Managing Project Risk Chapter 8 Copyright 2012 John Wiley & Sons, Inc.

PMBOK® Risk Management Processes Plan Risk Management Determining how to approach and plan the project risk management activities. An output of this process is the development of a risk management plan. Identify Risks Deciding which risks can impact the project. Risk identification generally includes many of the project stakeholders and requires an understanding of the project’s goal, as well as the project’s scope, schedule, budget, and quality objectives. Perform Qualitative Risk Analysis Focusing on a qualitative analysis concerning the impact and likelihood of the risks that were identified. Perform Quantitative Risk Analysis Using a quantitative approach for developing a probabilistic model for understanding and responding to the risks identified. Plan Risk Responses Developing procedures and techniques to reduce the threats of risks, while enhancing the likelihood of opportunities. Monitor and Control Risks Providing an early warning system to monitor identified risks and any new risks. This system ensures that risk responses have been implemented as planned and had the effect as intended.

IT Project Risk Management Processes

Risk Planning Requires firm commitment by all stakeholders to a RM approach Assures adequate resources are in place Focuses on preparation

Risk Identification Tools & Techniques Nominal Group Technique Checklists SWOT Analysis Cause & Effect (a.k.a. Fishbone/Ishikawa)

Risk Analysis & Assessment Quantitative Approaches Quantitative Probability Distributions Discrete Binomial Continuous Normal PERT TRIANG

Binomial Probability Distribution

Normal Distribution

Normal Distribution Rules of thumb with respect to observations Approximately…. 68% + 1 standard deviations of mean 95% + 2 standard deviations of the mean 99% + 3 standard deviations of the mean

PERT Distribution

PERT Distribution

Simulations Monte Carlo Technique that randomly generates specific values for a variable with a specific probability distribution Goes through a number of trials or iterations and records the outcome @RISK® An MS Project® add in that provides a useful tool for conducting risk analysis of your project plan http://www.palisade.com/riskproject/default.asp

Monte Carlo Simulation

Risk Strategies

Contingency and Fallback Plans, Contingency Reserves

Risk Strategies Depend On

Risk Monitoring & Control

Controlling Risks Involves executing the risk management proce

Risk Response Plan should include: A trigger which flags that the risk has occurred An owner of the risk (i.e., the person or group responsible for monitoring the risk and ensuring that the appropriate risk response is carried out) A response based on one of the four basic risk strategies Adequate resources

Lessons learned and best practices help us to: Risk Evaluation Lessons learned and best practices help us to: Increase our understanding of IT project risk in general. Understand what information was available to managing risks and for making risk-related decisions. Understand how and why a particular decision was made. Understand the implications not only of the risks, but also the decisions that were made. Learn from our experience so that others may not have to repeat our mistakes.