1. PMI North Area PMP Exam Study Group
Risk Presentation
Prepared by Denise Robertson
15 March 2003
Denise Robertson
Information derived or quoted from from PMI, Mulcahy, and Look Glass Development's PMP Exam Prep Materials

2. Risk Management Processes
Process I/O and Tools/Techniques emphasized on exam, so memorize them
Memorize process in order:
Risk Management Planning
Risk Identification
Qualitative Analysis
Quantitative Analysis
Risk Response Planning
Risk Monitoring and Control
Denise Robertson
Information derived or quoted from from PMI, Mulcahy, and Look Glass Development's PMP Exam Prep Materials

3. Risk Concepts Risk tolerance Risk adverse Risk factors Probability
Impact
Range of possible outcomes
Expected timing in project life cycle
Denise Robertson
Information derived or quoted from from PMI, Mulcahy, and Look Glass Development's PMP Exam Prep Materials

4. Unknowns Risks are also called “Unknowns”
“Known Unknowns” are identified during Risk Management and are documented in the project plan
Can be planned for with Risk Response
“Unknown Unknowns” are unanticipated risks
Cannot be planned for in advance
Denise Robertson
Information derived or quoted from from PMI, Mulcahy, and Look Glass Development's PMP Exam Prep Materials

5. Policy Level
Organization’s Risk Management Policy on how to approach risk is now part of PMBOK
Policy describes:
Level of tolerance
Level of acceptable risk
Denise Robertson
Information derived or quoted from from PMI, Mulcahy, and Look Glass Development's PMP Exam Prep Materials

6. Project Status 3 possible statuses: In Jeopardy Committed to Approved
Denise Robertson
Information derived or quoted from from PMI, Mulcahy, and Look Glass Development's PMP Exam Prep Materials

7. Risk Probability/Impact Matrix
2-D rating system that rates:
Likelihood (probability) of a risk occurring between 0.0 and 1.0 or 100% certainty
Impact of risk should it occur
Impact scale can be
Ordinal (ordered)
Cardinal (assigned numeric values)
Risk Score = Probability * Impact
Denise Robertson
Information derived or quoted from from PMI, Mulcahy, and Look Glass Development's PMP Exam Prep Materials

8. Evaluating Project Data for Use in Assessing Risk
Assumption Testing Criteria:
Stability of assumption
Impact to project if assumption proves false
Data Precision Ranking Accuracy Dependencies:
Extent risk is understood
Data available about risk
Quality of data
Reliability and integrity of data
Denise Robertson
Information derived or quoted from from PMI, Mulcahy, and Look Glass Development's PMP Exam Prep Materials

9. Monte Carlo Simulation
Used in Quantitative Risk Analysis and Cost Analysis
Evaluates the project, not the tasks, however:
Provides probability of completing project on any specific day or for any specific task
Provides probability of any task actually being on the critical path
Provides percent probability that each task will be on critical path
Takes into account path convergence
Translates uncertainties into impacts to total project
Can be used to assess cost and schedule impacts
Results in probability distribution
Denise Robertson
Information derived or quoted from from PMI, Mulcahy, and Look Glass Development's PMP Exam Prep Materials

10. Decision Tree Analysis
Quantitative Analysis Tool
Diagram describes decision and probabilities associated with choices
Determines aggressive or conservative route to highest Expected Monetary Value (EMV)
Total of Probabilities * Consequences for a Choice Event = EMV
Denise Robertson
Information derived or quoted from from PMI, Mulcahy, and Look Glass Development's PMP Exam Prep Materials

11. Cost Reserve PMI recommends at least 10% Based on EMV:OR
Based on EMV:
Total of Probability * Risk Cost for all risks
Remember risk can be negative or positive
Denise Robertson
Information derived or quoted from from PMI, Mulcahy, and Look Glass Development's PMP Exam Prep Materials

12. Risk Response Techniques
Description
Avoidance
Changing project plan to eliminate risk or protect objectives from its impact
Mitigation
Reduces probability and/or consequences of adverse event to acceptable threshold
Transference
Shifting consequences of risk and ownership to a third party (Insurance is a form of transference.)
Acceptance
Project plan not changed to deal with risk. Project team unable to identify any other suitable strategy
Denise Robertson
Information derived or quoted from from PMI, Mulcahy, and Look Glass Development's PMP Exam Prep Materials

13. Residual and Secondary Risks
Outputs from Risk Response Planning
Residual Risks are those that remain after Avoidance, Transference, and Mitigation have been taken.
Secondary Risks arise as a direct result of implementing a risk response
Secondary risks should be identified and responses planned
Denise Robertson
Information derived or quoted from from PMI, Mulcahy, and Look Glass Development's PMP Exam Prep Materials