Project Management

Making assumptions within a project will always create risks and a way to help manage this is to list all the assumptions of each phase or stage of your project against a timeline.Then think about the consequence of the assumptions and how they can affect the other parts of the project. 1.Assumption Analysis

Risk checklists are often built upon a Project or Program Managers past experience or the Project Management experience of an organization. They will normally take into accountQuality experience Formality of development Novelty of application Impact on business Requirements standards Software identification Projects concurrencyDependencies Project duration Flexibility of delivery Planning estimates Stability of suppliers Range of sites Impact upon status quo2.Checklists

Prompt lists provide a set of categories of riskthat are pertinent to the type of project under consideration, or the type of risk being considered by an organization. The lists are used to help people think about and identify risks.Sometimes different types of lists are used together to further improve the chance of identifying all of the important risks that may occur. For example, one prompt list might look at various aspects of the project (e.g. legal, commercial, technical, etc.) or types of tasks involved in the project (design, construction, testing).3.Prompt Lists

Within SWOT analysis risks are identified by looking at the Strengths (or perceived Strength) Weakness Opportunity & Threats to the success of the project or program. Brainstorming or SWOT Analysis

A facilitated workshop is a structured approach that enables a group of people to work together to reach a predetermined objective. The participants explore risks and make decisions in the workshop. These workshops are supported by a skilled facilitator to ensure that predetermined objectives are achieved.

Facilitated workshops can be used at any time in a project. 5.Facilitated Workshops

Interviews conducted to identify risk will only be successful where there is good preparation clear objectivesa positive & supportive environmentproper time managementuse of open questions &challenging not confrontational atmosphere. The results of interviews should be well documented.6.Interviews

Assess probability and seriousness of each risk.Probability may be low, medium, high or extreme.Risk effects might be catastrophic, serious, tolerable or insignificant.Risk AnalysisOne good reason for using qualitative analysis even if you intend to use quantitative analysis is to filter out the minor risks first so you dont waste time and resources analyzing minor risks.You come out of qualitative analysis with a good idea of overall project risks, which will be important to your stakeholders. Moreover you have prioritized your identified risks, and youre ready to either go on into more quantitative analysis, or to developing your response plan.Qualitative Risk Analysis11Overall risk ranking for project based on red condition risksList of prioritized risks by condition (red/yellow/green) by impact type (cost/schedule/scope/quality) by data precision

Risks requiring further analysis & managementAnalysis trendsQualitative Risk Analysis Outputs12A template of Qualitative Risk Analysis

Quantitative analysis of probability and impact:determine probabilities of not achieving project objectivesdetermine realistic cost, schedule, and scope objectivesquantify risk exposurequantify specific risk contributions to overall risk exposureOften follows qualitative risk analysis, but both can be done together.Large, complex projects involving leading edge technologies often require extensive quantitative risk analysis.Main techniques include:Sensitivity analysisDecision tree analysisQuantitative Risk AnalysisA template of Risk Quantification

A typical QRA Template on Excel Sheet

Sensitivity Analysis is a technique used to show the effects of changing one or more variables on an outcome.For example, many people use it to determine what the monthly payments for a loan will be given different interest rates or periods of the loan, or for determining break-even points based on different assumptions.Spreadsheet software, such as Excel, is a common tool for performing sensitivity analysis.It determines which risks have the greatest effect on the project objectivesSensitivity Analysis17They are like flowchart diagrams and represent a method of looking at many options and making a decision.By analyzing the impact each decision will have, the risks of taking that decision can be forecast and used to anticipate problems or inform the direction that the project may take.

This technique is best suited to simpler situations.

In complex scenarios they can become confusing and complicated. Decision Trees

Decision Tree

Decision Trees

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Objective of Risk Response PlanningDevelop options and determine actions to enhance opportunities and minimize threats to project objectives.Assign responsibility to individuals or parties for each risk response.Criteria for Risk Response PlanningRisk response must be:Proportional to the severity of the risk.Cost effective.Timely.Realistic.Accepted by all parties involved.Owned by a person or a party.Main Strategy of Risk Response PlanningStrategy for Negative RisksAvoidMitigateTransferAccept

Strategy for Positive RisksExploitShareEnhanceAvoid or Eliminate RiskRemove the cause, make an alternative course of actionThis should occur during the design and planning stageNot all risks can be avoided, but some may.

Mitigate or Reduce RiskRisk mitigation aims at reducing the probability and/or impact of a risk to within an acceptable threshold. The probability/Impact should be mitigated before the risk takes place. Mitigation costs should be appropriate given the likely impact and probability of the risk.

Risk Response PlanningTransfer or Deflect RiskTransfer the risk (in part or whole) to a third partyIt is most effective in dealing with financial risk exposure.The use of insurance, performance bonds, warranties and guarantees. Accept RiskAcceptance indicates a decision not to make any changes to the project plan to deal with a risk or that a suitable response strategy cannot be identified. This strategy can be used for both negative and positive risksRisk Response PlanningMore about Risk MitigationMitigation actions are proactive to prevent a risk from occurring and impacting the project or reducing the impact of the risk. Plans are prepared for execution after a risk occurs, becomes a problem and starts to impact the project. Risks can be mitigated not only by eliminating the risk but also by reducing their degree of occurrence and/or lessen the impact to the project. Contracting out: The act of transferring all or part of a risk to another party, usually by some form of contract.Clients RiskClients FlexibilityDesign and Build (Turnkey)Contractors IncentivePartnershipCost + Fixed FeeCost + % FeeFixed Price ContractBuild own, operate and transfer (BOOT)Unit RatesMore about Deflecting RiskInsurancedirect property damagebusiness interruptionlegal liabilitypersonal liabilityRetentionclient retains a % of the contractors income until completion. This can severely affect the contractors cash flowBondscontractor offers a bond (through a bank) to cover lack of performance / poor qualityFuturesfor projects involving multi-currency transactions you can offset the effects of currency fluctuations by paying a premium to purchase currency at an agreed rate in the future Examples of Deflecting RiskMore about Accepting RiskAcceptance The project team decides not to change project objectives to deal with the risk.Passive acceptance: no action , deal with threats as they occur (workarounds)Active acceptance: develop a contingency plan or establish a contingency reserve to handle risksResidual and Secondary RisksIts also important to identify residual and secondary risksResidual risks are risks that remain after all of the response strategies have been implemented

Secondary risks are a direct result of implementing a risk response

SARA

holding

A-CAT

A Painting by: Mary Cassatt

31SShareSharing with another party the burden of loss or the benefit of gain, from a risk, and the measures to reduce a risk."AAvoidinvolves (1) taking steps to remove ahazard, (2) engage in alternativeactivity, or (3) otherwise end a specificexposure.RReduceTaking measuresto reduce thelikelihoodof aloss, or to reduce theseverityof a possible loss.AAcceptOccurs when the cost of managing a certain type of risk is accepted, because the risk involved is not big enough to warrant the added cost it will take to avoid that risk.AAvoidChanging a project objective to eliminate the threat posed by an adverse risk event.CControlTechniques to evaluate potential losses and take action to reduce or eliminate such threatsAAcceptThe project team decides not to change project objectives to deal with the risk.TTransferShifting the negative impact of a threat, along with the ownership of the response, to a third party.

Courageous risks are life-giving, they help you grow, make you brave, and better than you think you are.