserves Task contingency Managerial contingency Mentoring Cross training

Control & Documentation Help managers classify and codify risks, responses, and outcomes Change management report system answers What? Who? When? Why? How?

FIGURE 7.6 Contingency Document for Adjustments to Project Plan Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Project Risk Analysis & Management Extends risk management over project’s life cycle Key Features of PRAM Risk management follows a life cycle Risk management strategy changes over the project life cycle Synthesized, coherent approach

Nine Phases of Risk Assessment Define Focus Identify Structure Clarify ownership of risks Estimate Evaluate Plan Manage

Summary Define project risk. Recognize four key stages in project risk management and the steps necessary to manage risk. Understand five primary causes of project risk and four major approaches to risk identification. Recognize four primary risk mitigation strategies. Explain the Project Risk Analysis and Management (PRAM) process.