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Chapter 17. Risk Management. RISK MANAGEMENT. RISK MANAGEMENT FOCUSES ON THE FUTURE RISK AND INFORMATION ARE INVERSELY RELATED. RISK MANAGEMENT (CONT.). HISTORICALLY, WE FOCUSED OUR ATTENTIONS ON SCHEDULE AND COST RISK MANAGEMENT.

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chapter 17

Chapter 17

Risk Management

risk management
RISK MANAGEMENT
  • RISK MANAGEMENT FOCUSES ON THE FUTURE
  • RISK AND INFORMATION ARE INVERSELY RELATED
risk management cont
RISK MANAGEMENT (CONT.)
  • HISTORICALLY, WE FOCUSED OUR ATTENTIONS ON SCHEDULE AND COST RISK MANAGEMENT.
  • TODAY, OUR PRIMARY EMPHASIS IS ON TECHNOLOGICAL RISK MANAGEMENT:
    • CAN WE DESIGN IT AND BUILD IT?
    • WHAT IS THE RISK OF OBSOLESCENCE?
definition of risk
Definition Of Risk

Risk = f(Likelihood, Impact)

event

  • Likelihood is the probability of occurrence of an event
  • Impact is the amount at stake
  • Likelihood up  risk up
  • Impact up  risk up
definition of risk 2
Definition Of Risk-2

Risk = f(Hazard, safeguard)

Hazard: source of danger

Safeguards: ways of overcoming

Hazard up  risk up

Safeguard up  risk down

tolerance for risk
Tolerance For Risk
  • Risk avoider
  • Risk neutral
  • Risk seeker
risk management rm
Risk Management (RM)
  • The act or practice of dealing with risk
    • Is proactive rather than reactive
    • Includes:
      • Planning for risk
      • Assessing (identifying and analyzing) risk issues
      • Develop risk handling strategies
      • Monitor risk
decision making categories
Decision-Making Categories
  • Decision Making under certainty
  • Decision making under risk

Decision making under uncertainty

    • Maximax, maximin, minimax, laplace criterion, decision trees
risk management processes
Risk Management Processes
  • Risk planning
  • Risk assessment
    • Risk identification
    • Risk analysis/quantification
  • Risk handling
  • Risk monitoring
types of risks general
Types Of Risks (General)
  • Business risks
  • Insurable (pure) risk
    • Direct property damage
    • Indirect consequential loss
    • Legal liability
    • Personnel
risk planning
Risk Planning
  • Develop and document a comprehensive risk management strategy
  • Determine the methods to be used
  • Plan for adequate resources
  • Develop Risk Management Plan (RMP)
risk assessment
Risk Assessment
  • One of the most important phases of risk management process
    • Risk identification
      • Identify all potential risk issues
      • Life-cycle risk analysis
    • Risk analysis
types of risk pmi method
Types Of Risk (PMI Method)
  • External – unpredictable
  • External – predictable
  • Internal – non-technical
  • Internal – technical
  • Legal
slide14
After risk analysis convert the results into risk levels.
    • High risk
    • Moderate risk
    • Low risk
  • be careful with uncertainty statements
risk handling
Risk Handling
  • Deal with known risk, identify who is responsible
    • Assumption (retention)
    • Avoidance
    • Control (mitigation)
    • Transfer
slide16
Assumption
    • I know the risk exists, I am aware of consequences, I accept the risk should it occur
  • Avoidance
    • I will not accept this option, change the design, change the requirements
  • Risk control
    • I will take necessary measures to prevent unfavorable results
slide17
Risk transfer
    • I will share the risk through insurance or warranty
  • Which method to use?
risk monitoring
Risk Monitoring
  • Earned Value
  • Program metrics: formal periodic performance assessments
  • Schedule performance monitoring
  • Technical performance measurement: product design assessment
how much risk is acceptable
How Much Risk Is Acceptable?
  • High tolerance for risk
  • Medium tolerance for risk
  • Low tolerance for risk