1. S.Cholette, based on McGraw-Hill/Irwin Managing Risk

2. 7-2

3. 7-3 Risk Management Process  Risk Management Process

4. 7-4 The Risk Event Graph FIGURE 7.1

5. 7-5 Risk Management’s Benefits  Risk Management’s Benefits

6. 7-6 The Risk Managemen t Process: a 4 Step Program FIGURE 7.2

7. 7-7 Managing Risk  Managing Risk

8. 7-8 Partial Risk Profile for Product Development Project FIGURE 7.3

9. 7-9 Risk Breakdown Structure

10. 7-10 Risk Assessment Form: A Typical Example FIGURE 7.4 Detection Difficulty is a misnomer- better to consider it as “ability to mitigate/avoid upon discovering the problem” before having to resort to a full blown contingency plan Although the text shows how to calculate “risk value” by multiplying these numbers together, be cautious about relying on such an arbitrary measure

11. 7-11 Impact Scales- One Example

12. 7-12 Risk Severity Matrix- an example FIGURE 7.5

13. 7-13 Managing Risk  Managing Risk

14. 7-14 Contingency Planning  Contingency Planning

15. 7-15 Sample Risk Response Matrix FIGURE 7.7 Note: although unclear from this text example the Detailed Response Strategy and Contingency Plans are not the same thing. We might Reduce the chance of User Backlash by designing a more user-friendly interface. But, if we fail to do that, our Contingency Plan is to have a large support staff help frustrated users navigate

16. 7-16 Risk and Contingency Planning  Risk and Contingency Planning

17. 7-17 Contingency Funding and Time Buffers  Contingency Funding and Time Buffers

18. 7-18 Contingency Fund Estimate-Sample TABLE 7.1 Figures in 000’s $ Note: the Management Reserve is too small for my comfort

19. 7-19 Managing Risk (cont’d)‏  Managing Risk (cont’d)‏

20. 7-20 Risk Goes Hand in Hand with…

21. 7-21 Change Management Control  Change Management Control “Your prototype looks great, but can we use a web interface instead?” Err, I guess so, but…

22. 7-22 Change Management Control  Change Management Control

23. 7-23 The Change Control Process FIGURE 7.8

24. 7-24 Benefits of a Change Control System  Benefits of a Change Control System

25. 7-25  What is the difference between avoiding a risk and accepting a risk ?  What is the difference between mitigating a risk and contingency planning ?  What are th likely outcomes  if a change control process is not used ?  If a change control log is not used ?

26. 7-26 Change Request Form: Sample FIGURE 7.9

27. 7-27 Change Request Log: Sample FIGURE 7.10

28. 7-28 One way of incorporating Risk Planning: PERT—Program Evaluation Review Technique  One way of incorporating Risk Planning: PERT—Program Evaluation Review Technique

29. 7-29 Activity and Project Frequency Distributions FIGURE A7.1 Why might activity distributions look so skewed? Even with such skewed activity distributions, why is the overall Project distribution symmetric?

30. 7-30 Activity Time Calculations The weighted average activity time is computed by the following formula: (7.1)‏

31. 7-31 Activity Time Calculations (cont’d)‏ The variability in the activity time estimates is approximated by the following equations: The standard deviation for the activity: The standard deviation for the project: Note the standard deviation of the activity is squared in this equation; this is also called variance. This sum includes only activities on the critical path(s) or path being reviewed. (7.2)‏ (7.3)‏ tt

32. 7-32 Example  Given the following activities, expected durations and predecessor information, construct the AoN project network and use the CPM. a5,a45a6 a36a5 a216a4 a120a3 a113a2 ---30a1 predecessorsdurationActivity

33. 7-33 Activity Times and Variances TABLE A7.1

34. 7-34 Probability of Completing the Project The equation below is used to compute the “Z” value found in statistical tables (Z = number of standard deviations from the mean), which, in turn, tells the probability of completing the project in the time specified. (7.4)‏

35. 7-35 Text Example  Consider the following 6-activity project  Draw the AoN and use the CPM to compute the CP, slack  Use PERT to analyze the chance the delays on CP activities does not push the project duration beyond 67 days.  Anything else we should consider?

36. 7-36 Example: Network, CP, Slack FIGURE A7.2 (cont’d)‏ a1 a3a5 a6 a4a2

37. 7-37 PERT, Considering the CP

38. 7-38 Example: Possible Project Duration FIGURE A7.3

39. 7-39 Some Sample Z Values TABLE A7.3 A z-table listing such values will be provided to you on exams

40. 7-40 What Might We Have Forgotten?  In the CPM, it is clear what the critical path is!  With PERT we can now consider network sensitivity in more detail.  Extension of the textbook example- what additional analysis would you do?

41. 7-41 PERT: Caveats Abound  For checking project duration considering multiple paths, it’s not as simple as adding up the probabilities.  Different paths usually have some activities in common.  Once again, the whole assumption of independence of activity durations must be considered.  For complex or high-value projects, Monte Carlo simulation is often a more appropriate approach.  Beyond scope of this class, take DS851 or DS852 for more!

42. 7-42 Group Exercise  Sample question from a DS856 final exam: Use the following table and a desired completion of 60 days  What is the likelihood that the CP exceeds 60 days?, How do PERT calculations differ from that of CPM, using the “most likely” time?  What should the PM worry about tracking besides CP activities?  What doesn’t the PM need to worry about?