1. RISK MANAGEMENT PRESENTATION ASQ- GREATER HOUSTON SECTION 1405 Lila Carden, Ph.D., MBA, PMP University of Houston Instructional Associate Professor lcarden@uh.edu

2. Agenda  ISO 31000 - Published in November 2009  Benefits of Risk Management  21 Ways to Excel at Project Management  Risk Management Processes  Risk Management Application  Top 10 Risk Issues  10 Golden Rules of Project Risk Management

3. ISO 31000 Published in November 2009  First international standard of risk management  Provides principles and generic guidelines on risk management  Plans will still need to include the needs of a specific organization  Standard that can be used by any public, private or community enterprise, association, group or individual  Not industry specific  Useful for all managers – operational, financial and project Gjerdrum, D. (2013). The new ERM gold standard: ISO 31000:2009. Retrieved from http://www.riskandinsurance.com/story.jsp?storyId=322335271

4. ISO 31000 Published in November 2009  Framework to integrate the process of managing risks and reporting  Risk management processes include identifying, analyzing, responding, implementing and monitoring risks.  Two key functions throughout implementation Communication and consultation need to include internal and external stakeholders Monitor and review need to include controls, lessons learned, responses to risks and ready for change Gjerdrum, D. (2013). The new ERM gold standard: ISO 31000:2009. Retrieved from http://www.riskandinsurance.com/story.jsp?storyId=322335271

5. Benefits of Risk Management  Establishes project feasibility  Lowers costs – rework and unforeseen late efforts are reduced  Establishes project priority and management support - risk plan noting competence and preparation  Enables project portfolio management – low risk and high risk projects  Exposes weakness in project plans  Plans management reserves  Facilitates project communication and monitoring – exposes weaknesses to the team Kendrick. T. (2009). Identifying and managing project risk. New York: AMACOM.

6. 21 Ways to Excel at Project Management  Managing the risks is number 6 on the list  Top 5 include  Sponsorship and Leadership  Defining the business objectives  Defining the project  Ensuring the project is a manageable size  Defining the budget Haughey, D. ( 2013). 21 ways to excel at project management. Retrieved from http://www.projectsmart.com/

7. Risk Management Processes 7  PMBOK’s project risk management processes include:  Plan Risk Management – how to conduct risk management activities  Identify Risks – determine risks and document characteristics  Perform Qualitative Risk Analysis  Perform Quantitative Risk Analysis  Plan Risk Responses  Control Risks PMI Global Standard. (2013). A guide to the project management body of knowledge (5th ed.). Newtown Square, Pennsylvania: Project Management Institute, Inc.

8. Plan Risk Management TABLE OF CONTENTS  1.0Purpose Of The Risk Management Plan  2.0RISK MANAGEMENT PROCEDURE  2.1Process  2.2ROLES AND RESPONSIBILITIES  2.3Risk Identification  2.3.1Methods for Risk Identification  2.4Risk Analysis  2.4.1Qualitative Risk Analysis  2.4.2Quantitative Risk Analysis  2.5Risk Response Planning  2.6Risk Monitoring, Controlling, And Reporting  2.7Risk Contingency Budgeting  3.0TOOLS AND PRACTICES  4.0CLOSING A RISK  5.0LESSONS LEARNED

9. Identify Risks 9  Techniques  Brainstorming  Interviewing  Root Cause Analysis  Delphi Technique – way to reach consensus of experts Facilitator uses a questionnaire to obtain ideas The responses are summarized then re-circulated to the experts for additional comments  Risk Breakdown Structure – structure for identifying risk PMI Global Standard. (2013). A guide to the project management body of knowledge (5th ed.). Newtown Square, Pennsylvania: Project Management Institute, Inc.

10. Identify Risk Risk Breakdown Structure 10

11. Perform Qualitative Risk Analysis 11  Tool  Risk Priority Matrix - probability and impact

12. Perform Quantitative Risk Analysis 12  Tools and techniques  Sensitivity Analysis – tornado diagram (useful for comparing importance and impact of variables)  Expected Monetary Value Analysis – decision tree http://goo.gl/DXSglV  Modeling and Simulation – translates uncertainties to impact of project objectives Monte Carlo The model is computed many times with the input variables (cost estimates, durations) chosen at random for each iteration from the probability distributions of these variables. A probability distribution (total cost or completion date) is calculated - Example - 12% likely to meet the $41 million most likely cost estimate or a 70% likelihood of success with a budget of $50 million PMI Global Standard. (2013). A guide to the project management body of knowledge (5th ed.). Newtown Square, Pennsylvania: Project Management Institute, Inc.

13. Plan Risk Responses  Negative risks  Avoid – change plan to eliminate threat entirely or shut down project entirely  Transfer – shifts risk to third party (consultant)  Mitigate – reduce probability or impact Develop prototype  Accept – not take any action Contingency Reserve – time, money or resources PMI Global Standard. (2013). A guide to the project management body of knowledge (5th ed.). Newtown Square, Pennsylvania: Project Management Institute, Inc.

14. Plan Risk Responses  Positive Risks  Exploit – ensure opportunity is realized Most talented resources  Enhance – increase the probably and/or impact Adding more resources  Share – allocating all or some of the ownership of the opportunity Joint ventures, partnerships  Accept – take advantage of the opportunity if realized PMI Global Standard. (2013). A guide to the project management body of knowledge (5th ed.). Newtown Square, Pennsylvania: Project Management Institute, Inc.

15. Control Risk Responses  Use Risk Register to  Implement risk response plans  Track identified risks  Identify new risks  Evaluate risk process effectiveness throughout the project – risk audits including project review meetings Deliverable status Schedule progress Costs PMI Global Standard. (2013). A guide to the project management body of knowledge ((5th ed.). Newtown Square, Pennsylvania: Project Management Institute, Inc.

16. Application – Risk Overview Example 16  http://capstone.tamu.edu/Teams/Spring%20%2708/VE G/deliverables/VEG_RiskAssessment.pdf http://capstone.tamu.edu/Teams/Spring%20%2708/VE G/deliverables/VEG_RiskAssessment.pdf  http://goo.gl/6clVE5

17. Top 10 Risk Issues Dr. Dieter Fink  1. Understanding the risk concept  2. Agreeing on what is project risk  3. Recognizing risk events  4. Determining the risk management approach  5. Determining the risk tolerance  6. Preparing the risk management plan  7. Developing organizational risk processes  8. Estimating risk severity  9. Preparing the risk breakdown structure  10. Creating and updating the risk register Fink, D. (2011). Trends: Key Issues in Project Risk Management. TPM (February/March). Retrieved from http://www.jkr.gov.my/prokom/images/stories/pdf/RM/trends.pdf

18. 10 Golden Rules of Project Risk Management Bart Jutte 1. Make risk management part of your project 2. Identify risks early in your project 3. Communicate about risks 4. Consider both threats and opportunities 5. Clarify ownership of issues 6. Prioritize risks 7. Analyze risks 8. Plan and implement risk responses 9. Register project risks 10. Track risks and associated tasks Jutte, B. (2010). 10 golden rules of project risk management. Retrieved from http://www.projectsmart.com/articles/10-golden-rules-of-project-risk-management.php

19. Intaver Institute RiskyProject 5  http://intaver.com/index-tutorial4.html

20. References Fink, D. (2011). Trends: Key Issues in Project Risk Management. TPM (February/March). Retrieved from http://www.jkr.gov.my/prokom/images/stories/pdf/RM/trends.pdf Gjerdrum, D. (2013). The new ERM gold standard: ISO 31000:2009. Retrieved from http://www.riskandinsurance.com/story.jsp?storyId=322335271 Haughey, D. ( 2013). 21 ways to excel at project management. Retrieved from http://www.projectsmart.com/ Jutte, B. (2010). 10 golden rules of project risk management. Retrieved from http://www.projectsmart.com/articles/10-golden-rules-of-project-risk- management.php Kendrick. T. (2009). Identifying and managing project risk. New York: AMACOM. PMI Global Standard. (2013). A guide to the project management body of knowledge (5th ed.). Newtown Square, Pennsylvania: Project Management Institute, Inc.