MARCH 1 Risk Management Why carry out Risk Assessment? l Is the project too risky? l Threat intensity? l Improve decision making l Clarification of terms.

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Presentation transcript:

MARCH 1 Risk Management Why carry out Risk Assessment? l Is the project too risky? l Threat intensity? l Improve decision making l Clarification of terms è Targets è Expected values è Commitments l Documentation RISK COST

MARCH 2 Risk Management The Risk Management Process - RMP OWNERSHIP risks responsibilities and contractors DEFINE the project DEFINE the risk management process IDENTIFY risks and response ORGANISE prioritise risks and responses ESTIMATE size the risks EVALUATE PLAN plans and strategies MANAGE INITIATION

MARCH 3 Risk Management Simple estimating of risk – more detail A=0.15 A=0.35 A=0.2 A = area Probability density Delay A=0.05 A=0.1 2

MARCH 4 Risk Management Cumulative probability graph Cumulative Probability Delay A and B, with B conditional on A

MARCH 5 Risk Management Types of plans l Initial plan l Reference plan l Base plan l Contingency plan l Horizon plan l Action plan

MARCH 6 Risk Management Cost model l With uncertainty l Use of a range l 3 - point estimate TaskCost MinLikelyMaxDistribution A B C D E F G H Total

MARCH 7 Risk Management Monte Carlo risk distribution TOTAL COST RISK OF EXCEEDING TARGET COST VALUE EXCEEDED BY 20% OF SAMPLE TARGET WITH 20% RISK OF BEING EXCEEDED l Because of the values put into the model there will be zero risk of exceeding total cost ‘x’. l All sample total costs will fall below value ‘x’. Hence, the risk is 1.0. l Easy to see what target cost will have a 20% risk of being exceeded. l Trying to set a target near the middle is sensitive to larger changes in the risk. X

MARCH 8 Risk Management PROJECT USING RISK ASSESSMENT TASK TRADITIONAL APPROACH COST = £5000 DURATION= 3 WEEKS 3 POINT ESTIMATE LIKELIHOOD AND IMPACT OF +VE AND –VE EVENTS MODEL COSTS

MARCH 9 Risk Management Human relations l Benefits è Can make all aware of the risks involved, relieving the pressure on individuals è If you wait for more data it may be too late to act è Early assessment enhances bid and budget control è The plan can run during risk assessment è Can focus resources in high risk areas è Risk assessment can bolster confidence in the plan è One needs confidence that any costs will not exceed the bid price è May be client driven è May be stakeholder driven

MARCH 10 Risk Management SIMPLE NETWORK NO LAG Task A Task B Task C Task D FS (3, 5, 8) (2, 3, 5) (3, 6, 8) (2, 4, 6) Note 3Note 1Note 2