11.1 Plan Risk Management The process of defining how to conduct risk management activities for a project Detailed risk planning enhances the overall probability of successful project completion Risk planning creates visibility of the degree and types of risk inherent in a specific project For high risk, large and complex projects – contingency is often added to cover responses to unexpected risks The risk planning process (11.1) happens concurrently with the project management planning process (4.2) Occurs during Planning Initiation Planning Execution Close Monitor Control Adapted from PMBOK 5th Edition

11.1 Plan Risk Management Inputs to Plan Risk Management Project Management Plan Scope Management Plan Cost Management Plan Schedule Management Plan Communications Management Plan Project Charter Enterprise Environmental factors: risk attitudes, tolerances and thresholds. Organisational Process Assets - Risk Categories, Common definitions of concepts and terms Risk statement formats, Standard templates Risk roles and responsibilities Authority levels for decision making Lessons learned from previous projects Stakeholder Register Initiation Planning Execution Close Monitor Control Adapted from PMBOK 5th Edition

11.1 Plan Risk Management The PMBOK includes three techniques for this process – Analysis Techniques, Expert Judgement and Meetings. Other tools and techniques have been included here from practice - Meetings Expert Judgement Risk Management Standards Analysis Techniques Workshops Stakeholder Consultation

Analysis Techniques – defines the risk context: 11.1 Plan Risk Management Analysis Techniques – defines the risk context: Stakeholder attitude to risk: Risk appetite: acceptable degree of uncertainty Risk tolerance: degree, amount or volume of risk that an organisation or individual can withstand Strategic risk exposure  

11.1 Plan Risk Management Risk Management Standards – The current standard is: AS/NZS ISO 31000:2009 If you want to look at the standards in more detail TAFE NSI has access to these through the Libraries Project Management Guide - select Australian Standards Online and log in using your username and password.  

11.1 Plan Risk Management Outputs of this process include – Risk Management Plan Risk management methodology Risk management roles and responsibilities Budgeting Timing Risk categories Definitions of risk probability and impact Risk probability and likelihood matrix Revised stakeholder tolerances Reporting formats Tracking Initiation Planning Execution Close Monitor Control Adapted from PMBOK 5th Edition

Risk Categories Risk categorisation is critical It helps to ensure that all aspects of risk on the project are considered Standard risk categories are hard to find Start with the Project Management Key Knowledge Areas and industry frameworks Risk Breakdown Structure – Lists the categories and sub-categories within which risks may arise for a typical project Different RBSs will be appropriate for different types of projects, different organisations and different industries Provides a framework to help ensure all risks are considered

Example Risk Breakdown Structure Project Risk Breakdown Structure Project Management External Technical Organisational Estimating Planning Controlling Communication Subcontractors & Suppliers Regulatory Market/Economy External Customer Environment Requirements & Scope Quality Performance & Reliability Complexity Technology Dependencies PM Environment Prioritisation Funding Human Resources Methodology & Materials Adaptations and additions to the example in the PMBOK Adapted from PMBoK Guide – 5th Edition

Probability and Impact Definitions Likelihood = Probability Consequences = Impact Likelihood is the probability that a risk will occur on a project Consequences are the impacts that the risk will have on the project outcomes (Scope, Time, Cost and Quality) if it does occur

Likelihood and Consequences Simple Likelihood Scale Simple Consequences Scale Rating Definition Scale Almost Certain Will definitely occur or will occur on an annual cycle 5 Likely Similar events have been experience several times in the past 20 years 4 Possible Will occur once every 20 years 3 Unlikely Occurs from time to time 2 Rare Occurrence is possible but highly unlikely 1 Rating Definition Scale Severe Most objectives cannot be met 5 Major Some important objectives cannot be met 4 Moderate Some objectives impacted but may still be met 3 Minor Minor effects that can be remedied 2 Negligible Almost no impact on objectives 1 Adapted from Risk Management Guidelines – Companion to AS 4360:2004

Consequence/Impact Scales from PMBok From PMBoK Guide – 5th Edition

Simple Risk Rating Matrix Put your likelihood and consequence ratings together and what do you get? Risk Rating = Likelihood x Consequences Rating Severe Major Moderate Minor Negligible Almost Certain Red 25 20 15 Amber 10 Green 5 Likely 16 12 8 4 Possible 9 6 3 Unlikely 2 Rare 1