Week 2 Project

Project Risk Assessment

Risk has been de�ned in many ways, but the "likelihood of a loss" is one common de�nition. Risk, therefore, implies probability.

So, like actuarial analysis in the insurance industry, precise risk management depends on historical data about similar events. But all projects are unique to some extent

and sometimes unprecedented. A problem with determining project risk is that there is often no data to assess the likelihood of a project being done on time, within

budget, and in keeping with performance criteria. In addition, historical data is usually scarce concerning the individual activities involved in the projects. However, effective risk management can still improve the odds. For example, risks encountered in one project can be chronicled in a lessons-learned archive so that future

managers can at least consider historical experience.

Risk management begins before the project even begins. You might say risk starts when you are justifying the project to senior management. If this cannot be

accomplished, then the project should either be rejected or radically reassessed. A major project may not be supported by the senior management, especially when a

"capital" project important to the overall mission is doomed to fail.

Assuming overall strategic risks are manageable, we can turn our attention to the triple threat of project management. For example, risk analysis can reduce a project's overall cost by avoiding foreseeable cost problems or it can reduce the chaos of �nancial crises by anticipating the proper actions to be taken if foreseeable bad things

actually happen. Establishing reserves for costly schedule delays, resource availability, and budget overruns are other ways to manage. Many projects have been

cancelled because of cost overruns that violated contractual stipulations and ruined the business case for the project.

Clearly, the worst kind of risk is the risk that is ignored. The worst kind of risk management is irrational optimism assuming it is unnecessary or believing things can be

handled as situations arise.

Once you identify a threat or a problem, you want to come up with a plan to manage it. For example, can the existing process continue until the new one is in place? If the

new process takes more time, what is the contingency or backup plan? Risk analysis is done by identifying threats and then looking at the possibility of the threat being realized.

Review threats periodically that you feel are adequate as the level of the risk can change. Some ways to get insights into what are threats is by listening carefully to your

customers, brainstorming with those you interact to get tasks completed, and reviewing your past projects for any similar issues with current projects.

Managers manage risk in everything they do. In project management, risk management should be formalized and executed according to a plan that takes all stakeholders

into consideration. Also to be considered are the technicalities of the dangers involved in �nishing over time, over budget, or without agreement to the prescribed project

scope documents. Risk management is important enough to create speci�c processes for controlling changes and ensuring adequate communications. During each of the �ve phases—initiation, planning, execution, control, and closing, including risk analysis will ensure smooth project management.

Additional Materials

More About Risk (media/week2/SUO_MGT3035%20W2%20L3.pdf?_&d2lSessionVal=aVaTmfHd5UkmjmVnoP1XalSFd&ou=85477)