1. Managing Project Risk

2. Project Risk
“…an uncertain event or condition that, if it occurs, has a positive or a negative effect on a project objective.”

3. Information Systems Associated Risks
Technology and project management related
Positive
Availability of new project management tools
Negative
Rate of change in technologies
Upgrades and new releases
Assumptions computer-generated output is always correct
Formation of teams

4. Risk & Project Life Cycle
Initiation stage
Identification and selection of specific projects
Inside or outside of organization’s core competencies
Planning stage
Procurement
Unreliability of new technology delivery timeframe
Development of accurate project schedule

5. Risk & Project Life Cycle (cont.)
Execution stage
Missed scheduled delivery date
Technology upgrades
Control stage
Implementation of risk plan
Modification of project schedule
Closing stage
Acceptance of project as finished

6. Project Risk Examples
New or different project management methodologies
Different:
Cultures
Organization structures
Human resources

7. General Categories of Project Risk
Ongoing changes to technology/materials
Finding, assigning, and retaining skilled personnel
Gaining user acceptance
Choosing the correct development methodology
Choosing correct manufacturing tools/materials

8. Outsourcing / Offshoring
Positives:
Expanded skill set availability
Cheaper labor
Reduced requirements for non-core competencies
Negatives:
Internal resistance
Possible solutions to reduce risk:
Ensure strong upper management support
Select the right personnel
Involve managers early in the outsourcing process
Educate and reassure internal employees

9. Outsourcing / Offshoring (cont.)
Negatives (cont.):
Increased security and privacy concerns
Possible solutions to reduce risk:
Increase physical security measures
Use software event logging and monitoring tools
Intrusion detection systems and firewalls
Encryption hardware/software

10. Top Five Project Risks
Lack of top management commitment to the project
Failure to gain user commitment/acceptance
Misunderstanding the requirements
Lack of adequate user/consumer involvement
Failure to manage end user expectations

11. Risk Management Planning
A systematic approach to planning the risk management activities of a given project

12. Risk Management Planning – Inputs
Enterprise environmental factors
Attitudes toward risk and risk tolerance
Organizational process assets
Processes in place to handle risk
Project scope statement
Defining the project
Project management plan
Project summary document

13. Risk Management Planning – Tools & Techniques
Risk planning meetings
Senior managers, project team leaders, stakeholders, project members with decision-making responsibilities
Development of specific risk management plans
Inclusion of risk-related items in budget and schedule
Creation of risk management templates

14. Risk Management Planning – Outputs
Methodology or approach to risk management
Roles and responsibilities of project members
Risk management budget
Integration of risk management activities into project life cycle
Scoring and interpretation of risk analysis
Risk thresholds
Reporting formats
Tracking

15. Risk Identification
The process of identifying potential risks to a project and documenting them

16. Risk Identification – Inputs
Enterprise environmental factors
Organizational process assets
Project scope statement
Project management plan
Risk management plan

17. Risk Categories Defined in a Risk Register
A formal recording of all project risks, explaining the nature of the risk and management of the risk

18. Risks

19. Risk Identification – Tools & Techniques
Documentation reviews
The review of organizational information to aid during risk identification
May include:
Project profiles (previous project information and related lessons learned)
Published information
Articles/studies/benchmarking information

20. Risk Identification – Tools & Techniques (cont.)
Information gathering techniques
Brainstorming
Delphi technique
Interviewing
Strengths, weaknesses, opportunities, and threats (SWOT)
Checklists

21. Risk Identification – Tools & Techniques (cont.)
Diagramming techniques
Cause and effect (Fishbone)
System or process flowcharts
Influence diagrams

22. Risk Identification – Output

23. Qualitative Risk Analysis
Establishment of probabilities regarding both the impact and likelihood of specific risk occurrences

24. Qualitative Risk Analysis – Inputs
Organizational process assets
Project scope statement
Risk management plan
Risk register

25. Qualitative Risk Analysis – Tools & Techniques
Risk probability and impact assessment
Probability/impact risk rating matrix
Risk data quality assessment
Risk categorization
Risk urgency assessment

26. Probability/Impact Risk Rating Matrix
A technique used to analyze project risk in terms of its probability of occurrence and its impact on project outcomes

27. Risk Data Quality Assessment
Assessment of the quality of the data used to assess risk
May include:
Extent to which a risk is understood
Available risk data
Data quality
Data integrity and reliability

28. Qualitative Risk Analysis – Outputs
Updated risk register

29. Quantitative Risk Analysis
Analysis of the probability of occurrence and impact of risk on project objectives using numerical techniques

30. Quantitative Risk Analysis – Inputs
Organization process assets
Project scope statement
Risk management plan
Risk register
Project management plan

31. Quantitative Risk Analysis – Tools & Techniques
Data gathering through interviewing
Quantitative procedures
Sensitivity analysis
Technique used to examine the potential impact of specific risks to a project (Tornado analysis)
Decision tree analysis
Diagramming technique used to evaluate courses of action in terms of their potential cost and benefits relative to other courses of action

32. Quantitative Risk Analysis – Tools & Techniques (cont.)
Expected monetary value analysis (EMV)
Statistical technique which captures the average value of potential projects by analyzing the likelihood of possible project outcomes as well as each outcome’s financial consequences
Simulation
Statistical technique where what-if analyzes are run to determine the impact of a given situation on a project objective (Monte Carlo)

33. Tornado Analysis

34. Expected Monetary Value + Decision Tree Analysis

35. Quantitative Risk Analysis – Outputs
Updated risk register

36. Risk Response Planning
The process of developing methods for responding to project risks

37. Risk Response Planning – Inputs
Risk management plan
Risk register

38. Risk Response Planning – Tools & Techniques
Avoidance
Identified risks are avoided through a different course of action
Transference
Transfer of risk to another party through the use of contracts
Mitigation
Steps are taken to reduce the occurrence or impact of stated risks
Acceptance
Risks are accepted and contingency strategies are planned

39. Risk Response Planning – Outputs
Updates to:
Risk register
Project management plan
Risk-related contractual agreements

40. Risk Response Plan Contents (Project Management Institute)
Any risks that have been identified along with a description and the areas and objectives the identified risk may affect
The roles and responsibilities of any risk owners
Qualitative and quantitative risk analysis results as well as any trends identified during either of these processes
A description of the risk response strategies including avoidance, transference, mitigation, and acceptance, and the risk that the strategies will be applied to
An acknowledgement of any residual risk projected to remain after any risk response strategies have been applied
A list of actions to be used to implement the risk response strategies
Budget and schedule information in terms of risk response
Any contingency plans used as part of an active response to accept risks

41. Additional Risk Terms Residual risks Secondary risks
Any risks remaining after risk response strategies have been applied
Secondary risks
Any risks resulting from the application of a risk response strategy
Contractual agreements
Any contracts for the purpose of risk transference during the project

42. Risk Monitoring & Control
The process of monitoring identified risks for change and controlling those changes

43. Questions?