1. 1 Project Management C53PM Session 4 Russell Taylor Staff Work-base – 1 st Floor E-mail: rtayl@borderscollege.ac.uk

2. Business Department 2 Session 4 Chapter 4 –Risk Management & Contingency Planning

3. Business Department 3 Risk The possibility of loss, injury, disadvantage or destruction. Risk components –An event (unwanted change) –A probability of occurrence of that event –Impact of that event (amount at stake) Calculate Risk – = ∫ (event + uncertainty + damage)

4. Business Department 4 Risk Types Speculative risks – Market risks –eg. Stocks Pure risk – Specific –eg. accident, technical failure Risk categories –Business risk –External risks –Service / operational risk Project –Risks that effect project success

5. Business Department 5 Project Risk Initiation & Definition Closure Development Planning Execution & Control Amount at stake Project risk

6. Business Department 6 Risk Management The formal process by which risk factors are systematically identified, assessed and provided for. Risk assessment –Risk identification –Risk analysis –Risk prioritise Risk control –Risk response plan –Risk resolution –Risk monitoring & reporting

7. Business Department 7 Risk Assessment Risk identification Risk Analysis Risk Prioritisation

8. Business Department 8 Risk Identification Determining project risks –What could happen, why & the impact? –Isolate high impact risks Inputs –WBS –Cost Estimates –Scope management plans Historical information –Project files, databases –Project team SWOT

9. Business Department 9 Risk Clinic – Stage 1 1.In Project teams identify all associated risks Brainstorming rules apply Brainstorming rules –Write down ALL suggested risks on post-it notes –Do not debate suggestions –Fix a target number (50 risks) –Fix a time limit (45 minutes)

10. Business Department 10 Risk Identification checklist 1.Business impact & benefits 2.Project management issues 3.Organisational impact 4.Technical risks & complexity 5.Logistics 6.Production 7.Testing

11. Business Department 11 Risk Analysis Analysis involves evaluation –Source, Probability & Criticality Analysis risk for possible outcomes Probability of Risk Occurring How Critical is that risk Impact / Exposure –Expected monitory value Quantitative rating –Impact of risk = probability x criticality Qualitative rating –Rank / prioritise risks (1-10)

12. Business Department 12 Qualitative Risk analysis High Medium Low MediumHigh Probability Criticality Impact 10 9 8 7 6 5 4

13. Business Department 13 Risk Clinic – Stage 2 Draw a risk matrix Draw 10 isorisk exposure bars on matrix In Project teams – analyse all identified risks –Probability What is the likelihood of the risk occurring? –Criticality What is the consequence of the risk occurring? Brainstorming Place post-it notes in the relevant quadrant/bar Give Quantitative rating for medium to high impact risks Probability (1-10) & Criticality (1-10)

14. Business Department 14 Qualitative Risk analysis High Medium Low MediumHigh Probability Criticality Impact 10 9 8 7 6 5 4 Level of acceptance

15. Business Department 15 Risk Control Risk Response Planning Risk Resolution Risk Monitoring & reporting

16. Business Department 16 Risk Response & Planning Eliminate risk where possible –High impact risks Isolate or minimise risks –Risk awareness Develop alternative course of action –Avoid risk Establish time & financial contingencies –Contingency planning

17. Business Department 17 Risk Response Plan 1.Avoidance –Choose alternative course of action 2.Mitigation –Reduce probability or consequence of risk 3.Acceptance –Acknowledge and advise 4.Transfer –Shared or transferred to a third party 5.Knowledge & research –Simulation & testing

18. Business Department 18 Risk Clinic – Stage 3 1.Identify highest exposure risks 2.Calculate Impact –Probability (10), Criticality (10) –Impact = Probability x Criticality Discuss responses –Avoid – How? –Mitigate – How ? –Accept – Advise ? –Transfer – Who to? –Test – How? 3.Record Responses for Risk Register

19. Business Department 19 Risk monitoring & control Monitor Identified risks –Risk Information sheet –Update risk register Periodically Identify new risks –Update risk register Take appropriate action –Update risk register

20. Business Department 20 If all else fails Contingency planning –Identify alternative processes –Identify alternative resources –Calculate lead times for substitute processes –Identify trigger point that causes contingency plan to be activated Always add a contingency sum to budget!! –5% - 10%

21. Business Department 21 Next lecture Chapter 5 –Breakdown Structures