Risk Management For Project Management

What is Risk? Risk (noun): possibility of loss or injury (Merriam-Webster Dictionary)

Risk in Project Management A risk is something that may happen and if it does, will have an impact on the project objectives. May→ possibility Impact→ loss Objectives→ time, cost, performance, quality, scope, client satisfaction.

Words in Risk Management Possibility → probability, likelihood Loss → impact Weakness → vulnerability Threat Control → countermeasure Residual Risk → the amount of risk that is left over when appropriate controls are properly applied to lessen or remove weakness

Risk Management Plan Risk Identification Risk Quantification Risk Response Risk Monitoring and Control

Risk Identification Or Risk Assessment Threats to the project Weaknesses of the project environment The possibility that threat will make use of weakness The impact of the exposure (threat to weakness) Available controls

Risk Identification and SWOT Factors affecting an organization (in this case, project) can usually be classified as: Internal factors – Strengths (S) – Weaknesses (W) External factors – Opportunities (O) – Threats (T)

Risk Identification Tools and Techniques Document Reviews Information Gathering – Brainstorming – Lessons Learned Database – Other methods, some common techniques include: questionnaires and surveys, interviewing, checklists, and examination of the Work Breakdown Structure for the project with appropriate specialty groups, asking “what-if’ questions

Risk Identification Output Identification # for each risk identified Date and phase of project development when risk was identified Name of risk (does the risk pose a threat or present an opportunity?) Detailed description of risk event Risk trigger Risk type Potential responses to identified risk Comments about risk identification

Risk Identification Sheet Example

Risk Quantification Set Impact Level of the Project – Impact Level to Cost – Impact Level to Schedule Set Probability Level of the Project (could be organization standard) Set Risk Matrix (should be organizational standard)

Impact Level Example Project Value 10M Project Schedule 3 Months LevelValueTime Very High> 5M> 1Mo High2M-5M2W-1Mo Medium0.5M-2M3d-2W Low0.1M-0.5M1d-3d Very Low<0.1M< 1d

Probability Level Example LevelProbability Very High>90% High70%-90% Medium30%-70% Low5%-10% Very Low<5%

Risk Matrix Example VH H M L VL LMHVH Probability Impact

Risk Response Avoid: Do Something to Remove Transfer: Make Someone Else Responsible Reduce: Take Action to Lessen the Impact or Possibility Accept

Risk Response: Rule Cost of Risk Response (Avoid, Transfer or Reduce) must be less than the cost of impact. ReduceAvoid AcceptTransfer Severity Probability

Risk Monitoring and Control Risk Audit Risk Reviews Risk Status Meetings and Reports