Embed Size (px)
Citation preview
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Project Management
Chapter 12
Project Risk Management
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Session will cover• What is risk management?
• Identify risks in a project
• Assess the risks
• Mitigate the risks - contingency planning
• Project recovery
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Terms• hazard: a rare or extreme event that adversely
effects the successful completion of the project• vulnerability: the degree of loss to a given
element that is at possible risk from the impact of a hazard
• risk: the expected losses that a particular phenomenon might cause or the existence of significant uncertainty
• probability: the degree to which the risk event is likely to occur
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Terms……• frequency: the number of times a particular
risk can impact on a project• severity: the impact of a risk on a project• risk mitigation: defining the necessary
steps to counter threats• risk response: the development of
measures to counteract risk in a project
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Concept• Risk management attempts to minimise
the impact of adverse events and to maximise the likelihood of positive outcomes, so that the project is successfully completed
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Risk Management Dilemma
chances of risk occuring cost to fix
the risk event
Project life cycle
LOW
HIGH
Ris
k
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Risk Management Dilemma
The chances of a risk event occurring e.g. error in cash flow, time or cost estimates being wrong are greatest in the concept and planning stagesBUT are much harder to anticipate!
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Risk Management
3 elements to risk management– risk assessment – identification &
analysis of risk
– risk mitigation – pre-emptive & contingency actions
– risk response – plan for resolving critical risks
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Risk Assessment• Identification, quantifying and evaluation of
the probability of the occurrence of risk events and the impact of these events on a project
• What are the possible consequences and how likely are they to occur?
• Risk assessment is proactive and reactive!
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Risk Identification
Determining risks likely to affect a projectInternal risks – aspects that the project team
can control or influence (staff assignment, cost estimates)
External risks – beyond the control of the project team (market shift, government legislation)
Positive and negative outcomes
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Risk Assessment
Likelihood x Severity x Frequency
Uses traffic lights to indicate biggest threats
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Risk Assessment
LIKELIHOOD IMPACT
THREAT low medium high low medium high
inadequate funding X X lack of technical skills in client's business unit X X
natural disaster X X
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Risk Mitigation
Pre-emptive Reactive/ contingency
Will reduce the chance that a threat will be realised or a risk will occur(likelihood)
Will reduce the impact of the threat if it occurs (severity)
V
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Contingency planning
Evaluates alternative strategies for possible foreseen events before they occur and selects the best alternative
Don’t confuse with contingency (buffer) that you build in to a cost estimate or time plan
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Contingency Planning• Risk management planning for a known event• Preventative actions to reduce or mitigate the negative
impact of the risk event• Evaluates alternative strategies for possible foreseen
events before the risk events occur, and selects the best option
• Must be communicated to all stakeholders in order to avoid ‘surprises’ and are activated by ‘a trigger event’.
• Must be well documented
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Who’s responsible for risk mgmt?
• Many people in the project will have some responsibility for risk management.– PM – risk manager– Steering committees– Project team members
• Risk cannot be managed by one individual – it is a communal activity involving a range of people associated with the project
Dr. Jana Jagodick Polytechnic of Namibia, 2012
• PM has overall responsibility like:– the development of a risk management plan– continual monitoring to identify new or
increasing risks– monitoring of the effectiveness of the risk
management plan– regular reports to sponsors and steering
committees• For big projects the PM might appoint a
risk manager, but the PM still maintains overall responsibility
Who’s responsible for risk mgmt?
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Risk mitigation examplesPre-emptive - In a project where you are encouraging
people to walk and cycle to work, you might include a bicycle shed to ensure that people have somewhere safe to lock up their bikes
Contingency actions - for example, if your bike gets stolen, enlisting people to help you find it
Oil rig, where pre-emptive action is to ensure that no fire causing materials are used on the oil rig. Contingency actions would be to have a life raft at every station, for a quick getaway.
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Risk management plan• The risk management plan should cover:
– a description of each risk– an assessment of the likelihood of it occurrence and
its impact– a grading of each risk– the person(s) responsible for managing the risk– an outline of the proposed countermeasures– the estimated cost for each countermeasure and the
collective costs– full details of assumptions and limitations
Dr. Jana Jagodick Polytechnic of Namibia, 2012
When things go wrong…..What to do when things go wrong…….i.e. when a
project is • out of control and failing• over budget• out of scope
AND YOU HAVEN’T PUT TOGETHER A CONTIGENCY PLAN......
• How do you achieve the project objectives in the least amount of time without incurring huge cost?
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Project recovery• Take a structured review of the project in
its present state• Look at the deliverables and milestones
with an eye towards getting the project back on track
• Assess risk, crash the schedule or develop deliverables simultaneously
• Project Recovery is determining where to target resources to get the project back on plan as quickly as possible and at least cost!
Dr. Jana Jagodick Polytechnic of Namibia, 2012
Deliverables for Project Recovery
• Project recovery plan
• Recovered project
• Trained project team members and project sponsors/customers and stakeholders
• Tools and techniques for future projects
