Wiki Project Risk Management

1. Wiki Project Risk Management

2. Purpose of Presentation • To provide an Overview of the Risk Management Process • To describe Specific Risks Identification and Risk Response Planning. Information Technology Project Management, Fourth Edition

3. What Is A Risk? • A Risk is a Potential Event with Negative Consequences that Has Not Happened Yet. • However a Risk could also be defined as the event with unforeseen positive consequences. • A Possibility of Loss — Not the Loss Itself! • A source of problem during a project • Avoid labeling the cost of a risk as a risk (e.g. schedule slippage). Find the sources! • Strike at the root of the problem, not the leaves! • Something that Makes the Project Special • In the widest sense everything is a risk • There are better ways of handling recurrent problems

4. Project Management Maturity by Industry Group and Knowledge Area* KEY: 1 = LOWEST MATURITY RATING 5 = HIGHEST MATURITY RATING *Ibbs, C. William and Young Hoon Kwak. “Assessing Project Management Maturity,” Project Management Journal (March 2000).

5. Benefits of Risk Management Practices* *Kulik, Peter and Catherine Weber, “Software Risk Management Practices – 2001,” KLCI Research Group (August 2001).

6. Risk Management Is Integral To Project Management.

7. Risk Can Be Positive • Positive risks are risks that result in good things happening; sometimes called opportunities. • A general definition of project risk is an uncertainty that can have a negative or positive effect on meeting project objectives. • The goal of project risk management is to minimizepotential negative risks while maximizing potential positive risks.

8. Broad Categories of Risk • Market risk • Financial risk • Technology risk • People risk • Structure/process risk

9. Project Risk Management Processes • Risk management planning: Deciding how to approach and plan the risk management activities for the project. • Risk identification: Determining which risks are likely to affect a project and documenting the characteristics of each. • Qualitative risk analysis: Prioritizing risks based on their probability and impact of occurrence.

10. Probability Risk Rating Matrix Project manager

11. Project Risk Management Processes (cont’d) • Quantitative risk analysis: Numerically estimating the effects of risks on project objectives. • Risk response planning:Taking steps to enhance opportunities and reduce threats to meeting project objectives. • Risk monitoring and control: Monitoring identified and residual risks, identifying new risks, carrying out risk response plans, and evaluating the effectiveness of risk strategies throughout the life of the project.

12. The Risk Management Process

13. Contingency and Fallback Plans, Contingency Reserves • Contingency plans are predefined actions that the project team will take if an identified risk event occurs. • Fallback plans are developed for risks that have a high impact on meeting project objectives, and are put into effect if attempts to reduce the risk are not effective. • Contingency reserves or allowances are provisions held by the project sponsor or organization to reduce the risk of cost or schedule overruns to an acceptable level.

14. Common risk factors • 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

15. Risk Breakdown Structure • A risk breakdown structure is a hierarchy of potential risk categories for a project. • Similar to a work breakdown structure but used to identify and categorize risks.

16. Sample Risk Breakdown Structure

17. Potential Negative Risk Conditions Associated With Each Knowledge Area

18. Risk Identification • Risk identification is the process of understanding what potential events might hurt or enhance a particular project. • Risk identification tools and techniques include: • Brainstorming • The Delphi Technique • Interviewing • SWOT analysis

19. Two sources of risk inidentification People Paper

20. Brainstorming • Brainstorming is a technique by which a group attempts to generate ideas or find a solution for a specific problem by amassing ideas spontaneously and without judgment. • An experienced facilitator should run the brainstorming session. • Be careful not to overuse or misuse brainstorming. • Psychology literature shows that individuals produce a greater number of ideas working alone than they do through brainstorming in small, face-to-face groups. • Group effects often inhibit idea generation.

21. Brainstorming

22. Delphi Technique • The Delphi Technique is used to derive a consensus among a panel of experts who make predictions about future developments. • Provides independent and anonymous input regarding future events. • Uses repeated rounds of questioning and written responses and avoids the biasing effects possible in oral methods, such as brainstorming.

23. Delphi Technique

24. Interviewing • Interviewing is a fact-finding technique for collecting information in face-to-face, phone, e-mail, or instant-messaging discussions. • Interviewing people with similar project experience is an important tool for identifying potential risks.

25. SWOT Analysis • SWOT analysis (strengths, weaknesses, opportunities, and threats) can also be used during risk identification. • Helps identify the broad negative and positive risks that apply to a project.

26. Risk Register • The main output of the risk identification process is a list of identified risks and other information needed to begin creating a risk register. • A risk register is: • A document that contains the results of various risk management processes and that is often displayed in a table or spreadsheet format. • A tool for documenting potential risk events and related information. • Risk events refer to specific, uncertain events that may occur to the detriment or enhancement of the project.

27. Risk Register Contents • An identification number for each risk event. • A rank for each risk event. • The name of each risk event. • A description of each risk event. • The category under which each risk event falls. • The root cause of each risk.

28. Risk Register Contents (cont’d) • Triggers for each risk; triggers are indicators or symptoms of actual risk events. • Potential responses to each risk. • The risk owner or person who will own or take responsibility for each risk. • The probability and impact of each risk occurring. • The status of each risk.

29. Sample Risk Register • Project severity = expectation (1-10) * impact (1-10) • When should risk analysis be formed? • Is not a time activity • Periodic update and reviewed

30. Calculating severity Project severity = expectation (1-10) * impact (1-10)

31. Risk Analysis Risk Assessment Risk Management Risk Monitoring Identification Control It Process Level Measurement Share or Transfer It Activity Level Prioritization Diversify or Avoid It Entity Level

32. Risk analysis • Assess probability and seriousness of each risk. • Probability may be very low, low, moderate, high or very high. • Risk effects might be catastrophic, serious, tolerable or insignificant.

33. Risk analysis (i)

34. Risk analysis (ii)

35. Risk management strategies (i)

36. Risk planning • Consider each risk and develop a strategy to manage that risk. • Avoidance strategies • The probability that the risk will arise is reduced; • Minimisation strategies • The impact of the risk on the project or product will be reduced; • Contingency plans • If the risk arises, contingency plans are plans to deal with that risk;

37. Risk management strategies (ii)

38. Risk monitoring • Assess each identified risks regularly to decide whether or not it is becoming less or more probable. • Also assess whether the effects of the risk have changed. • Each key risk should be discussed at management progress meetings.

39. Risk indicators

40. 10 golden rules of project managementby Bart jutte (projectsmart.co.uk) • Make Risk Management Part of Your Project • Identify Risks Early in Your Project • Communicate About Risks • Consider Both Threats and Opportunities • Clarify Ownership Issues • Priorities Risks • Analyze Risks • Plan and Implement Risk Responses • Register Project Risks • Track Risks and Associated Tasks

41. Who does the Risk Assessment? • Responsibilities must be allocated: • Appoint a Risk Management champion with appropriate qualifications, including experience and analytical skills. • Form a Risk Management Committee, representative of operational areas. • Conduct Risk Management Workshops. • Determine operating procedures.

42. Evaluate the risks After identifying and analysing the risks, you can evaluate. • What is the likelihood of the risk event occurring? • Extreme • Very high • Moderate • Low • Negligible? • Almost certain • Likely • Moderate • Unlikely • Rare? What is the consequence if the risk event occurs?

43. Evaluate the risks • You need to describe or to quantify exactly what the ‘Likelihood’ and ‘Consequence’ terms means to you. • This helps in ensuring a consistent approach in future risk assessment and review and monitoring. • It promotes a common understanding within the Administration.

44. Evaluate the risks • After establishing ‘Likelihood’ and ‘Consequence’ you can use a table like this to set a level of risk. You must define what these risk levels mean to you.

45. Treating the risks • Low and very low level risks can normally be accepted, subject to on-going monitoring. • All other risks are included in the management plan. • The plan catalogues the risks, the level of risk, and describes a treatment. • The treatment is the action proposed, (and perhaps the resources allocated).

46. Treating the risks Development ofRisk Profiles Targetedselections Industry audits Physicalexamination Randomexaminations Complianceimprovement Next

47. Treating the risks • A common method of treating risks is to develop risk profiling and targeting systems. • This means – in the case of goods – selecting transactions for specific checks, according to trader, agent, origin of goods, commodity code, duty rate, routing, value, etc.

48. Treating the risks Risk Profiles are developed as a means of putting risk management into practice at the Operational level. • A Risk Profile is normally specific to a Customs office. It describes: • The risk areas • Assessment of the level of risk • The countermeasures adopted • Activation date and review dates • Means of measuring effectiveness.

49. Treating the risks Selected movements Selection Criteria Documentsand Data Selections are made by manual checks of documents, or by using automated systems. Selected transactions or movements are subject to the actions detailed in the profile or plan, e.g., physical examination, audit, etc.

50. Monitor & Review The initial assessment made of the existence and level of risks must be evaluated on a regular basis. You need to measure the effectiveness of risk profiles and update as necessary. • Reliable reporting of examination results • Compliance measurement activities • Feedback from the business community • Results analysis and data comparisons