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OM480

OM480. Managing Project Risk (With Material from the Text Authors). Overview. Project Control Risk Defined Risk and Control Project Control Approaches Project Control Process Project Control Techniques Preventative Control Cost Control Control as Change Management.

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OM480

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  1. OM480 Managing Project Risk (With Material from the Text Authors)

  2. Overview • Project Control • Risk Defined • Risk and Control • Project Control Approaches • Project Control Process • Project Control Techniques • Preventative Control • Cost Control • Control as Change Management

  3. Project “Potential” Control • Project plan implementation and monitoring • Anticipate risk • Discover problems • Resolve problems • Bosses hate problems but…. • Despise Surprises! • Murphy’s Law • O’Toole’s Corollary

  4. Risk Management Process • ID Sources • Analyze and Assess • Respond • Contingency Planning • Establish Contingency Reserves

  5. “Sourcing” Risk • Undesirable Event • All Potential Outcome(s) • Magnitude and Severity • Chances/Probability of Event • Where in Project Timeline Occurs • Interaction w/ Other Project Events

  6. Risk Categories • Schedule • Use of Slack • Imposed Duration • Compression • Cost • Time/Cost Dependency • Cash Flow Decisions • Price Protection • Technological

  7. Risk Cost High Cost to fixrisk event Chances of risksoccurring Low Project life cycle Risk Event Graph

  8. Detecting Problems • Visibility • Approachability • Internal/External Communication • Multiple Communication Channels • Reward “Gatekeepers” • Avoid Assumptions • Monitor Schedule Continuously

  9. Contingency Planning • Nonquantitative Scenario Analysis • Ratio/Range – Prior data extrapolated • Hybrid – “rules of thumb” databases • Probability – PERT-like • Semi-quantitative • More than PERT • Confidence Intervals • Regression Analysis • Modeling

  10. Best-case schedule 10% 470 days Baseline schedule 50% 500 days Worst-case schedule 90% 590 days Actual tracking schedule Forecast completion schedule Actual schedule 300 days 550 days Risk Schedules

  11. Detectiondifficulty-LMH Severity-LMH Chance-LMH When Risk event Risk Assessment Matrix

  12. Risk Responses • Reduce/Retain • “Robust” Potential Failure Points • Assume and “Do Nothing” • Transfer • Passing Risk • Subcontracting • Fixed-prices • Sharing Risk • Partnering

  13. Accept, reduce,share, transfer Contingencyplan Risk event Trigger Responses to Risk Matrix

  14. Problem Solving • Supportive communication • Multi-level communication • Explore multiple implications • Symptoms mask “root cause” • Brainstorm alternatives • Evaluate possibilities • Anticipate “Law of Unintended Consequences” • Respond v. React

  15. 3/29/ Y2K-Machine Dept. Project _________________Originator ________________ Date _________________ Ext. 4942 CEG Phone ________________ Impact Areas Baseline Impact 1.3M Deliverable # __________ Scope Contingency 1.313M Work Package # __________ X Staff X Budget 1.31M Cost Account # __________ Equipment Schedule X X IS-M Dept. Organization Unit __________ Description of change Install Y2K compatible chip in six computer controlled milling machines Justification (include impact if not implemented) Reprogramming cost is higher than estimated, and risk of old chips failing is higherthan estimated. (Eliminating reprogramming cost is -$10,000. Cost of Y2K chipsinstalled is +$15,000) Disposition Priority Funding Source X Approve Mgmt. Reserve $ _____________ Emergency Approve as amended 5,000. X Urgent Budget. Reserve $ _____________ Disapprove Routine Other $ _____________ Deferred S.P 4/7/ Authorized _________________ Scheduled start _________________ 4/3/ 5/10/ Date ______________________ Scheduled finish ________________ Change Request

  16. Project Control Approaches • Dogmatic • Schedule – “Etched in Concrete” • Trade time for cost overruns • Laid-Back • Schedule – “A Ripple in a Pond” • Trade budget for schedule overrun • Pragmatic • Schedule – “Etched in Jello” • Focus on EPF • Balance time and cost implications

  17. Project Manager Accountability • Accountability to Organization First! • Friendliness over Friendship • Camaraderie • Administer Consequences • Reward superior performance • “Pull the trigger” – Don’t Hesitate • Balanced Proaction • Continuous vigilance • Avoid Micro-management

  18. Project Control Process • Communication • Concise and Relevant • Participation • Consensus over Compromise • Analysis • Assess Schedule & Budget Statuses • Action • Assertive Leadership • Commitment • Goals, Schedule, and PM Concepts

  19. Summary • Project Control • Risk Defined • Risk and Control • Project Control Approaches • Project Control Process • Project Control Techniques • Preventative Control • Cost Control • Control as Change Management

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