1. Project Management – PTM712S
Faculty of Computing and Informatics
14 October 2017
Project Management – PTM712S
Lesson 11 – Project risk management

2. Project risk management
Faculty of Computing and Informatics
Project risk management
Introduction to project risk management
Six major processes of risk management
Risk management planning
Common sources of risk on IT projects
Risk identification
Qualitative risk analysis
Quantitative risk analysis

3. Project risk management
Faculty of Computing and Informatics
Project risk management
Risk is the possibility of loss or injury
Project risk is understanding potential problems that might occur on the project and how they might impede project success
Project risk management is an activity undertaken to lessen the impact of potentially adverse events on a project

4. Risk Utility or risk tolerance
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Risk Utility or risk tolerance
Risk utility or risk tolerance is the amount of satisfaction or pleasure received from a potential payoff
Utility rises at a decreasing rate for people who are risk-averse
Those who are risk-seeking have a higher tolerance for risk, and their satisfaction increases when more payoff is at stake
The risk-neutral approach achieves a balance between risk and payoff

5. Six major processes in risk management
Faculty of Computing and Informatics
Six major processes in risk management
Risk management planning: deciding how to approach and plan risk management activities, e.g., review charter, WBS, roles and responsibilities, risk mgt. policies
Risk identification: determining what risks are likely to affect a project and documenting the characteristics of each, e.g., risk management plan, outputs from project planning, risk categories
Qualitative risk analysis: characterizing and analyzing risks and prioritizing their effects on project objectives. Tools and techniques to develop an overall risk ranking for the project are used

6. Six major processes in risk management
Faculty of Computing and Informatics
Six major processes in risk management
Quantitative risk analysis: characterizing and analyzing risks and prioritizing their effects on project objectives. Tools and techniques to prioritise risks and estimate probabilities of achieving project objectives
Risk response planning: steps to enhance opportunities and reduce threats. Uses outputs from preceding risk management processes to develop risk plan
Risk monitoring and control: monitoring known risks, identifying new risks, reducing risks and evaluating effectiveness of risk reduction. Outputs are corrective actions and updated risk response plan

7. Project risk management summary
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Project risk management summary

8. Risk management planning
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Risk management planning
Risk management planning is the process of deciding how to approach and plan for risk management activities for a project
A risk management plan documents the procedures for managing risk throughout the project
Inputs from project charter, WBS, definitions of roles and responsibilities, corporate risk management policies
Risk mitigation is reducing the impact of a risk event by reducing the probability of its occurrence

9. Risk management planning cntd.
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Risk management planning cntd.
Risk management is a methodology for risk management, roles and responsibilities for activities involved in risk management, budgets and schedules for risk management, descriptions of scoring, methods for qualitative and quantitative analyses of risk, threshold criteria for risks, reports for risk management activities
Contingency plans are actions that the project team will take if an identified risk event occurs
Feedback plans are developed for high impact risks on meeting project objectives
Contingency reserves are provisions held by the project sponsor that can be used to mitigate cost or schedule risk if changes in scope or quality occur

10. Topics addressed in a risk management plan
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Topics addressed in a risk management plan
Methodology
Roles and responsibilities
Budget and schedule
Risk categories
Risk probability and impact
Risk documentation

11. Common sources of risk on IT projects
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Common sources of risk on IT projects
User involvement
Executive management support
Clear statement of requirements
Proper planning
Realistic expectations
Smaller project milestones
Competent staff
Ownership
Clear visions and objectives
Hardworking, focused staff
Market risk – will it be marketable
Financial risk – will organisation afford to undertake project
Technology risk – is the project technically feasible

12. Faculty of Computing and Informatics
Risk breakdown structure
A risk breakdown structure is a hierarchy of potential risk categories for a project
Similar to a work breakdown structure but used to identify and categorize risks

13. Sample risk breakdown structure
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Sample risk breakdown structure

14. Potential risk conditions associated with each knowledge area
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Potential risk conditions associated with each knowledge area
Integration
Inadequate planning, poor resource allocation, poor integration management, lack of post-project review
Scope
Poor scope definition/incomplete definition
Time
Error in estimating time/resource availability; errors in determining critical path
Cost
Estimating errors; inadequate productivity, cost, change
Quality
Substandard design/materials/workmanship HR
Poor conflict management, poor project organisation and definition of responsibilities, absence of leadership
Communications
Careless planning/ communicating; lack of consultation with key stakeholders
Risk
Ignoring risk; unclear risk analysis; poor insurance management

15. Tools and techniques for risk identification
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Tools and techniques for risk identification
Review project documentation
Analyse project assumptions
Gather risk-related information
Information gathering techniques
- Brainstorming – generate ideas and solutions in groups
- Delphi technique – consensus among expert panel
- SWOT Analysis – strengths, weaknesses, opportunities, threats
- Checklists of risks encountered in other projects
- Diagrams – process flow charts

16. Faculty of Computing and Informatics
Risk register
The main output of the risk identification process is a list of identified risks and other information needed to begin creating a risk register
A risk register is:
A document that contains the results of various risk management processes and that is often displayed in a table or spreadsheet format
A tool for documenting potential risk events and related information
Risk events refer to specific, uncertain events that may occur to the detriment or enhancement

17. Risk register contents
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Risk register contents
An identification number for each risk event
A rank for each risk event
The name of each risk event
A description of each risk event
The category under which each risk event falls
The root cause of each risk

18. Faculty of Computing and Informatics
Sample risk register

19. Qualitative risk analysis
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Qualitative risk analysis
Assessing the likelihood and impact of identified risks to determine their magnitude and priority
The techniques of qualitative risk analysis are:
- Using probability/impact matrixes to calculate risk factors
- Top ten risk item tracking
- Expert judgement without sophisticated techniques

20. Quantitative risk analysis
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Quantitative risk analysis
Decision trees – diagram analysis technique used to help select the best course of action in situations in which future outcomes are uncertain
Simulation – a representation or model of a system to analyse the expected behavior or performance of the system, e.g. Monte Carlo analysis simulates a model’s outcome many times to provide a statistical distribution of calculated results
Project evaluation and review technique (PERT)- worst case estimate, best-case estimate, most-likely estimate

21. Using probability/impact matrix
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Using probability/impact matrix
Probability matrix lists the relative probability of a risk occurring on one axis of the matrix and the relative impact of the risk on the other
Probability
Risk 6
Risk 9
Risk 1
Risk 4
Risk 3
Risk 7
Risk 2
Risk 5
Risk 11
Risk 8
Risk 10
Risk 12
High
Medium
Low
High
Medium
Low
Impact

22. Top ten risk item tracking
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Top ten risk item tracking
Risk analysis tool that identifies risks and maintains an awareness of risks throughout the life of a project
Risk item
This month
Last month
No. of months
Risk resolution process
Inadequate planning 1 2 4
Review entire project plan
Poor definition 3
Meeting with project customer
Absence of leadership
New manager allocated
Poor cost estimates
Revising estimates

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