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Plan Risk Management

MGMT 767 Risk Management (Lecture 2)

February 18, 2020

Weekly Objectives

• Define the inputs, tools and techniques, output of plan risk management process

• Analyze the project and tailor the risk management activities to the project

• Identify and address barriers to project risk management

Project Risk Management Processes • The process of defining how to conduct risk management activities for a

project Plan Risk Management

• The process of identifying individual project risks as well as sources of overall project risk, and documenting their characteristicsIdentify Risks

• The process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristicsPerform Qualitative Risk Analysis

• The process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectivesPerform Quantitative Risk Analysis

• The process of developing options, selecting strategies, and agreeing on actions to address overall project risk exposure, as well as to treat individual project risksPlan Risk Responses

• The process of implementing agreed-upon risk response plansImplement Risk Responses

• 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 projectMonitor Risks

Why Do Projects Fail?

• 75% of projects fail:

• They are actually impossible

• They are over-constrained (or under-resourced)

• They are not competently managed

Project Success versus Project Management Success

Key Ideas for Project Risk Planning

• Project selection affects risk management and depends on it

• Project risk management builds on the foundation provided by project definition and planning

• A project risk plan summarizes your risk management approach

Project Selection is Important

• Optimism bias

• Limited resources

• Priorities misaligned

• Funding issues

• Unrealistic schedule

• Limited organizational capabilities

When Planning for Risk Management

• Pay attention to factors that are:

• Above the Project Level

• At the Project Level

Project Management Processes

Initiating Process

Planning Process

Executing Process

Closing Process

Monitoring and Controlling Process

Project Start

Project End

Plan Risk Responses

Perform Quantitative Risk Analysis

Perform Qualitative

Risk Analysis Identify Risks

Plan Risk Management

Monitor Risks

Plan Risk Management

• How to conduct risk management activities for a project

• Ensures that the degree, type, and visibility of risk management are proportionate to both risks and the importance of the project to the organization and other stakeholders

• Performed once or at predefined points in the project • Early in the project • If risk management plan requires modifications • Major phase changes • Changes to scope etc.

Data Flow

Source: PMBOK 6th edition

Input 1: Project Charter

• Authorizes the project

• High-level project description

• Overall projects risk

• Key stakeholder list

• High-level requirements

Input 2: Project Management Plan

• How the project will be executed, monitored, controlled, and closed

• Subsidiary management plans—10 knowledge areas

• Baselines-scope

• Additional components—change management

• Project Methodology

Input 3: Project Documents

• Stakeholder register

• Details of project's stakeholders

• Roles of all listed stakeholders

• Stakeholders’ attitudes toward risk

• Risk thresholds

• Roles and responsibilities

Input 4: Enterprise Environmental Factors

• Internal EEFs • Culture, structure and governance

• External EEFs • Market related issues

• Social and cultural issues

Input 5: Organizational Process Assets

• Organizational risk policy

• Risk categories—RBS

• Common definitions of risk concepts and terms

• Risk statement formats (e.g., PERIL Database)

• Templates for risk management plan, risk register, and risk report

• Roles and responsibilities

• Authority levels for decision making

• Lessons learned database

Tools and Techniques

• Expert judgement

• Data analysis • Stakeholder analysis

• Meetings

Stakeholder analysis

Source: https://www.fin.gov.nt.ca/sites/fin/files/stakeholder_register.docx

Stakeholder analysis

Output

Plan Risk Management

Risk Management Plan

Project Management Plan

How risk management activities will be structured and performed

Risk Management Plan Risk Management Plan

Risk Strategy—general approach to managing risk

Methodology—approaches, tools and data sources

Roles and Responsibilities—lead, support and team members

Funding—identifies funds for PRM

Timing—when and how often the processes will be performed

Risk Categories—grouping of individual risks

Stakeholder Risk Appetite—risk appetite of key stakeholders

Definition of Risk Probability and Impacts—scale to be used for the project

Probability and Impact Matrix—prioritization of risks

Reporting Format—risk reports

Tracking—documents used to track risk activities

Key Focus of Risk Management Plan

Risk Breakdown Structure

Definitions of Probability and Impacts

Probability and Impact Matrix with Scoring

Summary

• Relationship among Project Risk Management, project management and the management processes of the rest of the organization

• Separate budget in terms of resources, cost, and time for Project Risk Management

• Cost of responding to risks themselves should be included appropriately in the project budget

• Guidelines and rules for escalating risk-related information to management and other stakeholders

• How to maintain effective communication with the stakeholders to track any changes in stakeholders' attitudes towards risk

• Sharing of a common understanding of all terms used to describe the risks, and other critical values and thresholds

• Define subjective scale for qualitative analysis

• Define key numerical values for quantitative analysis

• Template for risk register

• Participation of stakeholders

• Roles and responsibilities

Wrap up and plan for next two weeks

Quiz 1

• Format (online on Canvas)

• Topics covered (all materials covered till Module 5)

• Date and time (Tuesday, February 25, 2020, 6:30 pm to 9:00 pm)

• Duration (50 minutes)

• Other issues

Weeks 5 and 6

• Identify Risks: risk breakdown structure, risk register

• Discussion posts 5 and 6

• Online Quiz 1 (Week 5)

• Questions

Sources

• Kendrick, T. (2015). Identifying and managing project risk (3rd ed.). New York, NY: AMACOM. ISBN-13: 9780814436080

• Project Management Institute, Inc. [PMI]. (2009). Practice standard for project risk management. Newtown Square, PA: Project Management Institute. ISBN-13: 9781933890388

• Project Management Institute (PMI). (2017). A guide to the project management body of knowledge (PMBOK Guide®) (6th ed.). Newtown Square, PA: Project Management Institute. ISBN-13: 9781628251845