1. PRJ566
Managing Risk

2. What is risk?
Risk=an uncertainty that can have a negative impact on meeting project objectives
Risks need to be managed throughout the project
Anticipate/avoid problems
Minimize surprises

3. Project Management Life Cycles
Linear
Iterative
Source: Figure 2.5
Effective Project Management: 6th edition, Robert Wysocki, John Wiley & sons, 2009, Chapter 2

4. When Risk is not Managed
Many people around the world suffered from financial losses as various financial markets dropped in the fall of 2008, even after the $700 billion bailout bill was passed by the U.S. Congress
According to a global survey of 316 financial services executives, more than 70 percent of respondents believed that the losses stemming from the credit crisis were largely due to failures to address risk management issues
They identified several challenges in implementing risk management, including data and company culture issues

5. Identifying Risks in IT Projects: “red flags”
Lack of user involvement
Lack of management support
Poor definition of Scope
Lack of proper planning
Unrealistic expectations

6. Identifying Risks in IT Projects: “red flags”
New technology
Lack of required skills
Poor communication
Poor estimating
Poor project management …

7. Managing Risks Perform a risk analysis Monitor and control risks
Identify Risks
Prioritize risks based on probability and impact
Plan risk response
Monitor and control risks

8. Identify Risks What potential events might hurt the project?
Categories of Risk:
Market risk
Financial risk
Technology risk
People risk
Structure/process risk

9. Organizations and risk
Risk Seeking
Risk Neutral
Risk Averse

10. Prioritizing Risks For each risk need to consider:
What is the probability that the risk will occur?
What impact will the risk have if it does occur?
There are many formal/informal methods for quantifying these measures.
For example, one of the simplest:
Probability is assigned value from 1 (very high) to 4 (unlikely)
Impact is assigned value from 1 (high impact—financial or other wise) to 4 (little or no impact)
Overall risk = (probability + impact)/2
Each organization will have its own formula for measuring risk ; some are very complex

11. Risk Response Planning
After identifying and quantifying risks, you must plan your response—how will you manage them to keep them from sinking your project
Four main response strategies for risks
Risk avoidance
Risk acceptance
Risk transference
Risk mitigation

12. Risk Response Planning Example
2 of 4 team members don’t know the required programming language
Mitigate—send developers on training program and assign each a development partner to oversee work.
If our small business software causes any problems due to bugs that we have not uncovered, or misuse, we might get sued.
Transfer to 3rd party—purchase liability insurance. Add liability limitation claims to software.
The technology we’re planning to use is really leading edge; we would be the first (we want to wow our customers!)
Eliminate. We can’t afford the investment unless it works. Go with the older, proven technology.
Our competitors are developing similar products. They might finish first.
Accept. Our suite of products needs this product. We need it to stay in business.