Microsoft Project Assignment
R534
Chapter17.pptChapter 17
Risk Management
Basic Concept
- Risk management focuses on:
Known unknowns
Proactive management
The alternative to proactive management is reactive management, also called crisis management. This requires significantly more resources and takes longer for problems to surface.
RISK MANAGEMENT
- RISK MANAGEMENT FOCUSES ON THE FUTURE
- RISK AND INFORMATION ARE INVERSELY RELATED
RISK MANAGEMENT (CONT.)
- HISTORICALLY, WE FOCUSED OUR ATTENTIONS ON SCHEDULE AND COST RISK MANAGEMENT.
- TODAY, OUR PRIMARY EMPHASIS IS ON TECHNOLOGICAL RISK MANAGEMENT:
CAN WE DESIGN IT AND BUILD IT?
WHAT IS THE RISK OF OBSOLESCENCE?
Definition Of Risk
Risk = f(Likelihood, Impact)
- Likelihood is the probability of occurrence
- Impact is the amount at stake
event
Tolerance For Risk
- Risk avoider
- Risk neutral
- Risk lover
Decision-Making Categories
- Complete uncertainty
- Relative uncertainty (partial information)
- Complete certainty
Maximin Approach
Maximax Approach
Minimax regret Approach
Insufficient Reason Approach
Developing and Using Payoff Tables
Establishing the procedure to follow
Construct the
Payoff table
Decision-making
under certainty
Decision-making
under complete
uncertainty
Decision-making
under risk
Expected Monetary Value (EMV) Approach
Expected Opportunity Loss (EOL) Approach
Expected Value of Perfect Information (EVPI) Approach
FIVE STEPS TO DEVELOP PAYOFF TABLE
- List all the alternatives.
- List the future consequences of each alternative.
- Identify the payoffs associated with each combination.
- Assess the degree of certainty that these combinations will materialize
- Decide on a decision criterion.
Risk Management Processes
- Risk planning
- Risk assessment
Risk identification
Risk analysis/quantification
- Risk handling
- Risk monitoring
Developing Contingency Plans
Types Of Risks (General)
- Business risks
- Insurable (pure) risk
Direct property damage
Indirect consequential loss
Legal liability
Personnel
Types Of Risk (PMI Method)
- External – unpredictable
- External – predictable
- Internal – non-technical
- Internal – technical
- Legal
Risk Types at Boeing
- Financial risks
- Market risks
- Technical risks
- Production risks
Risk Quantification
STAGE I
STAGE II
GUID-
ANCE
WARHEAD
COST
MANU.
TEST
DESIGN
HIGH
MEDIUM
LOW
LEGEND
PROGRAM
SUMMARY
Risk Handling
- Assumption (retention)
- Avoidance
- Control (mitigation)
- Transfer
Risk Problem-Solving
Idea Generation:
Brainstorming
Special Topics In Risk Management
Future Risks
Customer’s
Knowledge
Experienced
Inexperienced
Simple
Complex
Contract Type
Future Risks
Customer’s
Knowledge
Experienced
Inexperienced
Simple
Complex
Contract Type
INCREASING RISKS
How Much Risk Is Acceptable?
- High tolerance for risk
- Medium tolerance for risk
- Low tolerance for risk
Degrees of Downstream Risk
R&D
Manufacturing
Marketing
Time
Low Risk
Degrees of Downstream Risk
R&D
Manufacturing
Marketing
Information Exchange
Time
Moderate Risk
Degrees of Downstream Risk
R&D
Manufacturing
Marketing
Time
High Risk
Prioritization of Risks
Schedule
Cost
Technical
Performance
or Quality
First (Highest)
Priority
Second
Priority
Third
Priority
Risk Controls
Schedule Length
Risk Controls
Appropriate
Too
Long
Low
High
Too Many
Risk Management
Filters and
Gates
No
Risk Plan
Risk Control Measures
Intensity of Controls
Risk Intensity
Standard
Controls
High
Low
Low
Extreme
Range of Controls
Project Procedural
Documentation
Guidelines
High
Low
Tolerance for Risk
Which Method to Use?
Rigid
Policies/
Procedures
Assumption
Reduction
Transfer
Avoidance
The Risk-Reward Matrix
Low
High
Reward
Medium
Risk
High
Low
Medium
Quality of
Resources Needed
Low
Medium
High
Specification Limit
On Characteristic B
Interacting Risks
Product Feature A
Product Feature B
Desirable
Undesirable
Undesirable
Desirable
Poor Risk Management
Risk Planning
Technical
Inability
Customer Expectations
Actual Performance
Performance
Time
