Managing Project Risk Chapter 7 Copyright 2012 John Wiley & Sons, Inc.

Importance of Project Risk Management The art and science of identifying, analyzing, & responding to risk throughout the life of a project and in the best interests of meeting project objectives

Importance of Project Risk Management The art and science of identifying, analyzing, & responding to risk throughout the life of a project and in the best interests of meeting project objectives

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.

Managing Project Risk Common Mistakes: Effective/Successful Risk Management:

Benefits from Software Risk Management Practices* *Source: Kulik and Weber, KLCI Research Group

Definitions Risk Project Risk Management (PMBOK®)

What is your risk tolerance? Risk Utility What is your risk tolerance?

Risk Utility You are on a TV game show and can choose one of the following. Which would you take?  $1,000 in cash  A 50% chance at winning $5,000  A 25% chance at winning $10,000  A 5% chance at winning $100,000 You have just finished saving for a "once-in-a-lifetime" vacation. Three weeks before you plan to leave, you lose your job. You would: Cancel the vacation Take a much more modest vacation Go as scheduled, reasoning that you need the time to prepare for a job search Extend your vacation, because this might be your last chance to go first-class

Common Sources of Risk in Information Technology Projects The Standish Group developed an IT success potential scoring sheet based on potential risks

IT Project Risk Management Processes

Risk Planning

IT Project Risk Identification Framework

Applying the framework

Risk Identification Tools & Techniques Learning Cycles Brainstorming Nominal Group Technique Delphi Technique Interviews Checklists SWOT Analysis Cause & Effect (a.k.a. Fishbone/Ishikawa) Past Projects

Nominal Group Technique (NGT) Each individual silently writes their ideas on a piece of paper Each idea is then written on a board or flip chart one at a time in a round-robin fashion until each individual has listed all of his or her ideas The group then discusses and clarifies each of the ideas Each individual then silently ranks and prioritizes the ideas The group then discusses the rankings and priorities Each individual ranks and prioritizes the ideas again The rankings and prioritizations are then summarized for the group

Risk Check List Funding for the project has been secured Funding for the project is sufficient Funding for the project has been approved by senior management The project team has the requisite skills to complete the project The project has adequate manpower to complete the project The project charter and project plan have been approved by senior management or the project sponsor The project’s goal is realistic and achievable The project’s schedule is realistic and achievable The project’s scope has been clearly defined Processes for scope changes have been clearly defined

SWOT Analysis

Cause & Effect Diagram

Risk Breakdown Structure

Risks involved in MAA project

Risk Analysis & Assessment Depends on Stakeholder risk tolerances Can’t respond to all risks!

Risk Analysis & Assessment Qualitative Approaches

Payoff Table A B A*B Schedule Risk Probability Payoff Prob * Payoff     Payoff Table   A B A*B Schedule Risk Probability Payoff (In thousands) Prob * Payoff Project completed 20 days early 5% $ 200 $10 Project completed 10 days early 20% $ 150 $30 Project completed on Schedule 50% $ 100 $50 Project completed 10 days late $ - $0 Project completed 20 days late $ (50) ($3) 100% $88 The Expected Value

Decision Tree Analysis

Risk Impact Table 0-10 Rank 0 - 100% P*I Risk (Threats)   Risk Impact Table   0 - 100% 0-10 P*I Risk (Threats) Impact Score Key project team member leaves project Client unable to define scope and requirements Client experiences financial problems Response time not acceptable to users/client Technology does not integrate with existing application Functional manager deflects resources away from project Client unable to obtain licensing agreements Rank