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Definition of Project Risk

Manage Project Risk Introduction to Project Risk Diploma of Project Management 17872 Qualification Code BSB51507 Unit Code BSBPMG508A. Definition of Project Risk. The PMBOK defines Risk as –

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Definition of Project Risk

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  1. Manage Project RiskIntroduction to Project RiskDiploma of Project Management 17872Qualification Code BSB51507Unit Code BSBPMG508A

  2. Definition of Project Risk • The PMBOK defines Risk as – • “an uncertain event or condition that, if it occurs, will have a positive or negative effect on a project’s objectives.” • In practice, people generally associate risks with negative impacts • Opportunities are positive risks and, if they arise, these should be exploited to increase positive impacts on a project • Risks can generally be defined and predicted at the beginning of a project Adapated from PMBOK 4th Edition

  3. Project Risk Management • Project Risk Management decreases the probability and impact of negative events on the project • This in turn increases the chance of Project Success • Risks and issues that occur during a project can seriously impact Time, Cost, Scope and Quality • Both the Project Manager and the Project Sponsor have important roles to play in the management of risks • Both Risks and Issues need to be reviewed and managed as part of the Monitoring and Control process group

  4. Can be predicted upfront Mostly negative impacts Occasional positive impacts Responses planned in advance Maintain a Risk, monitor and resolve Standard categories No predicted upfront Can’t plan in advance Always have negative impacts Maintain an Issues log, monitor and resolve Categorised depending on project characteristics Risks vs Issues Risks Issues

  5. Characteristics of Project Risk • Project risk is always in the future • Risks are uncertain events or conditions, if they occur they will have an impact (usually negative) on at least one project objective – scope, time, cost and quality • Good practice dictates that ALL assumptions documented in any of the planning processes are automatically placed into the Risk Log to enable effective monitoring and control • Project risk has its origins in the uncertainty present in all projects • A project risk that has occurred can also be treated as an issue

  6. Characteristics of Project Risk • Known risks are those that have been identified and analysed during project planning • Unknown risks may also occur during the project for which no risk planning has been conducted • For high risk, large and complex projects – contingency is often added to cover responses to unexpected risks if they occur • Different Project Sponsors, Project Managers and organisations will have different appetites for risk, these need to be taken into account when determining the contingency

  7. Project Manager’s Responsibilities One of the primary responsibilities of a Project Manager is to monitor and control the project This means that they need to review the progress and status of the project regularly and make adjustments to ensure the project stays on track Risks and Issues that occur are the main reasons for slippage The Project Manager must undertake an overall project risk assessment identify, monitor and control risks identify, monitor and control issues

  8. Project Manager’s Responsibilities It is vital that – Risks are identified during planning and monitored during execution Risk response plans need to be ready for immediate implementation Issues are logged, reviewed and resolved regularly Risks and Issues on critical path activities require urgent action as they can have the greatest impact on the project timeline Communicate the impacts of major risks and issues to the Project Sponsor and senior stakeholders – In Advance!

  9. Project Manager’s Responsibilities Always maintain the following deliverables – Project Risk Assessment Risk Log Issue Log Risk Management Plan

  10. Project Sponsor’s Responsibilities • The Project Sponsor and senior stakeholders also have key roles when it comes to project risks • They need to – • Participate in risk identification • Participate in risk management planning • Assist in both risk and issue resolution • Unfortunately they don’t always realise that they need to contribute and the burden can often unfairly fall to the Project Manager • One resolution is to clearly define the expectations that the project has on the Project Sponsor and senior stakeholders, including a Steering Committee if there is one

  11. Next Steps Please proceed to Risk Processes Part 1 in the Learning Program. Best of Luck!

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