1. PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.0 Project Management Institute - Long Island Chapter PMP Study Group Risk Management

2. PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.02 Project Risk Management Definition A subset of project management that includes: “The processes of conducting risk management planning, identification, analysis, response planning and monitoring and control on a project.” PMBoK® Guide, 4th Edition, p. 273

3. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.03 Additional Definitions RISK is “an occurrence that may affect the project for good or bad.” UNCERTAINTY is “the absence of any information related to a desired outcome.” RISK TOLERANCES are acceptable levels of risk or “appetite for risk” CONTINGENCY RESERVES are Time or Money added to the plan to handle “known unknowns”

4. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.04 Project Risk Management Objectives Increase Increase the probability & impact of positive events Decrease Decrease the probability & impact of negative events Simple & clear-cut goals!

5. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.05 Why is Risk Management Necessary? Projects are: New, Unique Under Time Pressures Uncertain Under Budget Constraints

6. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.06 Six Step Approach to Handling Project Risk 1.Make a plan that address’ steps 2-6 in detail 2.Identify – Create a comprehensive list of risks 3.Screen or Qualify risks for further analysis or watching, use low cost/effort tools Quantitative 4.Analyze only the screened risks and the overall project, use heavier duty numerical (a.k.a. Quantitative) tools 5.Plan individual responses (and contingencies) as most needed based on step number 4. 6.Monitor the risks that have response plans and execute the responses. Use workarounds as needed. Watch for new (unplanned) risks. To hold it all together, form a risk register in step 1, update in 2 thru 6 Repeat as needed especially at phase gates or decision points.

7. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.07 Six Step Approach - Concepts Completely analyzing and planning responses to all risks is expensive & time consuming – not a practical approach Steps 3, 4, 5 progressively reduce # of risk items that will have more costly resources devoted to analyzing them The risk register (formatted in step 1) is updated with new information at all other steps These steps should be repeated as appropriate, especially at project phase gates or decisions points Each step is a process

8. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.08 Project Risk Management Processes 11.1 Plan Risk Management 11.2 Identify Risks 11.3 Perform Qualitative Risk Analysis 11.4 Perform Quantitative Risk Analysis 11.5 Plan Risk Responses 11.6 Monitor and Control Risks

9. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.09 Risk Management Processes Across Project Management Processes Project Mgmt Processes InitiationPlanningExecuting Monitoring and Controlling Closing Risk Mgmt Processes 11.1 Plan Risk Management 11.2 Identify Risks 11.3 Perform Qualitative Risk Analysis 11.4 Perform Quantitative Risk Analysis 11.5 Plan Risk Responses 11.6 Monitor and Control Risks

10. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.010 11.1 Plan Risk Management InputsTools & TechniquesOutputs Project scope statement Cost management plan Schedule management plan Communications management plan Enterprise environmental factors Organizational process assets Planning meetings and analysis Risk management plan Definition: “The process of defining how to conduct risk management activities for a project.” PMBoK® Guide, 4th Edition, p. 276

11. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.011 Inputs 11.1.1 Plan Risk Management Inputs Project Scope Statement Specifically defines what is included in the project. Cost Management Plan Describes how risk budgets/contingencies/reserves will be supported. Schedule Management Plan Supports selecting a scheduling methodology, e.g. critical path.

12. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.012 Inputs 11.1.1 Plan Risk Management Inputs Communications Management Plan Defines how information will be shared, who is responsible and what the frequency of info sharing will be Enterprise Environmental Factors An organization’s tolerance or attitude toward risk Organizational Process Assets May include predefined approaches or templates, roles and responsibilities, authority levels, lessons learned databases

13. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.013 Tools & Techniques 11.1.2 Plan Risk Management Tools & Techniques Planning Meetings and Analysis Should include: Project Manager Stakeholders Selected team members Other Risk Subject Matter Experts (SMEs) Anyone responsible for Risk Basic Risk Management Plan gets formulated here. Tools such as Risk Matrix, Categories, etc. get defined and placed into the Risk Management Plan.

14. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.014 Outputs 11.1.3 Plan Risk Management Outputs Risk Management PlanMethodology Approaches, tools, data sources used to manage risk. Roles and Responsibilities Define leads, team members and supporting roles; clarify responsibilities for each role.Budgeting Assign resources and estimate costs for Risk Management to include in project cost baseline.

15. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.015 Risk Management Plan (continued)Timing When, how often to perform risk management activities. Risk categories Structure to ensure the comprehensive identification of risks through a systematic process. Can be further decomposed into a Risk Breakdown Structure (RBS). Can be based on previous projects. Outputs 11.1.3 Plan Risk Management Outputs

16. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.016 Outputs 11.1.3 Plan Risk Management Outputs Example Set of Risk Categories Technical/Quality/Performance Unproven or complex technology Expected changes (standards, technology) Project Management Poor allocation of time and resources Inadequate project plan quality Organizational Inconsistent objectives (scope, cost, time) Lack of prioritization Inadequacy/Interruption of funding Resource conflicts External Shifting legal, regulatory, environmental requirements Labor issues Force Majeure (natural disasters, war, LOTTO)

17. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.017 Outputs 11.1.3 Plan Risk Management Outputs Risk Management Plan (continued) Risk probability and impact scales defined Risk probability and impact scales defined These form a matrix Probability and impact matrix Tabular plot of total qualitative risk scores based on probability (vertical) and impact (horizontal) Revised stakeholders’ tolerances Because tolerances may be project specific Reporting formats Define content and format of Risk register and other reports. How will the outcomes of risk management be documented, analyzed and communicated? Tracking How risk activities are recorded and audited Should benefit current project, future needs and record lessons learned

18. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.018 Terms & Facts 11.1 Plan Risk Management Terms & Facts Fact: The Risk Management Plan does not address responses to individual risks – that is done in the Risk Response Plan. Fact: Organizational assets are improved by lessons learned updates. Fact:Good Risk Management depends on good communications.

19. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.019 11.2 Identify Risks InputsTools & TechniquesOutputs Risk management Plan Activity cost estimates Activity duration estimates Scope baseline Stakeholder register Cost management plan Schedule management plan Quality management plan Project documents Enterprise environmental factors Organizational process assets Documentation reviews Information gathering techniques Checklist analysis Assumptions analysis Diagramming techniques SWOT analysis Expert judgment Risk register Definition: “Determine which risks might affect the project and document their characteristics.” PMBoK® Guide, 4th Edition, p. 282

20. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.020 Risk Types 11.2 Identify Risks Risk Types Business – Normal risk of doing business. Includes threats and opportunities. Threat – Risk that presents a possible loss. Opportunity – Risk that presents a possible gain. Pure (Insurable) Risk – Risk that presents a possible loss & no possible gain! Known Risk – Risks that were identified. Can be handled in a variety of ways. Unknown Risk – Risks that were not identified These can not be handled proactively It is prudent to allocate general contingency for these risks

21. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.021 Inputs 11.2.1 Identify Risks Inputs Risk Management Plan Include roles & responsibility assignments, risk budget tasks and categories of risk. Activity Cost Estimates Provides likely cost to complete tasks; often expressed as a range. Activity Duration Estimates Provides likely time to complete tasks; often expressed as a range. Scope Baseline Uncertainty in project assumptions indicate potential areas of risk.

22. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.022 Inputs 11.2.1 Identify Risks Inputs Stakeholder Register Provides helpful information to identify key players, e.g. customer. Cost Management Plan The cost management approach may generate or alleviate risk. Schedule Management Plan The schedule management approach may generate or alleviate risk. Quality Management Plan The quality management approach may generate or alleviate risk.

23. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.023 Inputs 11.2.1 Identify Risks Inputs Project Documents Include earned value reports, network diagrams and others; helps to identify risks Enterprise Environmental Factors Can influence the risk identification process and may include: benchmarking, risk attitudes, academic studies Organizational Process Assets Can influence the risk identification process and may include: lessons learned, risk templates, project files of actual data

24. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.024 Tools & Techniques 11.2.2 Identify Risks Tools & Techniques Documentation Reviews A review of project documentation, e.g. plans, contracts, to identify risks Information Gathering Techniques May include: Brainstorming, Delphi Technique, Interviewing, Root Cause Analysis Checklist Analysis Create checklists to assist with risk identification, based on past experiences and other project work Assumptions Analysis Uncertainty in project assumptions indicate potential areas of risk

25. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.025 Tools & Techniques 11.2.2 Identify Risks Tools & Techniques Diagramming Techniques Use risk diagramming techniques including: Cause & effect diagrams Influence diagrams Flow charts SWOT Analysis Identify risks using strengths, weaknesses, opportunities, threats (SWOT) Expert Judgment Utilize expert judgment to identify risks

26. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.026 Outputs 11.2.3 Identify Risks Outputs Risk Register Identified Risks Potential Responses Root Causes Updated Risk Categories The Risk Register is a LIVING project artifact!

27. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.027 Outputs 11.2.3 Identify Risks Outputs Initiate Risk Register Identify RisksPerform Risk AnalysisPlan Risk ResponsesMonitor & Control Risks #CategoryRisk Potential Result Defined By DateImpactProbScore Qualtve Impact Risk Strat NotesOwnerStatusDateNotes 1Tech IT Resource Availability Unable to meet project schedule Brian 15- Jun 2Contracts Project contract negotiate Inability to complete project goals Wendy 22- Jun 3Cost Scope Creep Project Budget Overrun Jeff 30- Jun Note: Register Updates in Amber

28. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.028 11.3 Perform Qualitative Risk Analysis InputsTools & TechniquesOutputs Risk Register Risk management Plan Project scope statement Organizational process assets Risk probability & impact assessment Probability and impact matrix Risk data quality assessment Risk categorization Risk urgency assessment Expert judgment Risk register updates Definition: “The process of prioritizing risks for further analysis or action by assessing and combining their probability of occurrence and impact.” PMBoK® Guide, 4th Edition, p. 289

29. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.029 Definitions 11.3 Perform Qualitative Risk Analysis Definitions EVENT – Something that happens, an occurrence, an outcome. PROBABILITY – How likely the event is to occur? IMPACT – The event’s impact on objectives should it occur. “POP QUIZ” Project Risk is greatest in the _____ phase of the project & why? Amount at stake is greater in the _____ phase of the project & why?

30. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.030 Commentary 11.3 Perform Qualitative Risk Analysis Commentary QUALITATIVE approach expresses probability and/or impact using an ordinal rating system to denote order. Adjectives: high, medium, low yellow Colors: red, yellow, green Ranking 1-10 Qualitative Approach: The Good, The Bad & The Ugly Good – it’s fast and easy to administer & understand Bad – it’s subjective, “invites” bias Ugly – it requires definitions, rules, standards, and process

31. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.031 Example of Ordinal Scale 11.3 Perform Qualitative Risk Analysis Example of Ordinal Scale Rank Probability Impact High Risk event is very likely to occur, high probability If risk occurs, a significant impact to cost, schedule, quality, or customer satisfaction will occur Medium Risk event is likely to occur, medium probability If risk event occurs, a moderate impact to cost, schedule, quality or customer satisfaction will occur Low Risk event is unlikely to occur, low probability If risk event occurs, a small impact to cost, schedule, quality, or customer satisfaction will occur

32. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.032 Inputs 11.3.1 Perform Qualitative Risk Analysis Inputs Risk Register An output from Identify Risks. Risk Management Plan An output from Plan Risk Management; an input to all other Risk processes. New elements that apply to this process: Risk categories Probability and impact matrix Revised stakeholder risk tolerances

33. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.033 Inputs 11.3.1 Perform Qualitative Risk Analysis Inputs Project Scope Statement An input for Plan Risk Management. Simple or complex project (defined in scope statement) – which would have more risks? Organizational Process Assets An input for prior Risk processes. Organizational Process Assets can provide: Data from similar projects previously completed Risk databases from industry or alternate sources

34. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.034 Tools & Techniques 11.3.2 Perform Qualitative Risk Analysis Tools & Techniques Risk Probability and Impact Assessment The likelihood that each specific risk will occur. The potential positive and negative impacts of the risk are also projected. Risks not likely to occur & with minimal impact (if they do) may be maintained on a watch-list for future monitoring. Probability and Impact Matrix Provides a visual display of probability and impact products, grouped by order of priority: Low, Medium or High. Risk Data Quality Assessment An analysis of the quality of the data used to assess the risk, due to the potential for being subjective and open to bias.

35. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.035 Tools & Techniques 11.3.2 Perform Qualitative Risk Analysis Tools & Techniques Risk Categorization Risks can be categorized to illustrate most vulnerable areas of the project; categories may include risk source (RBS), area of project affected (WBS). Risk Urgency Assessment A means to determine which risks need to be addressed first, not just due to high priority but possibly also due to high impact implications. Expert Judgment Leveraging an expert’s opinion to assess the probability and impact of each risk.

36. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.036 Outputs 11.3.3 Perform Qualitative Risk Analysis Outputs Risk Register Updates Relative ranking or prioritization of risks (NEW) Risks grouped by category Causes of risks requiring special attention (NEW) Risks requiring response in the near-term (NEW) Risks requiring further analysis and response (NEW) Quantitative risk analysis & response planning Watch-lists of low priority risks (NEW) Trends in qualitative analysis results (NEW)

37. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.037 Outputs 11.3.3 Perform Qualitative Analysis Outputs Update Risk Register Identify RisksPerform Risk AnalysisPlan Risk ResponsesMonitor & Control Risks #CategoryRisk Potential Result Defined By DateImpactProbScore Qualtve Impact Risk Strat NotesOwnerStatusDateNotes 1Tech IT Resource Availability Unable to meet project schedule Brian 15- Jun Mod impact to sched 2Contracts Project contract negotiate Inability to complete project goals Wendy 22- Jun Mod impact to goals 3Cost Scope Creep Project Budget Overrun Jeff 30- Jun Signif impact to cost Note: Register Updates in Amber

38. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.038 11.4 Perform Quantitative Risk Analysis InputsTools & TechniquesOutputs Risk Register Risk management plan Cost management plan Schedule management plan Organizational process assets Data gathering and representation techniques Quantitative risk analysis and modeling techniques Expert judgment Risk register updates Definition: “The process of numerically analyzing the effect of identified risks on overall project objectives.” PMBoK® Guide, 4th Edition, p. 294

39. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.039 11.4 Perform Quantitative Risk Analysis QUANTITATIVE risk analysis is a numerical analysis of the probability and/or impact of the highest risks. e.g.:  80% probability of occurrence  $10,000 impact or three week delay Helps to determine the most critical risks Less subjective than qualitative More time consuming; requires estimation Substantially more valuable in developing risk response strategies and reserves

40. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.040 Inputs 11.4.1 Perform Quantitative Risk Analysis Inputs Risk Register Was an input and output to Perform Qualitative Risk Analysis Risk Management Plan An input to multiple risk processes Cost Management Plan An input to multiple risk processes Schedule Management Plan An input to Plan Risk Management and Identify Risks Organizational Process Assets An input to the three prior risk processes: Plan Risk Management Identify Risks Perform Qualitative Analysis

41. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.041 Tools & Techniques 11.4.2 Perform Quantitative Risk Analysis Tools & Techniques Data Gathering and Representation Techniques Interviewing Utilize experience & historical data to quantify probability and impact of project risks. Probability Distributions Often used in simulations to represent uncertainty in values, e.g. uniform distribution (“bell curve”) is commonly seen.

42. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.0 42 The probability of Task E starting on time decreases as the number of parallel predecessors increases. Task A Start Task B Task C Task D Task E Finish Tools & Techniques 11.4.2 Perform Quantitative Risk Analysis Tools & Techniques Quantitative Risk Analysis & Modeling Techniques Sensitivity Analysis – Shows which risks have the most impact.

43. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.043 Quantitative Risk Analysis & Modeling Techniques (continued) Expected Monetary Value (EMV) Analysis Statistical concept that calculates the average outcome EMV of opportunities/threats is either positive or negative EMV (project) = Outcome 1 x Probability 1 + Outcome n x Probability n Decision Tree Common use is in a Decision Tree analysis Tools & Techniques 11.4.2 Perform Quantitative Risk Analysis Tools & Techniques

44. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.0 44 RiskProbability of X Impact =Expected Value Event Occurrence 110% $500,000 overrun $50,000 10 week delay 1 week delay 250% $100,000 overrun $50,000 16 week delay 8 week delay 3 75% $10,000 overrun $7,500 2 week delay 1.5 week delay EMV = Probability x Impact Tools & Techniques 11.4.2 Perform Quantitative Risk Analysis Tools & Techniques

45. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.045 Tools & Techniques 11.4.2 Perform Quantitative Risk Analysis Tools & Techniques Quantitative Risk Analysis & Modeling Techniques (continued) Decision Tree Analysis A diagram that graphically describes the implications of choosing one or more alternatives Incorporates probabilities of risks as well as costs or rewards of each logical path Solving a “decision tree” determines which decision has the greatest yield or expected value

46. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.046 EXPECTED MONETARY Probability (P) multiplied by Outcome = VALUE Uncertain Aggressive Outcome P =.20 +100,000 = + $20,000 Schedule (EMV = $4,000) Decision P =.80 x - $20,000 = - $16,000 Uncertain P =.30 x - $20,000 = - $6,000 Outcome Conservative Schedule (EMV = $1,000) P =.70 x + $10,000 = + $7,000 X x Decision Tree Example: Decision Tree

47. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.047 P(A or B) = P(A) + P(B) P(A and B) = P(A) x P(B) Tools & Techniques 11.4.2 Perform Quantitative Risk Analysis Tools & Techniques Rules for Dealing with Probabilities - For mutually exclusive, independent events. Addition Rule: The probability of one outcome or another outcome occurring is equal to the sum of the probabilities of the outcomes occurring individually. Multiplication Rule: The probability of one outcome and another outcome occurring is equal to the product of the probabilities of the outcomes occurring individually.

48. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.048 Tools & Techniques 11.4.2 Perform Quantitative Risk Analysis Tools & Techniques Quantitative Risk Analysis & Modeling Techniques (continued) Modeling and Simulation Often use Monte Carlo technique Expert Judgment A technique used in the two prior risk processes

49. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.049 Outputs 11.4.3 Perform Quantitative Risk Analysis Outputs Risk Register Updates Probabilistic analysis of the project Probability of achieving cost and time objectives Prioritized list of quantified risks Trends in quantitative risk analysis results

50. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.050 Outputs 11.4.3 Perform Quantitative Analysis Outputs Update Risk Register Identify Risks Perform Risk AnalysisPlan Risk ResponsesMonitor & Control Risks #CategoryRisk Potential Result Defined By DateImpactProbScore Qualtve Impact Risk Strat NotesOwnerStatusDateNotes 1Tech IT Resource Availability Unable to meet project schedule Brian 15- Jun 0.4 0.60.24 Mod impact to sched 2Contracts Project contract negotiate Inability to complete project goals Wendy 22- Jun 0.3 0.90.27 Mod impact to goals 3Cost Scope Creep Project Budget Overrun Jeff 30- Jun 0.8 0.70.56 Signif impact to cost Note: Register Updates in Amber

51. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.051 11.5 Plan Risk Responses InputsTools & TechniquesOutputs Risk Register Risk management plan Strategies for negative risks or threats Strategies for positive risks or opportunities Contingent response strategies Expert judgment Risk register updates Risk-related contract decisions Project management plan updates Project document updates Definition: “The process of developing options and actions to reduce threats and enhance opportunities to project objectives.” PMBoK® Guide, 4th Edition, p. 301

52. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.052 Inputs 11.5.1 Plan Risk Responses Inputs Risk Register Was an input and output to Perform Qualitative Risk Analysis. Risk Register now contains a list of risks and risk analysis information. Risk Management Plan An input to multiple risk processes. Important components include roles and responsibilities, definitions, timing for reviews, and risk thresholds.

53. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.053 Tools & Techniques 11.5.2 Plan Risk Responses Tools & Techniques Strategies for Negative Risks (Threats) Avoid Change the plan to eliminate the threat. Examples: Extend schedule, change strategy, reduce scope Transfer Shift impact to a third party (note: does not eliminate threat). Examples: Buy insurance, issue a contract (Cost Plus)Mitigate Lessen impact or probability of occurrence. Examples: Utilize redundancy for critical systems, NASA Accept Do nothing and address when/if it occurs. Example: Active acceptance – use contingency reserve

54. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.054 Tools & Techniques 11.5.2 Plan Risk Responses Tools & Techniques Secondary Risks Risks that arise as a direct result of implementing a risk response. Example: Request new project resources to replace poor performers – what can happen? Residual Risks Risks that remain after risk responses have been implemented. Example: You execute a risk response strategy for a project during hurricane season but a hurricane may still occur.

55. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.055 Avoidance: Transference: Mitigation: Acceptance: Situation: Company’s data center is in a hurricane zone. Risk: Loss of data center after major storm. Options: What are they? 11.5 Plan Risk Responses

56. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.056 Avoidance Avoidance: Move data center Secondary Risk: longer response times Transference Transference: Insurance is only monetary it wont keep the data center up Outsource the data center & hold the contractor responsible Residual Risk: Outsourcer’s disaster recovery plan does not work Mitigation Mitigation: Create disaster recovery plans (e.g.: spare hardware for the most critical elements of the data center, or backup data center located elsewhere) Acceptance Acceptance: Passive: Do nothing now. Develop a workaround on the fly if it happens. Active: Do nothing now but have a contingency plan and the funding to implement it Situation: Company’s data center is in a hurricane zone. Risk: Loss of data center after major storm. Options: 11.5 Plan Risk Responses

57. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.057 Tools & Techniques 11.5.2 Plan Risk Responses Tools & Techniques Strategies for Positive Risks (Opportunities) Exploit Ensure an opportunity is realized, eliminate uncertainty. Example: Assign “A Team” to project Share Allocate partial opportunity ownership to get “an edge”. Examples: Risk sharing partnership, joint ventureEnhance Increase the probability or impacts of an opportunity. Example: Add resources to finish a task early Accept Take advantage of an opportunity if it occurs, don’t pursue.

58. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.058 Exploit : Share : Enhance : Accept : Situation: Define a situation Risk: Define Positive Risks (Opportunities) Options: Think about it - what are they? Homework / Self Study 11.5 Plan Risk Responses Homework / Self Study

59. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.059 Tools & Techniques 11.5.2 Plan Risk Responses Tools & Techniques Contingent Response Strategies Special Responses to be employed if triggered by events Sufficient warning is required to be effective. Example: Trigger - Missing intermediate milestone Expert Judgment Input from any group or person relating to any actions to be taken on a specific identified risk. Knowledge, skill, experience or training in risk responses.

60. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.060 Outputs 11.5.2 Plan Risk Responses Outputs Risk Register Updates Rick Response Strategies for prioritized risks Triggers, symptoms and warning signs Budget and schedule activities (related) Contingency plans and associated triggers Secondary and Residual Risks, if applicable Risk Related Contract Decisions To transfer risk, as applicable. Provides input to the Plan Procurements Process.

61. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.061 Outputs 11.5.2 Plan Risk Responses Outputs Project Management Plan Updates Schedule Management Plan Cost Management Plan Quality Management Plan Procurement Management Plan Human Resource Management Plan Work Breakdown Structure (WBS) Schedule Baseline Cost Performance Baseline Project Document Updates Assumptions Log Updates May be part of Scope Statement or separate. Technical Documentation Updates Update any new technical approaches.

62. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.062 Outputs 11.5.3 Plan Risk Responses Outputs Update Risk Register Identify Risks Perform Risk AnalysisPlan Risk ResponsesMonitor & Control Risks #CategoryRisk Potential Result Defined By DateImpactProbScore Qualtve Impact Risk Strat NotesOwnerStatusDateNotes 1Tech IT Resource Availability Unable to meet project schedule Brian 15- Jun 0.4 0.60.24 Mod impact to sched Avoid, extend sched With Apprvd Sponsor Chg Rqst PM Jeff 2Contracts Project contract negotiate Inability to complete project goals Wendy 22- Jun 0.3 0.90.27 Mod impact to goals Trans fer risk with contrct Fixed Price Cont Limits Addtl Risk PM Jeff 3Cost Scope Creep Project Budget Overrun Jeff 30- Jun 0.8 0.70.56 Signf impact to cost Accept use Cont Resrv With Apprvd Sponsor Chg Rqst PM Jeff Note: Register Updates in Amber

63. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.063 11.6 Monitor and Control Risks InputsTools & TechniquesOutputs Risk Register Risk management plan Work performance information Performance reports Risk assessment Risk audits Variance and trend analysis Technical performance measurement Reserve analysis Status meetings Risk register updates Organizational process assets updates Change requests Project management plan updates Project document updates Definition: “The process of implementing risk response plans, tracking identified risks, monitoring residual risks, identifying new risks and evaluating risk process effectiveness throughout the project.” PMBoK® Guide, 4th Edition, p. 308

64. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.064 Inputs 11.6.1 Monitor and Control Risks Inputs Risk Register Was an input and output to Plan Risk Responses. Project Management Plan Contains the Risk Management Plan, an output of Plan Risk. Management and an input to all other Risk processes. Work Performance Information Includes deliverable status, schedule progress & costs incurred. Performance Reports Project work performance information that includes: Variance analysis, Earned value data, Forecasting data

65. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.065 Tools & Techniques 11.6.2 Monitor and Control Risks Tools & Techniques Risk Reassessment A risk review to determine if risks are still valid, need to be updated, can be closed or are new and must be added. Risk Audits Executed as specified in the Risk Management Plan for the Purpose of evaluating the effectiveness of risk responses as applied to identified risks Variance and Trend Analysis A means to measure planned vs. actual results. Variances in expected results may indicate the impact of threats or opportunities.

66. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.066 Tools & Techniques 11.6.2 Monitor and Control Risks Tools & Techniques Technical Performance Measurement A gauge of a project’s technical success by evaluating entities like transaction times and storage capacity. Deviations of these may identify the technical risk encountered in the project. Reserve Analysis Measures the positive or negative impacts of project risks on budget or schedule contingency reserves, as well as the amount of remaining reserves to support remaining risks. Status Meetings Should provide a regular forum for Risk discussion with the team

67. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.067 Outputs 11.6.3 Monitor and Control Risks Outputs Risk Register Updates Typical updates during this process may include: Results of risk reassessments, audits and periodic reviews Identification of new risks or changes to any risk values: probability, impact, priority or ownership Determination that risks can be closed and the subsequent release of any associated reserves. Results or effectiveness of risk responses, which can be used for future risk planning and analysis.

68. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.068 Outputs 11.6.3 Monitor and Control Risks Outputs Organizational Process Asset Updates Leverage Risk data collected from the six processes to support future projects by recording values from: Risk management plan, probability and impact matrix, risk register, risk breakdown structure Lessons learned from project risk management activities

69. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.069 Outputs 11.6.3 Monitor and Control Risks Outputs Change Requests May be required to support contingency plans/workarounds for known/unknown risks, a.k.a. recommended corrective action. Recommended preventive actions are taken to reduce the probability of negative consequences of project risks. Project Management Plan Updates Should be updated if any change requests impacted the risk management processes. Project Document Updates

70. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.070 Outputs 11.6.3 Monitor and Control Risks Outputs Update Risk Register Identify RisksPerform Risk Analysis Plan Risk ResponsesMonitor & Control Risks #CategoryRisk Potential Result Defined By DateImpactProbScore Qualtve Impact Risk Strat NotesOwnerStatusDateNotes 1Tech IT Resource Availability Unable to meet project schedule Brian 15- Jun 0.4 0.60.24 Mod impact to sched Avoid, extend sched With Apprvd Sponsor Chg Rqst PM Jeff Projct on sched Risk Closed 31 - Oct Tech Tasks Cmplt 2Contracts Project contract negotiate Inability to complete project goals Wendy 22- Jun 0.3 0.90.27 Mod impact to goals Trans fer risk with contrct Fixed Price Cont Limits Addtl Risk PM Jeff Cont Cmplt Risk Closed 16 - Aug Cont Cmplt 3Cost Scope Creep Project Budget Overrun Jeff 30- Jun 0.8 0.70.56 Signf impact to cost Accept use Cont Resrv With Apprvd Sponsor Chg Rqst PM Jeff No Chg 25 - Nov Proj within revised budget Note: Register Updates in Amber

71. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.071 Risk Fact Review 11.6.3 Monitor and Control Risks Risk Fact Review Risk The most important item to cover at team meetings. Project Risk Response Audits Risk auditors examine and document the effectiveness of the risk response in avoiding, transferring, or mitigating risk occurrence as well as the effectiveness of the risk owner. Done throughout project life cycle. Earned Value Analysis Used for monitoring overall project performance against a baseline plan. Deviations from the project baseline may be risk triggers. Contingency Reserves Time and money for known unknowns. Added on top of the estimate. Made part of the cost baseline. Management Reserves Time and money for unknown unknowns. Added on top of the estimate. Made part of the project budget, not the baseline. Some organizations have policies on management reserves. Fallback Plans A plan of action if contingency plans are not effective. “Plan C” Workarounds Unplanned responses to emerging project risks that were previously accepted (passively) or unidentified. Must be documented and incorporated into the project plan and risk response plan.

72. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.072 When should risk management first take place? When is corrective action most costly? When is “scope” risk highest? When is “cost” risk highest? Are product defects a project risk? Who is responsible for risk? Who is accountable for risk? Risk Question Review 11.6.3 Monitor and Control Risks Risk Question Review

73. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.073 Sample Risk Documents

74. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.074 Cause & Effect Diagram

75. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.075 Risk Breakdown Structure (RBS) - Sample IT Project Business Competitors Suppliers Cash flow Technical Hardware Software Network Organizational Executive support User support Team support Project Management Estimates Communication Resources

76. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.076 Probability Impact Matrix - Sample

77. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.077 Expected Monetary Value (EMV) - Example

78. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.078 Risk Register Sample – US Army Website

79. Risk Management PMP Prep Course – Project Risk Management - PMBOK 4 th Edition – Version 1.079 Good Luck!!