Risky Business Avneet Mathur (PMP) Essentials of Risk Management

What is a Project? A project is a temporary endeavor undertaken to produce a unique product or service Temporary – Definitive beginning and end Unique – New undertaking, unfamiliar ground Temporary Unique Characteristics of Projects

Risk RISK can be defined as “the threat or probability that an action or event, will adversely or beneficially affect an organization's ability to achieve its objectives” *. In simple terms risk is ‘Uncertainty of Outcome’, either from pursuing a future positive opportunity, or an existing negative threat in trying to achieve a current objective. * Luhmann 1996:3

Issue vs. Risk TODAYFUTURE ISSUE RISK

Issue vs. Risk If not fixed today, task stops If not identified, may become issue later ISSUE RISK Issue… already impacting the cost, time or quality Risk… POTENTIAL negative impact to project

What’s the Plan? IdentificationQuantificationResponse Monitoring and Control

Identification Risk Types Business (risk to overall business) Delivery (risk to project delivery) Technical (specific to particular technology) CauseImpact Vendor not meeting deadline Budget will be exceeded "The vendor not meeting deadline will mean that budget will be exceeded"

Quantification Risk Likelihood Impact

Quantification TitleScoreDescription Very low20 20 Highly unlikely to occur based on current information, as the circumstances likely to trigger the risk are also unlikely to occur. Low40 Unlikely to occur. However needs to be monitored as certain circumstances could result in this risk becoming more likely to occur during the project. Medium60Likely to occur as it is clear that the risk may eventuate. High80Very likely to occur, based on the circumstances of the project. Very High100 Highly likely to occur as the circumstances that will cause this risk to eventuate are also very likely to eventuate TitleScoreDescriptionImpact * Very low20Insignificant impact on the project.- Low40Minor impact on the project.< 5% Medium60Measurable impact on the project % High80Significant impact on the project % Very high100Major impact on the project.> 25% * Deviation in scope, scheduled end-date or project budget IMPACT LIKELIHOOD

Quantification Priority = [Likelihood + Impact] Priority Score Priority Rating Priority Color –20 Very Low Black 21–40 Low Green 41–60 Medium Yellow 61–80 High Orange 81–100 Very High Red Risk IDLikelihoodImpactPriorityRating Medium High High Low Very High Medium

Response Risk IDRatingPreventive Actions Action Resource Action Date Contingent Actions Action Resource Action Date 2.2Very HighClearly identify the expected business benefits Project sponsorDDMMYYMeasure the actual business benefits achieved by the project Project Manager DDMMYY 2.3HighAll requirements need to be well defined. Project sponsorDDMMYYStakeholders need to sign-off on the requirements. Project Manager DDMMYY … … Address risks rated based on severity. Very-High-rated risks warrant the highest priority, and should be addressed before the less severe classes of risks, and should be tracked until they can be downgraded. Create a Risk Schedule to address these risks. In a risk schedule, for every risk identified, preventive actions are listed that are required to reduce the likelihood of the risk occurring, as well as the contingent actions needed to reduce the impact to the project should the risk occur.

Monitoring and Control Continually monitor risks to identify any change in the status, or if they turn into an issue. Hold regular risk reviews To identify actions outstanding, risk probability and impact Remove risks that have passed Identify new risks

Case Study – Buying a Used Car online Requirements Buy a car over the internet Price less than $15,000 Reliable Specific make and model Mileage

Case Study – Buying a Used Car online Sample Risks Buy a car over the internet Most people would say don’t! to eliminate the risk, but this is a requirement Websites that do not have good ratings Price less than $15,000 Owner may increase price or add additional cost after finalizing the deal. Hidden cost Reliable Does not need frequent repairs Does not breakdown Good brand Specific make and model Not getting the same model after finalizing the car Mileage Odometer rollback

Case Study – Buying a Used Car online Risk Quantification Buy a car over the internet Websites that do not have good ratings Price less than $15,000 Owner may increase price or add additional cost after finalizing the deal. Hidden cost IDLikelihoodImpactPriority (40+60)/2 = 50 IDLikelihoodImpactPriority (20+40)/2 = 30 Medium Low

Case Study – Buying a Used Car online Risk Quantification Reliable Does not need frequent repairs Does not breakdown Good brand Specific make and model Not getting the same model after finalizing the car IDLikelihoodImpactPriority (60+100)/2 = (20+80)/2 = (40+80) /2 = 60 IDLikelihoodImpactPriority (20+40)/2 = 30 High Medium Low

Case Study – Buying a Used Car online Risk Quantification Mileage Odometer rollback IDLikelihoodImpactPriority (80+80)/2 = 80 High

Case Study – Buying a Used Car online Risk Response Risk IDRatingPreventive Actions Action Resource Action Date Contingent Actions Action Resource Action Date 5.1HighGet a Car Fax report and check mileage history Project sponsorDDMMYYAvoid cars with no car fax history. Project Manager DDMMYY 1.1MediumCheck website rating before initiating a purchase Project sponsorDDMMYYAvoid “suspicious websites” or too good to be true deals. Project Manager DDMMYY … …

Summary Risk management is a project management tool for handling events that might adversely impact the project, thereby increasing the likelihood of success. A sound process like this removes the uncertainty and empowers the project manager to complete their project within schedule and within budget. Asses Risk Identify RiskAnalyze Risk Prioritize Risk Control Risk Mitigate RiskControl Risk Measure Risk

About the Author Avneet Mathur is a Certified Project Management Professional, as awarded by the Project Management Institute, USA and has been involved in IT for more than a decade. He holds an MBA in General Business Administration, with an additional Master's Degree in Computer Science and Networking from University of Missouri, Kansas City. He also has a Bachelor's Degree in Computer Science from the Aurangabad University, India. He can be reached at

About Project Perfect Project Perfect is a project management software consulting and training organisation based in Sydney Australia. Their focus is to provide organisations with the project infrastructure they need to successfully manage projects. Project Perfect sell “Project Administrator” software, which is a tool to assist organisations better manage project risks, issues, budgets, scope, documentation planning and scheduling. They also created a technique for gathering requirements called “Method H” , and sell software to support the technique. For more information on Project tools or Project Management visit