IS 556 Fall IS 556 Project Management Risk Management z Personal Notes z Survival Guide – Chapter 7 David Lash

CS Winter 2 Unit Objectives zWhat is Risk Management? zThree Main Steps to Risk Management yIdentify yDevelop Response yControl

David LashCS Winter 3 Plan Early… Plan Often zMission  Shared vision – Could be charter yCreates buy-in, understanding, motivation yAchievable goals zExecutive Champion – Critical to project success zOpen planning yInclude those who carry out plan zRefine estimates of effort throughout project zDocument and announce risks and achievements zProject web page zTop 10 Risks List- risk, resolution, progress

David LashCS Winter 4 How Much Effort? Some budget should be committed to risk management. zFigure 7-2: Variation in risk level according to risk-management overhead. The average project devotes virtually no attention to risk management and accepts extremely high levels of risk as a consequence. Successful projects devote a small amount of overhead to risk management and substantially reduce their risk exposure

David LashCS Winter 5 What Is Risk Management? zThe means by which uncertainty is systematically identified and managed to increase likelihood of success zRisk might be obvious: yDevelopment of a new drug to treat cancer zOr less obvious: yLarge contract requires execution of 1 or more sub- contractors (how will ensure they will deliver?) yTurn-over in industry may result in loss of key people on project yDepartmental reorganization may disrupt project

David LashCS Winter 6 Why Risk Management? zProactively understand and manage risk of: ybeing late ybeing over budget yuncertainty yquality assurance zAn iterative process to identify and manage risk throughout the project

David LashCS Winter 7 Level Of Risk Management? zRisks exists at business level - select right project and project level - execution of the project yFor example, building a new office building on-time and on-cost - project level responsibility yIf turns out there is no demand for office space (once done) - business level responsibility. zProject managers are most concerned with project level execution zProgram managers or functional managers or senior management with business risk

David LashCS Winter 8 PM Should Be Defined Process zCharter yPurpose yreview and publish zSOW yA. Document goals, scope deliverables HL budget estimate yReview with Project board zCommunication Plan yDocument communication methods of various level yReview with project board, various stakeholders zRisk Strategy zProject Plan zExecute HL Plan LL Plan

David LashCS Winter 9 Risk Management Influence Risk mgmt influences project plan and rules

David LashCS Winter 10 Risk Management Framework zThree main steps I. Identify - find the sources of project risk II. Develop Response - As risks are identified determine how you will mitigate them xMay result in a change in change in documents that define project rules (e.g, scope change) III. Control - Implement strategies and monitor effect of changes

David LashCS Winter 11 Step I - Identify Risk There are 4 techniques to identify risks 1.Asking stakeholders Brainstorming sessions Interviewing 2. Developing a risk profile list A risk profile (or template) might be gathered from post-mortem reviews of projects. Develop categories of risks under each category develop possible risk areas refine over time 3. Learning from similar projects ( You may be able to find historical records )

David LashCS Winter Identify Risk - Budgets & Schedules There are 4 techniques to identify risks 1.Asking stakeholders 2. Developing a risk profile list 3. Learning from similar projects 4. Focus on schedule and budget risk For each task will need to develop time & cost estimates How accurate do you believe estimates are? How definite are estimates? What parts are uncertain? How can you shore those up?

David LashCS Winter 13 Risk Management Process Analyze the source of risks Risk Identification Response Development Control Known Risks Risk Management Plan Define the risk & potential neg impact Assign probability Develop risk reduction strategy Implement the risk strategy Continue to monitor for new risks New Risks

David LashCS Winter 14 Step II - Risk Response Strategy Not all risks are equally important and/or likely likely. Need a plan that will 1.Identify the severity of risk – For each risk identify the: Condition - description of the risk situation Consequence - what are possible negative outcomes 2. Identify the probability of the risk 3. Develop strategy to deal with the risk

David LashCS Winter Risk Severity - Probability Condition - soil conditions require a complex boring machine with which we have little experience Consequence - Improper use of machine may damage machine and/or riverbed. Machine damage could be from K Riverbed damage may prevent future contracts Probabilities- 75K of equipment damage - 20% 200K of equipment damage - 20% No damage at all 60% Probable cost of damage - 55K ( 200* *.2 = 55k )

David LashCS Winter Defining the Risk Strategy Strategy - Hire operator from equipment provider for estimated cost of 10K. (any damage by their operator paid by them). Adds 10K to cost of project but reduces possible additional cost and schedule risk

David LashCS Winter 17 Another Example Condition - required that all diagrams be developed with a tool that tech writers don’t know. Consequence - Document generation and management tasks will take longer. Possibly causing rework. Probabilities- Work may be 25% slower. (Since everyone new to tool would work at junior level VS senior.) Probable labor cost: 1.25*20=25 Probable schedule: 1.25*4 mon = 5 mon

David LashCS Winter 18 Another Example - 2 Strategy - Send all technical writers to 2 day course on new tool. Costs: $2,200 and will reduce training factor to 1.1. Make 1 tech writer a tool expert to exercise tool and create templates for others to reduce productivity factor to 1.0.

David LashCS Winter 19 Possible Format Example Might organize material in a table # Risk Risk Risk Risk Cond Consequence Prob Strategies (H,M,L) 1. Loss of Late Project H Increase project Staff documentation. Require formal reviews. However estimation of risk costs can be very useful

David LashCS Winter 20 Another format (From survival guide)

David LashCS Winter 21 Risk Management Process Analyze the source of risks Risk Identification Response Development Control Known Risks Risk Management Plan Define the risk & potential neg impact Assign probability Develop risk reduction strategy Implement the risk strategy Continue to monitor for new risks New Risks

David LashCS Winter 22 Step Three: Control Risk Control - not a 1-shot step Monitor risks like monitor project execution periodic risk review with Project Board evaluate status of identified risks identify new risks Create a risk control log Someone responsible for each risk Rank risks by severity Update periodically

David LashCS Winter 23 Risk Control Log

David LashCS Winter 24 zRisk - The means by which uncertainty is systematically identified and managed to increase likelihood of success z3 basic steps xI. Identify Work with others xII. Develop Response Quantify when possible xIII. Control Control log Summary