OM480 Managing Project Risk (With Material from the Text Authors)

Overview Project Control Risk Defined Risk and Control Project Control Approaches Project Control Process Project Control Techniques Preventative Control Cost Control Control as Change Management

Project “Potential” Control Project plan implementation and monitoring –Anticipate risk –Discover problems –Resolve problems Bosses hate problems but…. Despise Surprises! Murphy’s Law O’Toole’s Corollary

Risk Management Process ID Sources Analyze and Assess Respond Contingency Planning Establish Contingency Reserves

“Sourcing” Risk Undesirable Event All Potential Outcome(s) Magnitude and Severity Chances/Probability of Event Where in Project Timeline Occurs Interaction w/ Other Project Events

Risk Categories Schedule –Use of Slack –Imposed Duration –Compression Cost –Time/Cost Dependency –Cash Flow Decisions –Price Protection Technological

Risk Event Graph Risk High Cost Low Project life cycle Chances of risks occurring Cost to fix risk event

Detecting Problems Visibility Approachability Internal/External Communication Multiple Communication Channels Reward “Gatekeepers” Avoid Assumptions Monitor Schedule Continuously

Contingency Planning Nonquantitative Scenario Analysis –Ratio/Range – Prior data extrapolated –Hybrid – “rules of thumb” databases –Probability – PERT-like Semi-quantitative –More than PERT –Confidence Intervals –Regression Analysis –Modeling

Risk Schedules Best-case schedule Baseline schedule Worst-case schedule Actual schedule Forecast completion schedule 10% 50% 90% 470 days 500 days 590 days 550 days 300 days Actual tracking schedule

Risk Assessment Matrix Risk event Chance- LMH Severity- LMH Detection difficulty- LMH When

Risk Responses Reduce/Retain –“Robust” Potential Failure Points –Assume and “Do Nothing” Transfer –Passing Risk –Subcontracting –Fixed-prices Sharing Risk –Partnering

Responses to Risk Matrix Risk event Accept, reduce, share, transfer Contingency plan Trigger

Problem Solving Supportive communication Multi-level communication Explore multiple implications Symptoms mask “root cause” Brainstorm alternatives Evaluate possibilities Anticipate “Law of Unintended Consequences” Respond v. React

Change Request Project _________________ Originator ________________ Description of change Install Y2K compatible chip in six computer controlled milling machines Date _________________ Phone ________________ Y2K-Machine Dept. CEG 3/29/ Ext Impact AreasBaseline Impact Deliverable # __________ Work Package # __________ Cost Account # __________ Organization Unit __________ 1.3M 1.313M 1.31M IS-M Dept. Scope Budget Schedule Contingency Staff Equipment X X X X Justification (include impact if not implemented) Reprogramming cost is higher than estimated, and risk of old chips failing is higher than estimated. (Eliminating reprogramming cost is -$10,000. Cost of Y2K chips installed is +$15,000) Disposition Approve Approve as amended Disapprove Deferred X Priority Emergency Urgent Routine X Funding Source Mgmt. Reserve $ _____________ Budget. Reserve $ _____________ Other $ _____________ 5,000. Authorized _________________ Date ______________________ Scheduled start _________________ Scheduled finish ________________ S.P 4/3/ 4/7/ 5/10/

Project Control Approaches Dogmatic –Schedule – “Etched in Concrete” –Trade time for cost overruns Laid-Back –Schedule – “A Ripple in a Pond” –Trade budget for schedule overrun Pragmatic –Schedule – “Etched in Jello” –Focus on EPF –Balance time and cost implications

Project Manager Accountability Accountability to Organization First! –Friendliness over Friendship –Camaraderie Administer Consequences –Reward superior performance –“Pull the trigger” – Don’t Hesitate Balanced Proaction –Continuous vigilance –Avoid Micro-management

Project Control Process Communication –Concise and Relevant Participation –Consensus over Compromise Analysis –Assess Schedule & Budget Statuses Action –Assertive Leadership Commitment –Goals, Schedule, and PM Concepts

Summary Project Control Risk Defined Risk and Control Project Control Approaches Project Control Process Project Control Techniques Preventative Control Cost Control Control as Change Management