1. Project Risk Management
CHAPTER 14
Project Risk Management

2. Risk Event Graph

3. Risk Management Process

4. Risk Management Process (cont.)
Step 1: Establishing the risk context
Step 2: Risk identification
Step 3: Risk analysis
Step 4: Risk evaluation
Step 5: Risk treatment
Step 6: Contingency planning

5. Step 1: Establishing the Risk Context
What is the organisation’s context for risk?
How does this affect the project environment?
How are ‘individual’ risk tolerances levelled?
Do you use the ‘As Low As Reasonably Possible’ (ALARP) approach?

6. Step 2: Risk Identification
WBS
RBS
Risk Profiles
Lessons learned
Delphi method
SWOT
Others…

7. Step 2: Risk Identification (cont.)
The Risk Breakdown Structure (RBS)

8. Step3: Risk Analysis
Probability refers to the probability of the event. (This is otherwise known as the likelihood of the risk occurring.)
Impact refers to the impact of the event. (This is otherwise known as the consequence of the risk if the event occurs.)

9. Simple ‘inherent’ risk analysis
Step 3: Risk Analysis
Simple ‘inherent’ risk analysis

10. Step 3: Risk Analysis (cont.)
Impact considered over multiple criteria

11. Step 3: Risk Analysis (cont.)
Decision tree analysis

12. Step 4: Risk Evaluation
The purpose of risk evaluation is to assist in making decisions, based on the outcomes of the risk analysis, about which risks need treatment and the priority for treatment implementation.
Risk evaluation involves comparing the level of risk found during the analysis process with risk criteria established when the context was considered.
Based on this comparison, the need for treatment can be considered. (AS/NZS/ISO 31000:2009)

13. Step 5: Risk Treatment for Threat Risks
Mitigating risk
Avoiding risk
Transferring risk
Accepting (retaining) risk

14. Step 5: Risk Treatment (cont.)
Mitigation and residual risk assessment

15. Step 5: Risk Treatment for Opportunity Risks
Exploit
Share
Enhance
Accept

16. Step 6: Contingency Planning
A contingency plan is an alternative plan that will be used if a possible foreseen risk event becomes a reality (an issue).

17. Step 6: Contingency Planning (cont.)
Risk contingency plan

18. Step 6: Contingency Planning (cont.)
Common methods for handling risk
Technical risks
Schedule risks
Cost risks
Funding risks

19. Contingency Funds and Risk
Budget reserves
Management reserves
Time buffers
How are risk contingencies managed in your organisations?

20. Risk Management Plan Risk context Risk methodology
Risk roles and responsibilities
Risk escalation process
Risk reporting
Risk audits and health checks
Lessons learned

21. Risk Monitoring and Review

22. Key Terms Monte Carlo technique 5 Whys opportunity risk ALARP PERT
AS/NZS/ISO 31000:2009
assumptions
constraints
contingency plan
contingency planning
decision trees
decision tree analysis
Delphi Method
Failure Mode and Effects Analysis (FMEA)
impact (consequence)
mitigation strategy (risk response)
Monte Carlo technique
opportunity risk
PERT
PERT simulation
probability (likelihood)
risk analysis
risk breakdown structure (RBS)
risk context
risk evaluation
risk identification
Risk Management Plan
risk monitoring and review
risk profile
Risk Register
risk severity matrix
root cause analysis
threat risk