1. BSBPMG407A Apply Risk Management Techniques Apply Risk Management Techniques Project Risk Processes Part 1 C ertificate IV in Project Management 17871 Qualification Code BSB41507 Unit Code BSBPMG407A

2. BSBPMG407A Apply Risk Management Techniques Project Risk Management Processes PMBOK Project Risk Management Processes - 11.1 Plan Risk Management 11.2 Identify Risks 11.3 Perform Qualitative Risk Analysis 11.4 Perform Quantitative Risk Analysis 11.5 Plan Risk Responses 11.6 Monitor and Control Risks Related processes from Project Integration Management – 4.1 Develop Project Charter 4.2 Develop Project Management Plan 4.6 Close Project PMBOK 4 th Edition

3. BSBPMG407A Apply Risk Management Techniques Learning Objectives – Part 1 1.Be able to plan for risk events on projects 2.Understand risk management processes and how to develop risk management strategies 3.Understand how to identify and prioritise potential risks 4.Describe and use risk analysis and reporting tools

4. BSBPMG407A Apply Risk Management Techniques Reading – Risk Processes Part 1 Please take some time to review – PMBOK Chapters 11.1, 11.2 Risk Management Standard – AS/NZS 31000:2009 Risk Management Companion- HB 327:2010 This could take 60 to 90 minutes

5. BSBPMG407A Apply Risk Management Techniques 4.1 Develop Project Charter The process of developing a document that formally defines and authorises a project by documenting the initial requirements that will satisfy the needs of the Project Sponsor and stakeholder The high level Project Risks are identified and an estimate is made of the overall risk of the project, this can be important to project prioritisation decisions The Project Charter establishes a partnership between the Project Sponsor or client and the Project Manager Occurs during the Initiation Phase Adapted from PMBOK 4 th Edition InitiationPlanning ExecutionClose Monitor Control

6. BSBPMG407A Apply Risk Management Techniques 4.1 Develop Project Charter Inputs into the Project Charter - Business need or rationale Product and project description Strategic Plan Business Case Regulations and standards Contractual requirements Methodologies, policies and procedures Adapted from PMBOK 4 th Edition

7. BSBPMG407A Apply Risk Management Techniques 4.1 Develop Project Charter Common contents of a Project Charter – Project purpose or justification Project objectives – should be measurable Project description High level requirements High level risks or overall risk analysis Preferred timeframe Estimated high level budget High level project structure – Project Sponsor, Project Manager Authorisation or Governance processes PMBOK 4 th Edition

8. BSBPMG407A Apply Risk Management Techniques 4.2 Develop Project Management Plan This is the process of defining and documenting the actions necessary to prepare and integrate all subsidiary plans for each of the 8 key knowledge areas of project management. The planning processes for all project management key knowledge areas are normally performed at the same time and during this process, or expanded upon shortly afterwards. It is progressively updated during project execution via the Perform Integrated Change Control process (PMBOK 4.5) Adapted from PMBOK 4 th Edition InitiationPlanning ExecutionClose Monitor Control

9. BSBPMG407A Apply Risk Management Techniques Typically, a detailed Risk Log will be developed during this process. Very high priority risks may also have specific Risk Action Plans developed to ensure that they can be enacted quickly if the risk occurs. Together with Scope Creep, risks and issues that occur on critical path activities cause the biggest delays and financial impacts to projects. The Risk planning process (11.1) happens concurrently with the project management planning process (4.2) 4.2 Develop Project Management Plan Adapted from PMBOK 4 th Edition

10. BSBPMG407A Apply Risk Management Techniques Risk Management Plan The Risk Management Plan describes how risk management will be structured and performed on the project. It is a subset of the overall Project Management Plan. Common inclusions in the Risk Management Plan – Risk management methodology Risk management roles and responsibilities Risk Action plans including costs and resources required to manage specific risks Risk categories Risk probability and likelihood matrix Risk Log Adapted from PMBOK 4 th Edition InitiationPlanning ExecutionClose Monitor Control

11. BSBPMG407A Apply Risk Management Techniques 11.1 Plan Risk Management Adapted from PMBOK 4 th Edition InitiationPlanning ExecutionClose Monitor Control The process of defining how to conduct risk management activities for a project Detailed risk planning enhances the overall probability of successful project completion Risk planning creates visibility of the degree and types of risk inherent in a specific project For high risk, large and complex projects – contingency is often added to cover responses to unexpected risks The risk planning process (11.1) happens concurrently with the project management planning process (4.2) Occurs during Planning

12. BSBPMG407A Apply Risk Management Techniques 11.1 Plan Risk Management Inputs to Plan Risk Management Project Scope Statement Cost Management Plan Schedule Management Plan Communications Management Plan Enterprise Environmental factors Organisational Process Assets - –Risk management standards –Risk management policies and procedures –Risk categories and definitions –Standard templates –Lessons learned from previous projects –Stakeholder registers Adapted from PMBOK 4 th Edition InitiationPlanning ExecutionClose Monitor Control

13. BSBPMG407A Apply Risk Management Techniques 11.1 Plan Risk Management The PMBOK includes only one technique for this process – Planning Meetings and Analysis, this is a very simplistic view. Other tools and techniques have been included here from practice - Planning Meetings Subject Matter Experts Risk Management Standards Risk Management Methodologies Stakeholder Consultation Workshops Templates Standard Risk Categories Risk Analysis Tools Risk Registers

14. BSBPMG407A Apply Risk Management Techniques 11.1 Plan Risk Management Outputs of this process include – Risk Management Plan –Risk management methodology –Risk management roles and responsibilities –Risk Action plans including costs and resources required to manage specific risks –Risk categories –Risk probability and likelihood matrix –Risk Log Project Document Updates –Stakeholder Register and Responsibility Assignment Matrices (part of Project HR) Change Requests Adapted from PMBOK 4 th Edition InitiationPlanning ExecutionClose Monitor Control

15. BSBPMG407A Apply Risk Management Techniques Risk Categories Risk categorisation is critical It helps to ensure that all aspects of risk on the project are considered Standard risk categories are hard to find Start with the Project Management Key Knowledge Areas and industry frameworks Risk Breakdown Structure – Lists the categories and sub-categories within which risks may arise for a typical project Different RBSs will be appropriate for different types of projects, different organisations and different industries Provides a framework to help ensure all risks are considered

16. BSBPMG407A Apply Risk Management Techniques Example Risk Breakdown Structure Adaptations and additions to the example in the PMBOK Adapted from PMBoK Guide – Fourth Edition

17. BSBPMG407A Apply Risk Management Techniques Likelihood = Probability Consequences = Impact Likelihood is the probability that a risk even will occur on a project Consequences are the impacts that the risk will have on the project outcomes (Scope, Time, Cost and Quality) if it does occur Probability and Impact Definitions

18. BSBPMG407A Apply Risk Management Techniques Likelihood and Consequences Simple Likelihood Scale Simple Consequences Scale RatingDefinitionScale Almost CertainWill definitely occur or will occur on an annual cycle5 LikelySimilar events have been experience several times in the past 20 years4 PossibleWill occur once every 20 years3 UnlikelyOccurs from time to time2 RareOccurrence is possible but highly unlikely1 Adapted from Risk Management Guidelines – Companion to AS 4360:2004 RatingDefinitionScale SevereMost objectives cannot be met5 MajorSome important objectives cannot be met4 ModerateSome objectives impacted but may still be met 3 MinorMinor effects that can be remedied2 NegligibleAlmost no impact on objectives1

19. BSBPMG407A Apply Risk Management Techniques Put your likelihood and consequence ratings together and what do you get? Risk Rating = Likelihood x Consequences Simple Risk Rating Matrix RatingSevereMajorModerateMinorNegligible Almost Certain Red 25 Red 20 Red 15 Amber 10 Green 5 LikelyRed 20 Red 16 Amber 12 Amber 8 Green 4 PossibleRed 15 Amber 12 Amber 9 Green 6 Green 3 UnlikelyAmber 10 Amber 8 Green 6 Green 4 Green 2 RareGreen 5 Green 4 Green 3 Green 2 Green 1

20. BSBPMG407A Apply Risk Management Techniques 11.2 Identify Risks Adapted from PMBOK 4 th Edition InitiationPlanning ExecutionClose Monitor Control The process of determining which risks may affect the project and documenting their characteristics This is an interactive process as new risks may evolve or become known during the project Participants in risk identification activities can include – –Project Manager and Project Team –Project Sponsor and Stakeholders –Risk management experts –Customers –Subject Matter Experts –Other Project Managers Occurs during Planning

21. BSBPMG407A Apply Risk Management Techniques 11.2 Identify Risks Inputs to Identify Risk Risk Management Plan Activity Cost Estimates Activity Duration estimates Scope Baseline Stakeholder Register Cost Management Plan Schedule Management Plan Quality Management Plan Adapted from PMBOK 4 th Edition InitiationPlanning ExecutionClose Monitor Control

22. BSBPMG407A Apply Risk Management Techniques 11.2 Identify Risks Inputs to Identify Risk (continued) Project Documents – –Assumptions Log –Work performance reports –Requirements Enterprise Environmental Factors - –Research and publications –External Risk Management Standards –Checklists and Benchmarks –Industry studies –Risk Attitudes Organisational Process Assets - –Project Files –Risk Management Templates –Lessons Learning –Standard risk categories –Lists of standard risks Adapted from PMBOK 4 th Edition InitiationPlanning ExecutionClose Monitor Control

23. BSBPMG407A Apply Risk Management Techniques 11.2 Identify Risks Tools and techniques for identifying risk include - Influence Diagrams Cause & Effect Diagrams System or Process Flowcharts Interviews and Surveys Assumptions Analysis Brainstorming Workshops Questionnaires Root Cause Analysis Risk Checklists Documentation Reviews Adapted from PMBOK 4 th Edition SWOT Analysis Expert Judgement Risk Categories Industry Risk Frameworks Lessons Learnt

24. BSBPMG407A Apply Risk Management Techniques 1.2 Identify Risks Risk Checklists & Questionnaires Many organisations and certain industries have standard risk checklists and questionnaires that assist with the identification of the overall risk on a project, as well as the specific risks that may be applicable Assumptions Analysis Any assumptions that have been documented during the planning processes need to be analysed and included in the Risk Log. Is any assumption does not prove to be true there will be impacts to project objectives, the risk of assumptions proving untrue must be evaluated. Risk Categories Many organisations and certain industries have standard risk categories which help to ensure that all risk areas are reviewed when undertaking risk planning

25. BSBPMG407A Apply Risk Management Techniques 1.2 Identify Risks SWOT Analysis Standard approach used to identify risks and opportunities during business planning and marketing activities. Can also be applied to project risk identification. Involves the identification of an organisations Strengths, Weaknesses, Opportunities and Threats. Weakness and Threats may need to documented in project risk logs. Expert Judgement Many organisations will have specialised risk management teams that can provide expert assistance to projects in the planning and identification of risks. In very risky projects it may also be helpful to consult external subject matter experts. Industry Risk Frameworks Some industries, particularly Construction and Defence, have standard risk frameworks which are extremely helpful to project risk management.

26. BSBPMG407A Apply Risk Management Techniques 11.2 Identify Risks Outputs of this process include – Initial entries on the Risk Register List of identified risks Potential risk owners List of potential responses Sample column headings in a typical Risk Register Adapted from PMBOK 4 th Edition Risk ID Risk Category Risk DescriptionRisk Owner LikelihoodImpactRisk Rating Management /Mitigation Strategies Residual Likelihood Residual Impact Residual Rating StatusPriority

27. BSBPMG407A Apply Risk Management Techniques Risk ID Risk Category Risk DescriptionRisk Owner LikelihoodImpactRisk Rating Management /Mitigation Strategies Residual Likelihood Residual Impact Residual Rating StatusPriority Risk Description Plain English explanation of the risk One to two sentences in length Ensures common understanding Inclusions in Risk Register during Planning Adapted from PMBOK 4 th Edition Risk Id Can be a simple as a number May relate to the risk category Used as a unique identifier may be an internal standard Risk Category Can be taken from industry frameworks Can be set at internal standards May need to be developed/tailored Ensures identification of all risks Assists with monitoring and control Risk Owner A specific person or role Ensures clear ownership of the risk Responsible for monitoring & control

28. BSBPMG407A Apply Risk Management Techniques Risk Planning and Identification 1.What methods have you seen used for risk identification? Were they successful? If none, what would you use? Which is appropriate for your individual project? Go to the Forum on Risk Planning and Identification answer the question posed and discuss your findings with other students. Research ReflectDiscuss

29. BSBPMG407A Apply Risk Management Techniques Next Steps Please proceed to Risk Processes Part 2 in the Learning Program. Best of Luck!