1. Managing Project Risks and Opportunities
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2. MGMT 440 Week 2 Chat

3. Scenario
The design manager and the engineering manager were discussing with you the software tool they normally use for their design and engineering work.
It is critical to their process, but there are some defects in the software that result in errors in the designs.
MGMT 412 Week 3 Chat

4. Scenario
The team knows how to find the errors and correct them, but it takes additional time during the design and engineering timeline.
The managers just received an from the software vendor stating that a new version of the tool will be available right as the design tasks are expected to begin.
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5. Scenario
Historically, the vendor is known to deliver the software about four weeks later than announced.
The upgrade corrects the defects that the team knows about, as well as provides some new functionality that will make some of the engineering tasks faster.
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6. Scenario
The vendor is strongly encouraging training for the design and engineering teams to use this new version.
As the project manager, you must decide whether or not the team will use this new version of the software.
The vendor is offering a 50% discount on the training if people are signed up within the next ten days.
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7. Scenario Answer the following questions:
What risks does this use of technology introduce to the project?
What is the impact of each risk?
What is the probability of each risk?
Based on your understanding of the risks, will you tell the managers whether or not they should sign up their people for training?
MGMT 412 Week 3 Chat

8. What risks does this use of technology introduce to the project?
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9. Software Risks A list of potential software risks include:
Database complexity
Development required
Management ability
Software complexity
Software maturity
System size
Telecommunication aspects
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10. Suppliers & Sub-contractors Risks
Ability to deliver, skills, and quality of the software
Accreditation
Alternative suppliers and/or sub-contractors
Availability
Claims and variations
Commercial terms
Quality of goods and services provided
Reliability of supplier
Safety attitude
Special considerations
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11. Suppliers & Sub-contractors Risks (cont.)
Control and supervision
Cost of goods and services provided
Delivery of goods and services provided
Failure of a critical supplier and/or sub-contractor
Flow-on conditions from prime contract
Lead times for orders
Limited number of suppliers or producers
New or existing sub-contract
Overseas versus local sub-contractors
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12. Suppliers & Sub-contractors Risks (cont.)
Stability of joint ventures and/or partnerships
Timeliness
Transferability of warrantees and/or guarantees
Warranty of goods and services provided
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13. Technology Risks A list of technology risks include:
Availability of key components
Failure rates
Lack of technical knowledge
Maintenance
Need for further development
New or non-standard performance
Quality requirements
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14. Technology Risks (cont.)
Obsolescence
Reliability, availability, maintainability
Spare parts and support
Specification does not reflect client needs
Specification incomplete or misleading
Technical standards or regulations change
Technical standards or regulations unclear
Technological change
Technology not available
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15. What is the impact of each risk?
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16. Cost, Schedule, and Performance Factors
Cost, schedule, and performance are what is impacted by risk.
The impact probabilities include:
0.1 = Insignificant
0.3 = Low
0.5 = Medium
0.7 = Very High
0.9 = Catastrophic
MGMT 412 Week 3 Chat

17. 0.1 = Insignificant Cost Factor Schedule Factor Performance Factor
Budget estimates not exceeded, some transfer of money
Negligible impact, slight schedule change compensated by available schedule slack
Minimal or unimportant performance impacts
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18. 0.3 = Low Cost Factor Schedule Factor Performance Factor
Project costs exceed budget by 1% to 5%
Minor slip in project schedule, less than 1 month
Small reduction in performance
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19. 0.5 = Moderate Cost Factor Schedule Factor Performance Factor
Project cost estimates increased by 5% to 10%
Small slip in project schedule from 1 to 3 months
Some reduction in performance
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20. 0.7 = Very High Cost Factor Schedule Factor Performance Factor
Project cost estimates increased by 10% to 20%
Project schedule slip from 3 to 6 months
Significant reduction in performance
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21. 0.9 = Catastrophic Cost Factor Schedule Factor Performance Factor
Project costs increased by more than 20%
Large project schedule slip, key milestones not achieved
Key performance criteria cannot be achieved
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22. Cost, Schedule, and Performance Factors
For each risk you will need to determine the following:
Whether it is a cost, schedule, or performance factor
Whether the impact is insignificant, low, moderate, very high, or catastrophic
Read the number that ranges from 0 to 1 from the appropriate table, and then use that number in the succeeding calculations
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23. What is the probability of each risk?
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24. Probability Factors They include: Maturity factors Complexity factors
Integration, interfacing, and dependency factors
Commercial risk and management process factors
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25. Probability Factors
Here are the actual probabilities that you will employ:
0.1 = Rare
0.3 = Unlikely
0.5 = Possible
0.7 = Likely
0.8 = Highly likely
0.9 = Almost certain
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26. Impact & Probability Factors
First, you will need to figure out which of the four (4) impact probabilities listed in the previous slides applies.
Second, you will need to decide which one of the other six (6) probabilities to assign.
Once you have made these two decisions, you have just about answered the question.
In the last part of the question, will need to justify your selections.
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27. Based on your understanding of the risks, how will you tell the managers whether or not they should sign up their people for training.
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28. Risk Priority Matrix
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29. Recommended Formula
there are two formulas that can be used to calculate the risk factor.
The recommended equation is:
RF = P + C – (P*C)
where
P = the selected probability and
C = the selected consequence or
impact value.
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30. Recommendation
All you need to do is substitute the probability and impact factors selected into the equation on the previous slide, perform the calculation, and calculate the result.
This will tell you whether or not the team members should or should not sign up for the training.
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31. Example It is obvious that the impact is an interfacing factor.
Suppose that you believe that it is unlikely that there will be only minor interfacing problems.
Then, the probability value is 0.3, which is read off from the first column of the Table on slide 24 .
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32. Example Next, you will need to decide the impact factor.
Since going to training may impact the budget, create a minor slip in the schedule with possibly a small reduction in performance, the impact factor is 0.5.
The last step is to substitute these two values into the equation.
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33. Example Here is the calculation: RF = P + C – (P * C)
= – (0.3 * 0.5)
= 0.8 – 0.15
= 0.65
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34. Example
With a 0.65 probability of the training affecting the project schedule, you may come to the conclusion that the training is not worthwhile.
This is not an unreasonable conclusion, and so you see how to address this discussion board question.
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35. Caveat
Please note that your selection of probabilities may be different from my selection.
I encourage you to review the example carefully, specify your own values, and then reach your own conclusions.
Then you will have answered the question, and understand how to deal with this elusive issue called risk.
MGMT 412 Week 3 Chat