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IS 556 Project Management. Risk Management Personal Notes Survival Guide – Chapter 7. David Lash. Unit Objectives. What is Risk Management? Three Main Steps to Risk Management Identify Develop Response Control. Plan Early… Plan Often. Mission  Shared vision – Could be charter

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is 556 project management

IS 556 Project Management

Risk Management

Personal Notes

Survival Guide – Chapter 7

David Lash

unit objectives
Unit Objectives
  • What is Risk Management?
  • Three Main Steps to Risk Management
    • Identify
    • Develop Response
    • Control
plan early plan often
Plan Early… Plan Often
  • Mission Shared vision – Could be charter
    • Creates buy-in, understanding, motivation
    • Achievable goals
  • Executive Champion – Critical to project success
  • Open planning
    • Include those who carry out plan
  • Refine estimates of effort throughout project
  • Document and announce risks and achievements
  • Project web page
  • Top 10 Risks List- risk, resolution, progress
how much effort
How Much Effort?

Some budget should be committed to risk management.

  • Figure 7-2: Variation in risk level according to risk-management overhead. The average project devotes virtually no attention to risk management and accepts extremely high levels of risk as a consequence. Successful projects devote a small amount of overhead to risk management and substantially reduce their risk exposure
what is risk management
What Is Risk Management?
  • The means by which uncertainty is systematically identified and managed to increase likelihood of success
  • Risk might be obvious:
    • Development of a new drug to treat cancer
  • Or less obvious:
    • Large contract requires execution of 1 or more sub-contractors (how will ensure they will deliver?)
    • Turn-over in industry may result in loss of key people on project
    • Departmental reorganization may disrupt project
why risk management
Why Risk Management?
  • Proactively understand and manage risk of:
    • being late
    • being over budget
    • uncertainty
    • quality assurance
  • An iterative process to identify and manage risk throughout the project
level of risk management
Level Of Risk Management?
  • Risks exists at business level - select right project and project level - execution of the project
    • For example, building a new office building on-time and on-cost - project level responsibility
    • If turns out there is no demand for office space (once done) - business level responsibility.
  • Project managers are most concerned with project level execution
  • Program managers or functional managers or senior management with business risk
pm should be defined process
PM Should Be Defined Process
  • Charter
    • Purpose
    • review and publish
  • SOW
    • A. Document goals, scope deliverables HL budget estimate
    • Review with Project board
  • Communication Plan
    • Document communication methods of various level
    • Review with project board, various stakeholders
  • Risk Strategy
  • Project Plan
  • Execute

HL Plan

LL Plan

risk management influence
Risk Management Influence
  • Risk mgmt influences project plan and rules
risk management framework
Risk Management Framework
  • Three main steps

I. Identify - find the sources of project risk

II. Develop Response - As risks are identified determine how you will mitigate them

      • May result in a change in change in documents that define project rules (e.g, scope change)

III. Control - Implement strategies and monitor effect of changes

step i identify risk
Step I - Identify Risk
  • There are 4 techniques to identify risks
    • 1.Asking stakeholders
      • Brainstorming sessions
      • Interviewing
    • 2. Developing a risk profile list
      • A risk profile (or template) might be gathered from post-mortem reviews of projects.
      • Develop categories of risks under each category develop possible risk areas refine over time
    • 3. Learning from similar projects (You may be able to find historical records )
4 identify risk budgets schedules
4. Identify Risk - Budgets & Schedules
  • There are 4 techniques to identify risks
    • 1.Asking stakeholders
    • 2. Developing a risk profile list
    • 3. Learning from similar projects
    • 4. Focus on schedule and budget risk
    • For each task will need to develop time & cost estimates
    • How accurate do you believe estimates are?
    • How definite are estimates?
      • What parts are uncertain?
      • How can you shore those up?
risk management process
Risk Management Process

Risk Identification

  • Analyze the source
  • of risks

New

Risks

Known

Risks

Response

Development

  • Define the risk &
  • potential neg impact
  • Assign probability
  • Develop risk
  • reduction strategy

Control

Risk

Management

Plan

  • Implement the risk
  • strategy
  • Continue to monitor
  • for new risks
step ii risk response strategy
Step II - Risk Response Strategy
  • Not all risks are equally important and/or likely likely.
  • Need a plan that will
    • Identify the severity of risk –For each risk identify the:
    • Condition - description of the risk situation
          • Consequence - what are possible negative outcomes
    • 2. Identify the probability of the risk
    • 3. Develop strategy to deal with the risk
1 2 risk severity probability
1-2. Risk Severity - Probability
  • Condition - soil conditions require a complex boring machine with which we have little experience
  • Consequence - Improper use of machine may damage machine and/or riverbed.
    • Machine damage could be from 50-250K
    • Riverbed damage may prevent future contracts
  • Probabilities-
    • 75K of equipment damage - 20%
    • 200K of equipment damage - 20%
    • No damage at all 60%
    • Probable cost of damage - 55K
      • ( 200*.2 + 75*.2 = 55k )
3 defining the risk strategy
3. Defining the Risk Strategy
  • Strategy - Hire operator from equipment provider for estimated cost of 10K. (any damage by their operator paid by them).
    • Adds 10K to cost of project but reduces possible additional cost and schedule risk
another example
Another Example
  • Condition - required that all diagrams be developed with a tool that tech writers don’t know.
  • Consequence - Document generation and management tasks will take longer. Possibly causing rework.
  • Probabilities-
    • Work may be 25% slower. (Since everyone new to tool would work at junior level VS senior.)
    • Probable labor cost: 1.25*20=25
    • Probable schedule: 1.25*4 mon = 5 mon
another example 2
Another Example - 2
  • Strategy - Send all technical writers to 2 day course on new tool.
    • Costs: $2,200 and will reduce training factor to 1.1.
    • Make 1 tech writer a tool expert to exercise tool and create templates for others to reduce productivity factor to 1.0.
possible format example
Possible Format Example
  • Might organize material in a table
  • # Risk Risk Risk Risk
  • Cond Consequence Prob Strategies
    • (H,M,L)
  • 1. Loss of Late Project H Increase project
  • Staff documentation.
  • Require formal
  • reviews.
  • However estimation of risk costs can be very useful
risk management process21
Risk Management Process

Risk Identification

  • Analyze the source
  • of risks

New

Risks

Known

Risks

Response

Development

  • Define the risk &
  • potential neg impact
  • Assign probability
  • Develop risk
  • reduction strategy

Control

Risk

Management

Plan

  • Implement the risk
  • strategy
  • Continue to monitor
  • for new risks
step three control
Step Three: Control
  • Risk Control - not a 1-shot step
  • Monitor risks like monitor project execution
    • periodic risk review with Project Board
    • evaluate status of identified risks
    • identify new risks
  • Create a risk control log
    • Someone responsible for each risk
    • Rank risks by severity
    • Update periodically
slide24

Summary

  • Risk - The means by which uncertainty is systematically identified and managed to increase likelihood of success
  • 3 basic steps
      • I. Identify
        • Work with others
      • II. Develop Response
        • Quantify when possible
      • III. Control
        • Control log