writing a reflection

Learning Outcome:

· Identify, evaluate and analyse project risks and suggest strategies for reducing risks.

Risk

· Definition

· Uncertain or chance events that planning can not overcome or control

· PMI states ‘uncertain event or condition that, if it occurs, has a positive or negative effect on a project’s objective’

· Characteristics

· Focuses on the future

· Deals with probabilities

· Tends to emphasise negative consequences

The risk project life cycle

Risk anatomy

Risk and uncertainty

· Certainty (knowns) – decision-maker aware of alternatives and outcomes

· Uncertainty (unknown unknowns) – the future is unknowable so the probabilities and consequences remain unknown

· Risk (known unknowns) – situation where the future can be analysed and planned for

Project risk management

· Attributes:

· Decision-making process (informs decisions)

· Structure and formality (helps effective management)

· Continuity (iterative, continuous monitoring)

· Project focus (for project performance and outcomes)

Benefits of risk management

· A proactive rather than reactive approach

· Reduces surprises and negative consequences

· Prepares the project manager to take advantage of appropriate risks

· Provides better control over the future

· Improves chances of reaching project performance objectives within budget and on time

Risk management process

Process flowchart

Step 1: Planning and context

· The risk management plan includes:

· objectives

· methodology

· roles and responsibilities

· budgeting, timing

· risk categories

· scoring interpretation

· tolerance thresholds

· reporting formats

· tracking

· Establishing the context:

· The external context (the environment such as political, social, legal, financial and geographical)

· The organisational context (culture, values, governance, capabilities, policies, processes, strategic objectives)

· The project context (full set of objectives and project outcomes)

Step 2: Risk Identification

· The process of identifying potential risks—what, when and how

· Tools:

· personal experience

· individual pondering

· group processes

· structured interviews

· project information

· checklists

· risk breakdown structure (RBS)

Step 3: Risk analysis and evaluation

· Prioritise identified risks for action analysing:

· likelihood of occurrence

· consequence type and magnitude

Analysis

· Quantitative or qualitative

· consequence criteria

· likelihood rating

Evaluation

· Do I need to do anything about this risk?

· Classify, e.g. intolerable, undesirable, acceptable, negligible

· Determine risk tolerance

· Know your risk appetite

Step 4: Risk treatment

· Identifying and assessing options for treating risk and planning then planning their implementation

· Avoidance: changing the plan to eliminate the threat. Refusing to accept the risk.

· Reduction: reduce the likelihood or consequences of the risk, pre- or post-risk. Contingency plans.

· Retention: accepting the risk and exposure with no further action to manage. Often for low risk.

· Transfer: shifts responsibility and consequences to another party (contract or insurance) though the risk still exists.

Step 5: Implementation and control

· Monitoring and review of the risk management process

· Use of progress meetings and risk audits to evaluate:

· the identified risks remain valid

· any changes in the level of risk

· the implementation process

· new treatments identified

· new risks identified

· Risk register as formal documentation of the risk management process and decisions

· Contingency reserves through float (schedule) and reserves (financial) to cover or reduce risk

Opportunity management tactics

· Exploit

· Seeking to eliminate the uncertainty associated with an opportunity to ensure that it definitely happens.

· Share

· Allocating some or all of the ownership of an opportunity to another party who is best able to capture the opportunity for the benefit of the project.

· Enhance

· Taking action to increase the probability and/or the positive impact of an opportunity.

· Accept

· Being willing to take advantage of an opportunity if it occurs, but not taking action to pursue it.

Step 1

Planning and context

Step 2

Risk identification

Step 3

Risk analysis and evaluation

Step 4

Step 5

Risk treatment

Implementation and control