1. Managing Project Risk
Chapter 7
Copyright 2012 John Wiley & Sons, Inc.

2. Importance of Project Risk Management
The art and science of identifying, analyzing, & responding to risk throughout the life of a project and in the best interests of meeting project objectives

3. Importance of Project Risk Management
The art and science of identifying, analyzing, & responding to risk throughout the life of a project and in the best interests of meeting project objectives

4. PMBOK® Risk Management Processes
Plan Risk Management
Determining how to approach and plan the project risk management activities. An output of this process is the development of a risk management plan.
Identify Risks
Deciding which risks can impact the project. Risk identification generally includes many of the project stakeholders and requires an understanding of the project’s goal, as well as the project’s scope, schedule, budget, and quality objectives.
Perform Qualitative Risk Analysis
Focusing on a qualitative analysis concerning the impact and likelihood of the risks that were identified.
Perform Quantitative Risk Analysis
Using a quantitative approach for developing a probabilistic model for understanding and responding to the risks identified.
Plan Risk Responses
Developing procedures and techniques to reduce the threats of risks, while enhancing the likelihood of opportunities.
Monitor and Control Risks
Providing an early warning system to monitor identified risks and any new risks. This system ensures that risk responses have been implemented as planned and had the effect as intended.

5. Managing Project Risk
Common Mistakes: Effective/Successful Risk Management:

6. Benefits from Software Risk Management Practices*
*Source: Kulik and Weber, KLCI Research Group

7. Definitions
Risk
Project Risk Management (PMBOK®)

8. What is your risk tolerance?
Risk Utility
What is your risk tolerance?

9. Risk Utility
You are on a TV game show and can choose one of the following. Which would you take?
 $1,000 in cash
 A 50% chance at winning $5,000
 A 25% chance at winning $10,000
 A 5% chance at winning $100,000
You have just finished saving for a "once-in-a-lifetime" vacation. Three weeks before you plan to leave, you lose your job. You would:
Cancel the vacation
Take a much more modest vacation
Go as scheduled, reasoning that you need the time to prepare for a job search
Extend your vacation, because this might be your last chance to go first-class

10. Common Sources of Risk in Information Technology Projects
The Standish Group developed an IT success potential scoring sheet based on potential risks

11. IT Project Risk Management Processes

12. Risk Planning

13. IT Project Risk Identification Framework

14. Applying the framework

15. Risk Identification Tools & Techniques
Learning Cycles Brainstorming Nominal Group Technique Delphi Technique Interviews Checklists SWOT Analysis Cause & Effect (a.k.a. Fishbone/Ishikawa) Past Projects

16. Nominal Group Technique (NGT)
Each individual silently writes their ideas on a piece of paper
Each idea is then written on a board or flip chart one at a time
in a round-robin fashion until each individual has listed all of his or her
ideas
The group then discusses and clarifies each of the ideas
Each individual then silently ranks and prioritizes the ideas
The group then discusses the rankings and priorities
Each individual ranks and prioritizes the ideas again
The rankings and prioritizations are then summarized for the group

17. Risk Check List Funding for the project has been secured
Funding for the project is sufficient
Funding for the project has been approved by senior management
The project team has the requisite skills to complete the project
The project has adequate manpower to complete the project
The project charter and project plan have been approved by senior management or the project sponsor
The project’s goal is realistic and achievable
The project’s schedule is realistic and achievable
The project’s scope has been clearly defined
Processes for scope changes have been clearly defined

18. SWOT Analysis

19. Cause & Effect Diagram

20. Risk Breakdown Structure

21. Risks involved in MAA project

22. Risk Analysis & Assessment
Depends on Stakeholder risk tolerances
Can’t respond to all risks!

23. Risk Analysis & Assessment Qualitative Approaches

24. Payoff Table A B A*B Schedule Risk Probability Payoff Prob * Payoff
Payoff Table A B
A*B
Schedule Risk
Probability
Payoff
(In thousands)
Prob * Payoff
Project completed 20 days early 5%
$ 200
$10
Project completed 10 days early
20%
$ 150
$30
Project completed on Schedule
50%
$ 100
$50
Project completed 10 days late
$ - $0
Project completed 20 days late
$ (50)
($3)
100%
$88
The
Expected
Value

25. Decision Tree Analysis

26. Risk Impact Table 0-10 Rank 0 - 100% P*I Risk (Threats)
Risk Impact Table %
0-10
P*I
Risk (Threats)
Impact
Score
Key project team member leaves project
Client unable to define scope and requirements
Client experiences financial problems
Response time not acceptable to users/client
Technology does not integrate with existing application
Functional manager deflects resources away from project
Client unable to obtain licensing agreements
Rank