Risk Management

1. Risk Management • Figure 4-4 Estimate of Project Cost: Estimate Made at Project Start

2. Risk Management • What is Risk? • An uncertain event or condition that, if it occurs, has a positive or negative effect on a project’s objectives. • PMI (project management institute)

3. Risk Management • Risk Analysis • Risk analysis includes the estimating its probability, evaluating its impact and preparing for solution in advance. • Project size/complexity vs. risk • Risk analysis is not free

4. Risk Management • Successful Risk Management • SEI summaries successful risk management as follows • A successful risk management practice is one which risks are continuously identified and analyzed for relative importance. • Risks are mitigated, tracked, and controlled to effectively use program resources. • Problems are prevented before they occur and personnel consciously focus on what could affect product quality and schedules

5. Risk Management • Common Risk factors • Lack of top management commitment to the project • Failure to gain user commitment • Misunderstanding the requirement • Lack of adequate user involvement • Failure to manage end user expectation • Changing scope and objectives • Lack of required knowledge/skill in the project personnel • New technology • Insufficient / inappropriate staffing • Conflict between user departments

6. Risk Management • Anticipating Problems • The first stage of risk analysis requires a review of all project technical and administrative plans in order to identify potential problems. It includes: • The project development plan • The requirement specification • The design specification • External dependences • Project support issues

7. Risk Management • Risk Identification

8. Risk Management • Risk Analysis • Evaluate each problem • Estimate the probability that the problem will occur • Estimate the impact of the problem on the project if occurred • Attribute a measure of severity to the problem

9. Risk Management • Measuring the severity for each anticipated problem • Assign an expectation number between 1-10 based on the probability that the problem will occur. • 10 = high probability • 1= low probability • Assign a number between 1 and 10 based on the impact of the problem on the project. • 10 = high impact • 1= low impact • Multiply the value produced in step 1 by the value produced in step 2 to produce the measure of the severity for the problem.

10. Risk Management

11. Risk Management • Risk Analysis and contingency plan • Sort according to the severity of the problem • Severity less than may not be considered • Develop a contingency plan for each problem

12. Risk Management • Anticipating, Analyzing and Implementing Risk analysis • Project severity = expectation (1-10) * impact (1-10) • When should risk analysis be formed?

13. Risk Management • Implementing contingency plan • Contingency plans are implemented in one of the following instances • The anticipated problem occurs, or becomes imminent • The contingency plan requires advance preparation

14. Individual Assignment 20% • Using the Bigelow Inc. case study conduct a risk analysis for the top 10 risks. • You may make any assumption, simply state your assumptions.