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PMP Lectures Prepared By: Eng. Mohamed ElSaadany
0. I n t roduc t ion
1. P lan R isk Management
2. Iden t i f y R isks
3. Per fo rm Qua l i ta t i ve R isk Ana lys is
4. Per fo rm Quant i ta t i ve R isk Ana lys is
5. P lan R isk Responses
6. Cont ro l R isks
Lecture 11 : Pro ject R isk Management (1 /31) Contents
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
Definitions:• Project risk is an uncertain event or condition that, if it occurs, has a
positive or negative effect on one or more project objectives.• Through risk management you try to increase probability and impact of
opportunities, while decrease probability and impact of threats.• Uncertainty: Lack of knowledge that reduce confidence in conclusions• Risk Averse: Someone who doesn’t want to take risks. يتجنب المخاطر• Risk Tolerance: Area of acceptable risks • Thresholds: The point at which risk becomes unacceptable.
Risk Factors:• Probability : How much percent risk may occur• Impact: Range of possible outcomes (Time – Money)• Timing: When the risk is expected to take place• Frequency: How often this risk is expected to happen
Lecture 11 : Pro ject R isk Management (2 /31) 0 . Introduct ion
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
P r o j e c t R i s k M a n a g e m e n t
11.1 Plan Risk Management
Inputs : Project Management Plan Project Charter Stake Holder Register Enterprise Environmental Factors Organizational Process Assets
Tools and Techniques : Analytical Techniques Expert Judgment Meetings
Outputs : Risk Management Plan
Lecture 11 : Pro ject R isk Management (3 /31) 01. P lan R isk Management
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
O Risk Management Plan:• Methodology: Approaches, tools, and data sources that will be used• Roles & responsibilities: Who will do what
Lecture 11 : Pro ject R isk Management (4 /31) 01. P lan R isk Management
Team member Name Role Responsibilities
Ahmed Arafa Risk Manager
1. Develop the risk management plan 2. Manage the risk management team. 3. Follow up that risk management activities are being done
with the valid manner in the right time. 4. Monitor contingency reserve and maintain the sufficiency
of monetary in reserve fund. 5. Report on risk management activities.
Ayman Nagy Risk
Software Admin
1. Administrate the risk management program. 2. Maintain and monitor the privilege of users.
Wael Samy Risk Engineer
1. Share in the identification of risks. 2. Develop the qualitative and quantitative analysis.
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
O Risk Management Plan:• Budget: Estimated funds that will be needed• Timing: When and how often risk management processes will be done
• Definitions of risk probability and impacts: Define different levels of risk impact and probability. This will help standardize interpretations to be compared with other projects.
Lecture 11 : Pro ject R isk Management (5 /31) 01. P lan R isk Management
Activity2014 2015
Aug Sep Oct Nov Dec Jan Feb MarRisk Plan Risks Identification Risk Assessment Response Plan
Project Item Classification
Low Medium High
Time < 10% Delay 10-25% Delay > 25% Delay
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
O Risk Management Plan:• Risk Categories: Simple list or risk breakdown structure. Can be
categorized according to the following: Ex1: External – Internal EX2(Caused by): Customer – Supplier – Cultural Differences –
Resistance to Changes – Customer’s customers. EX3(Source): Schedule – Cost – Quality – Scope – Resources –
Customer satisfaction
Lecture 11 : Pro ject R isk Management (6 /31) 01. P lan R isk Management
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
O Risk Management Plan:
• Stakeholders Tolerances: This should be uncovered in project initiation • Reporting Formats: How risk management output will be analyzed and
documented.• Tracking: How risk activities will be recorded, tracked, and audited.
Lecture 11 : Pro ject R isk Management (7 /31) 01. P lan R isk Management
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
Lecture 11 : Pro ject R isk Management (8 /31) 02. Ident i fy R isks
P r o j e c t R i s k M a n a g e m e n t11.2 Identify Risks
Inputs : Risk Management Plan ■ Cost Management Plan Schedule Management Plan ■ Quality Management Plan Human Resource Management Plan ■ Scope Baseline Activity Cost Estimates ■ Activity Duration Estimates Stakeholder Register ■ Project Documents Procurement Documents Enterprise Environmental Factors Updates Organizational Process Assets Updates
Tools and Techniques : Documentation Reviews ■ Information Gathering
Techniques Checklist Analysis ■ Assumptions Analysis Diagramming Techniques ■ SWOT Analysis Expert Judgment
Outputs : Risk Register
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
TT Documentation ReviewIncluding charter, plans, assumptions, contracts, and other documents.The quality and consistency of plans is an indication for risks in the project
Lecture 11 : Pro ject R isk Management (9 /31) 02. Ident i fy R isks
TT Information Gathering Techniques:1. Brainstorming: Ideas are generated to obtain a comprehensive list of risks.2. Delphi Technique: Experts participate anonymously till consensus.3. Interviewing4. Root Cause Analysis: Identify issue, determine causes, preventive action
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
Lecture 11 : Pro ject R isk Management (10/31) 02. Ident i fy R isks
TT Checklist AnalysisDeveloped based on historical information from past projects.The lowest level of RBS can be used as a checklist.
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
Lecture 11 : Pro ject R isk Management (11/31) 02. Ident i fy R isks
TT Diagramming Techniques:1. Fishbone: Identifying causes will identify new risks.2. System process flow charts: Shows how problem have occurred3. Influence Diagrams: Shows causal influence with time order and relations.
TT Assumptions AnalysisWhether the assumptions are valid, inaccurate, incomplete, inconsistent.
Influence Diagram
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
Lecture 11 : Pro ject R isk Management (12/31) 02. Ident i fy R isks
TT SWOT AnalysisS= Strength W= WeaknessO= Opportunities T= ThreatsIdentify opportunities that are result of organization strength as well as threats that are result of organization weakness
Strengths Recently, the company acquired a furniture
manufacturing company. Steel bars price is expected to decrease in this
season.
Weaknesses The company experience in marine work is very
weak. Agent in China for custom relationships is about to
bankrupt.
Opportunities Convince the project client to furnish the project
after building. Buy total quantity of steel bars in this season
Threats Slippage of time schedule because of marine work. Supplies that will be imported from Chaina may
delay.
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
Lecture 11 : Pro ject R isk Management (13/31) 02. Ident i fy R isks
O Risk Register:• Document the following information of identified risks:
Description, risk owner, risk category, root cause, impact on project objectives, probability of occurring, proposed responses, and current status.
• Risk register will be updated through each process of risk management.• At this point, it contains list of risks, list of potential responses, root
causes of risks, and risk categories.
ID Risk Description Root cause Proposed response
1 Lack of labors Booming in economy Increase benefits in
addition to best salary in industry
2 Delay in marine work package
Weak experience in marine work
Award marine work to a qualified subcontractor
3
4
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
Lecture 11 : Pro ject R isk Management (14/31) 03. Perform Qual i tat ive R isk Analys is
P r o j e c t R i s k M a n a g e m e n t11.3 Perform Qualitative risk Analysis
Inputs : Risk Management Plan Scope Baseline Risk Register Enterprise Environmental Factors Organizational Process Assets
Tools and Techniques : Risk Probability and Impact Assessment Probability and Impact Matrix Risk Data Quality Assessment Risk Categorization Risk Urgency Assessment Expert Judgment
Outputs : Project Documents Updates
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
Lecture 11 : Pro ject R isk Management (15/31) 03. Perform Qual i tat ive R isk Analys is
TT Risk Probability and Impact Assessment:• Probability and impact are assessed for each identified risk through
meetings and interviews with stakeholders who are familiar with risk categories.
TT Probability and Impact Matrix:• A table specifies combinations of probability
and impact that lead to rate the risks as low, moderate, or high priority.
• This helps finding risks need immediate response, risks need additional analysis, and risks need to be put on the watchlist.
TT Risk Data Quality Assessment:• Before using any data , you should check that it’s accurate and integrated.
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
Lecture 11 : Pro ject R isk Management (16/31) 03. Perform Qual i tat ive R isk Analys is
TT Risk Categorization:• Risks are grouped by sources of risk (ex: project phase, WBS, people, ..etc)• This will let you know the causes that have the most risk associated
TT Risk Urgency Assessment:• This will be applied to risks that move more quickly than others• Urgent risks may move independently to risk response planning while the
others continue through quantitative risk analysis
O Update Risk Register• Prioritized risks and their probability & impact ratings.• Risks need additional analysis• Watchlist: Non-critical risks• Note: Risk Register may be used to compare risks to other projects, and to
determine whether to continue or terminate project• Also, assumptions log will be updated through this process.
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
Lecture 11 : Pro ject R isk Management (17/31) 04. Perform Quant i tat ive R isk Ana lys is
P r o j e c t R i s k M a n a g e m e n t
11.4 Perform Quantitative Risk Analysis
Inputs : Risk Management Plan Cost Management Plan Schedule Management Plan Risk Register Enterprise Environmental Factors Organizational Process Assets
Tools and Techniques : Data Gathering and Representation Techniques Quantitative Risk Analysis and Modeling Techniques Expert Judgment
Outputs : Project Documents Updates
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
Lecture 11 : Pro ject R isk Management (18/31) 04. Perform Quant i tat ive R isk Ana lys is
Purpose:• Determine which risks need response• Determine overall project risk (Risk Exposure)• Quantified probability of meeting project objectives
Ex: We have probability of 80% to finish project in the required six months• Determine cost reserve and schedule reserve
Qualitative Vs. Quantitative AnalysisQualitative Analysis Quantitative analysis
Subjective evaluation شخصي تقدير Objective and numerical موضوعي وعددي
Example of result : High risk Example of result : Impact = $ 5000
Required for all risks Not required for all risks
- May be called Risk Assessment
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
Lecture 11 : Pro ject R isk Management (19/31) 04. Perform Quant i tat ive R isk Ana lys is
Probability Distribution:• Quantitative analysis utilizes computer software to model probability
distribution. • This can be depicted graphically using continuous or discrete distribution.
Continuous Probability Distribution Discrete Probability distribution
Show Uncertainties in values Show Uncertainties in Events Values are infinitely divisible Values are whole numbers Uses 3 point estimates Looks like bar chart Typically used for time/cost simulation Used for decision tree scenarios, prototypes, or tests
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
Lecture 11 : Pro ject R isk Management (20/31) 04. Perform Quant i tat ive R isk Ana lys is
TT Quantitative risk analysis and modeling techniques:1. Modeling and Simulation2. Expected Monetary Value (EMV)3. Sensitivity Analysis
1- Modeling and Simulation:• Performed using Monte Carlo technique• Calculating project data many times using network diagram and estimates
to assess cost and schedule impacts• Evaluate overall risk of the project• Provide probability of completing project on specific time / specific cost• Provide probability of any activity being on critical path• Translate uncertainties into impacts to the total project• Results in probability distribution
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
Lecture 11 : Pro ject R isk Management (21/31) 04. Perform Quant i tat ive R isk Ana lys is
2- Expected Monetary Value :• EMV = P x I where P=Probability and I=Impact
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
Lecture 11 : Pro ject R isk Management (22/31) 04. Perform Quant i tat ive R isk Ana lys is
2- Expected Monetary Value :
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
Lecture 11 : Pro ject R isk Management (23/31) 04. Perform Quant i tat ive R isk Ana lys is
3- Sensitivity Analysis:• Helps to determine which risk have the most impact on the project• It examines the extent to which uncertainty affects objective being studied• Tornado diagram is a typical display of sensitivity analysis
BaseUnits Labor Cost Material Cost Total Cost Result
250 Units $ 30 $ 50 $ 20’000 - -
Quantity Change
Scenario (1-1)Increase 50 Units
300 Units $ 30 $ 50 $24’000 + 20 % Lower Limit
Scenario (1-2)Decrease 30 Units
220 Units $ 30 $ 50 $ 17’600 - 12 % Upper Limit
Labor Cost Change
Scenario (2-1)Labor cost $ 40
250 Units $ 40 $ 50 $ 22’500 +12.5 % Lower Limit
Scenario (2-2)Labor cost $ 25
250 Units $ 25 $ 50 $ 18’750 - 6.25 % Upper Limit
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
Lecture 11 : Pro ject R isk Management (24/31) 04. Perform Quant i tat ive R isk Ana lys is
O Update Risk Register• Risk accommodation: Amount of contingency time/cost reserve needed• Probability of achieving project cost and time objectives
Ex: 80% to complete on project time, or 70% to complete within budget• Completion date/cost with confidence level
Ex: 70% confidence to finish on May 17th
• Prioritized list of quantified risks
ID
Risk Description Root cause Proposed response Ranking
(Priority) Category Additional Analysis
Urgency
Watchlist
1 Lack of labors Booming in economy
Increase benefits in addition to best salary in
industryMedium Resources Not required Yes No
2Delay in
marine work package
Weak experience in marine work
Award marine work to a qualified subcontractor High Schedule Required No No
3
4
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
Lecture 11 : Pro ject R isk Management (25/31) 05. P lan R isk Responses
P r o j e c t R i s k M a n a g e m e n t
11.5 Plan Risk Responses
Inputs : Risk Management Plan Risk Register
Tools and Techniques : Strategies for Negative Risks or Threats Strategies for Positive Risks or Opportunities Contingent Response Strategies Expert Judgment
Outputs : Project Management Plan Updates Project Documents Updates
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
Lecture 11 : Pro ject R isk Management (26/31) 05. P lan R isk Responses
Identify Risks
Qualitative analysis
Quantitative Analysis
Minor Risks
Plan Response(Contingency Plan)
Watch ListAcceptanceMitigation
Residual Risks
OK Secondary Risks
Positive(Reserve)
NegativeNo Reserve
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
Lecture 11 : Pro ject R isk Management (27/31) 05. P lan R isk Responses
Definitions:• Risk Trigger: A sign which provides warning that risk is about to occur
• Contingency Plan: Planned response to be performed when trigger happened
• Fallback Plan: Plan to be used when planned response prove ineffective
• Residual Risk: Risk remains after acceptance
• Secondary Risk: A direct result of implementing a risk response
• Workaround: Unplanned response developed to deal with occurrence of
unanticipated risk events.
• Contingency Reserve: Funds or time allocated by PM for known-unknowns
• Management Reserve: Funds or time allocated by top management for
unknown-unknowns .
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
Lecture 11 : Pro ject R isk Management (28/31) 05. P lan R isk Responses
TT Strategies For Threats1. Avoid: Eliminate cause. Ex: Removing work package2. Mitigate: Reduce probability or impact. Ex: Choose better supplier3. Transfer: Make another party in responsibility. Ex: Contract and insurance.4. Accept: This could be positive or negative acceptance
• Negative Acceptance : Just document the risk• Positive Acceptance: Allocate reserve for the risk (Money / Time)
TT Strategies For Opportunities1. Exploit: Ensure opportunity happen. Ex: Use experienced PM to finish early2. Enhance: Increase Probability / Impact. Ex: Select reliable vendor3. Share: Allocate ownership of opportunity to a third party. Ex: Joint Venture4. Accept: Willing to take opportunity if it comes but not pursuing it عى�ال تس
لهاNote for Questions: When trigger occurred, implement response plan
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
Lecture 11 : Pro ject R isk Management (29/31) 06. Contro l R isks
P r o j e c t R i s k M a n a g e m e n t11.6 Control Risks
Inputs : Project Management Plan ■ Risk Register Work Performance Data ■ Work Performance Reports
Tools and Techniques : Risk Reassessment Risk Audits Variance and Trend Analysis Technical Performance Measurement Reserve Analysis Meetings
Outputs : Work Performance Information Change Requests Project Management Plan Updates Project Documents Updates Organizational Process Assets Updates
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
Lecture 11 : Pro ject R isk Management (30/31) 06. Contro l R isks
TT
Monitor & Control Risk• Look for occurrence of risk triggers• Monitor residual risks• Evaluate effectiveness of risk management plan• Collect / communicate risk status• Determine if assumptions still valid• Recommend corrective actions• Use contingency reserves
Risk ReassessmentPeriodically review risk management plan and risk register and adjust them
as required . Also, close risks that are outdated.
TT Risk AuditAuditors will ask you to prove that you have identified all the risks, you have
plans for each major risk, and risk owner is prepared to take action.
PMP Lectures Prepared By: Eng. Mohamed ElSaadany
Lecture 11 : Pro ject R isk Management (31/31) 06. Contro l R isks
TT Variance and Trend AnalysisVariance may indicate Impact of threats and opportunities
TT Technical Performance MeasurementEx: Weight, capacity, or no. of defects. Calculating deviation will make you
able to forecast a success degree in achieving scope.
TT Reserve Analysis• compare amount of reserves remaining to amount of risk remaining• Note that contingency reserve may only used to handle impact of risk that
it was set aside for. If risk didn’t occur, reserve returned to the company• Asking for addition reserve indicates that PM has not properly planned