Managing Risk Text by Stanley E. Portny, Samuel J Mantel, Jack R. Meredith, Scott M. Shaffer, Margaret M. Sutton with Brian Kramer. PowerPoints by Christine Mooney 13-1

Risk Management Project managers should consider risk when undertaking projects. Risk the possibility that a project may not achieve its product, schedule or resource targets because something unexpected occurs or something planned does not. Risk is greater: a.The longer the project lasts b.The longer the time span between when a project plan is prepared and when the project begins c.The newer the technology d.The less experience the manager or team has had with similar projects. 13-2

Risk Management Risk management is the process of identifying possible risks, assessing their potential impact on a project, and developing and implementing plans for minimizing their effects. The following risk management strategies do not work: a.Ostrich approach b.Prayer approach c.Denial 13-3

Minimizing Risk Project managers can manage the negative impact of risks on projects by: a.Identify Risk b.Assess potential impact of risks on a project c.Develop plans for mitigating the impact of the risks d.Monitor the status of a project’s risks throughout performance e.Keep others informed 13-4

Strategy A project manager who chooses to develop a risk management strategy, needs to decide which risks to proactively manage. When making the choice, they should: a.Consider together the likelihood of a risk and its potential impact on the project. b.In certain instances, a potential consequence is so totally unacceptable that, even if it has a low likelihood of occurrence, the project manager is not willing to take the chance. 13-5

Approaches for Dealing with Risk A project manager can use the following approaches for dealing with risk: Minimize the chance the risk will occur. Take actions to reduce the chances that an undesirable situation will come to pass. Develop contingencies. Develop one or more alternative action plans to follow in the event an undesirable situation does come to pass. 13-6

Communicating About Risk Project managers need to share information with drivers and supporters at the following points during a project: a.Concept – to support the decision whether to undertake the project b.Definition – to guide the development of all aspects of a project plan c.Start – to allow team members to discuss and understand d.Perform – To update the likelihood identified risks will occur 13-7

Recognizing Risk Factors A risk factor is a situation that may give rise to one or more project risks. A risk factor itself increases the likelihood a project team may miss a deadline or resource target. Project managers identify possible risk factors by reviewing written materials and interviewing people who know about or were involved in the development of the project. They should consider: a.How the different phases of the project have been handled b.The information developed in each of the phases 13-8

Defining Risks Possible product, schedule and resource risks arising from this risk factor are as follows: Product risk - The technology may not produce the desired results. Schedule risk - Tasks using the new technology may take longer than anticipated. Resource risk – The existing facilities and equipment may not be adequate to support the use of new technology. 13-9

Assessing & Analyzing Risk Any of the following schemes can help project managers describe the chance that a risk will come to pass: a.Probability of occurrence – express the likelihood a risk will occur as a probability. b.Category rankings – classify risks into categories that represent the likelihood they will occur. c.Ordinal ranking – order the risks so the first is more likely to occur, the second is the next most likely. d.Relative likelihood of occurrence – if two possible risks exist, the project manager can, for example, declare that the first is twice as likely to occur as the second

Using Experience Project managers can use the experience and opinions of people who have worked on similar projects in the past. To increase the accuracy of likelihood estimates based upon the opinions of others a project manager should: a.Define as clearly as possible what categories mean. b.Consider the opinions of as many people as possible. c.Be sure the opinions come from similar circumstances

Precision & Accuracy Precision is different from accuracy. Precision refers to the detail with which a number or measurement is expressed. Accuracy refers to how correct the number or measure actually is

Risk Effects on Projects Project managers also need to determine the effect of specific risks on a project. When evaluating these effects: a.Consider the impact of the risk on the total project, not just part of it. b.Consider the impact of related risks when assessing the impact on the overall project. c.Project managers should describe the risks as specifically as possible

Risk Assessment Risk estimation and assessment can be supported by a variety of formal techniques: a.Decision trees – diagrams illustrating different A of each situation occurring, and the consequences if it does. b.Risk assessment questionnaires – formal data- collection instruments for eliciting expert opinion about the likelihood certain situations may come to pass. c.Automated impact assessments – computerized spreadsheets that consider in combination both the risk that different situations will occur and the consequences if they do

Risk Management Plans A risk management plan lays out specific strategies to minimize the potential negative consequences that uncertain occurrences will have on a project. The include the following: a.Risk factors b.Associated risks c.An assessment of the likelihood of occurrence and the associated consequences for each risk

Risk Control Many organizations have risk management groups which maintain records on how all projects within the organization deal with risk. A risk management group is not merely a passive record holder. They should be an advisor providing ongoing support and scenario planning activities

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