Project Ethics and Risk Management - Project Management

MGMT 8050 Project Ethics and Risk Management - 12 hours (1.2 CEUs)

COURSE After completing this course, students will know: OBJECTIVES

. What a risk is

. What the risk management processes are

. How to identify and analyze risks

. How to apply ethical decisions to your projects

PREREQUISITE None

TEXTS A Guide to the Project Management Body of Knowledge (PMBOK Guide), 6th Edition, Project Management Institute, 2017

Tom Kendrick, Identifying and Managing Project Risk, Third Edition, AMACOM, 2015

John C. Maxwell, Ethics 101: What Every Leader Needs to Know, Center Street, 2005

INSTRUCTOR

Module I

Module Objectives

The objectives of this module are:

• Define what a risk is

• Identify the risk management processes

• Understand how to identify project risks.

• Determine how to eliminate resource contention.

Reading Assignments

PMBOK Guide, Chapter 11 Kendrick, Chapters 1-6

Project Risk Management

What is risk? According to the PMBOK® Guide, risk is defined as “an uncertain event or

condition that, if it occurs, has a positive or negative effect on one or more project

objectives”. The PMBOK® Guide definition points out that project risks can be positive as

well as negative, although Project Managers usually worry about the negative

consequences of project risk. The processes of project risk management are shown in the

following figure:

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These processes are defined in the PMBOK® Guide as follows:

1 . Plan Risk Management — the process of defining how to conduct risk management activities for a project.

2. Identify Risks — the process of determining individual project risks as well as sources of overall project risks, and documenting their characteristics

3. Perform Qualitative Risk Analysis — the process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics

4. Perform Quantitative Risk Analysis — the process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives

5. Plan Risk Responses — the process of developing options, selecting strategies, and agreeing on actions to address overall project risk exposures, as well as to treat individual project risks

6. Implement Risk Responses — the process of implementing agreed-upon risk response plans

7. Monitor Risks — the process of monitoring the implementation of agreed-upon risk response plans, tracking identified risks, identifying and analyzing new risks, and evaluating risk process effectiveness throughout the project.

Figure 1 1 -3 of the PMBOK® Guide shows how these risk management processes relate to

other PMBOK® Guide processes.

Plan Risk Management

Risk management planning is performed as part of the project planning process. The Risk

Management Plan usually is a subset of the overall Project Management Plan, although on

larger projects it is sometimes a stand-alone document. The Risk Management Plan can

contain the following elements:

1. Risk management methodology

2. Roles and responsibilities for the risk management activities

3. Budgeting — risk management resources and costs

4. Timing — when the risk management activities will occur

5. Risk categories, such as the Resource Breakdown Structure (RBS) shown in Figure 11-4 of the PMBOK® Guide

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6. Definitions of risk probability and impact, as shown by Table I 1 -1 of the PMBOK® Guide

7. Probability and impact values, such as shown on the probability and impact matrix in Figure 1 1 -5 of the PMBOK® Guide

8. Revised stakeholders’ tolerances

9. Reporting formats for the risk management processes, such as a risk management log

1O.Tracking — how the risks will be tracked

Kendrick lists three key ideas for project risk management planning on p. 47:

1 . Project selection affects risk management and depends upon it.

2. Project risk management builds on the foundation provided by your project definition and planning.

3. A project risk plan summarizes your risk management approach.

Identify Risks

After the planning of how risk management will be conducted for the project, we need to

identify the project risks. The methods of techniques for identifying project risks can include:

1. Brainstorming — listing various potential risks that may be encountered on the project

2. Delphi technique — obtaining a consensus from experts

3. Interviewing project participants, stakeholders and subject matter experts

4. Root cause analysis — identifying the root causes of risks, not only the symptoms

The first method listed is to involve the project team members in a brainstorming process.

To facilitate the brainstorming process, it is useful to separate risks into risk categories, as

shown in the following example:

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Risk Category Risk Example

Technical Relying on unproven or complex technology

Quality Not using industry standards

Performance Unrealistic performance goals

Project management Objectives not well-defined

Organizational Priority problems

External Budget cutbacks

Project Risk Categories for Risk Identification Process

A larger number of risk categories can be obtained by using the Risk Breakdown Structure

technique shown in Figure 11-4.

Risk categories can also be obtained through historical data, such as the PERIL database

described in Kendrick. Kendrick lists the following major project scope risk categories on p.

50-54:

1. Change risks

a. Scope gaps

b. Scope creep

c. Scope dependencies

2. Defect risks

a. Software problems

b. Hardware failures

c. Integration defects

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Kendrick lists the following major project schedule risk categories on p. 81-84:

1. Delay risks

a. Parts delays

b. Information delays

c. Slow decisions

2. Estimating risks

a. Learning curve issues

b. Estimating judgment

c. Imposed deadlines

3. Dependency risks

a. Other projects

b. Infrastructure

c. Legal and regulatory

Kendrick lists the following major project resource risk categories on p. 109-113:

1. People risks

a. Permanent staff loss

b. Short-term staff loss

c. Queueing

d. Late start

e. Motivation

2. Outsourcing risks

a. Late or poor output

b. Delayed starts

3. Money risks

a. Funding issues

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Additional methods of identifying risks are listed in Kendrick and the PMBOK® Guide:

I . Checklist analysis - Kendrick includes a checklist for additional potential risks on p. 373-380.

2. Assumption analysis

3. Diagramming techniques

a. Cause-and-effect diagrams b. System or process flow charts c. Influence diagrams

4. SWOT (strengths, weaknesses, opportunities, threats) analysis

5. Expert judgment

Scheduling Resources

A problem with the way that schedules are conventionally constructed is that resources are

not considered when determining the longest path of the project, or Critical Path. As a

consequence, some resources may be scheduled to perform tasks at the same time. For

example, in the House project shown below, after we assign the resources to our tasks, we

find that the carpenters are scheduled to perform both the Finish Exterior and Finish

Interior tasks at the same time, as shown in the following figure:

—

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Carpenters have Resource Contention

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To correct this situation, we need to perform what is called leveling the project; that is,

eliminating the resource contention of having a resource scheduled to perform two tasks at

the same time. In this example, leveling the project to eliminate the resource contention

changes the location of the Critical Path and affects the project end date, as shown:

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Leveling the Project Eliminates Resource Contention

The PMBOK® Guide defines the Critical Path as “the sequence of activities that represents

the longest path through the project.” Because the Critical Path does not address resource

contention, Goldratt (Goldratt, Critical Chain, 1997) advocates focusing on what he terms

the Critical Chain rather than the Critical Path. The Critical Chain Method is defined as a

schedule method that allows the project team to account for limited resources and project

uncertainties. The difference is that the Critical Chain addresses resource contention and

the Critical Path does not. As a consequence, the Critical Chain gives a better prediction of

when a project can be completed than does the Critical Path in projects when there is

resource contention.

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Module I Summary

In Module 1, we learned to:

. Identify project risks.

. Determine howto schedule resources by leveling the projectto eliminate resource contention.

Discussion Postings

Post your discussion posting by the date shown in the Syllabus. Discussion postings must

be a minimum of 100 words. In order to obtain full credit, review and comment on a

minimum of two other students’ discussion postings within two days after the scheduled

posting date. Please respond to comments on your discussion postings.

The discussion posting for Module I is:

1. What is your experience in identifying your project risks? How successful have you been?

2. What are the most common types of risks that actually occur on projects that you have worked on or are familiar with? Relate an example.

3. What problems with resource contention have you had on your projects? What was the result? How can you avoid resource contention problems in the future?

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