MGT 4301 IV J

MGT 4301, Project Planning 1

Course Learning Outcomes for Unit IV Upon completion of this unit, students should be able to:

6. Explain the risk management process, including risk identification, analysis, and response. 6.1 Identify risks within a project and how they may affect the project. 6.2 Describe how a project manager should respond to risks found in a project.

Required Unit Resources Chapter 7: Managing Risk—Read the following sections:

• Introduction • 7.1–7.9 • Summary

Chapter 8: Scheduling Resources and Costs—Read the following sections:

• Introduction • 8.1–8.10 • Summary

Chapter 9: Reducing Project Duration—Read the following sections:

• Introduction • 9.1–9.6 • Summary

Unit Lesson

Risk All projects involve some form of risk. Risk factors are identified and classified as known or unknown and are accounted for accordingly. Risk factors include things that could possibly happen and that the project team is aware of, such as inclement weather, increased supplier costs, and personnel issues, as well as unforeseen things, such as drastic changes in market conditions, fire, and catastrophic weather in areas affecting the project or project suppliers, and changes in customer needs (Larson & Gray, 2021). Once a risk has been identified, it is analyzed both qualitatively and quantitatively. Qualitative analysis is based on historical information, expert judgment, meetings, focus groups, surveys, and ranking charts. Quantitative analysis uses statistical models and methods to determine the likelihood of a risk happening, the impact it would have on the schedule and the cost of the project, and how severe it would be in comparison to other identified risks. Risks have to be determined as acceptable or unacceptable for a project to continue. Unacceptable risks can stop a project before completion. Project managers have options for responding to acceptable risks should they occur; responses include avoiding, transferring, mitigating, or accepting the risk (Larson & Gray, 2021). Avoiding a risk usually involves changing the project management plan to eliminate the risk entirely. Transferring the risk gives it to someone else, usually a third party. Mitigating the risk involves finding ways to lessen its impact on the project, and accepting the risk does not require any action unless the risk actually occurs. The project team knows it might happen but does not do anything about it unless it does happen.

UNIT IV STUDY GUIDE Risks and How to Properly Respond to Them

MGT 4301, Project Planning 2

UNIT x STUDY GUIDE Title

Essentially the same process that is used to manage negative risks is applied to positive risks. The major differences occur in the responses. Instead of avoiding negative risks, project managers often try to exploit positive risks by taking action to ensure that the opportunity occurs. Instead of transferring risks to another party, project managers often share positive risks to increase the likelihood that the opportunity can be exploited. Instead of mitigating negative risks, project managers will take action to enhance the likelihood that the opportunity will occur and/or increase the positive impact of the opportunity. Finally, project managers will often choose to accept both negative and positive risks but be prepared to respond if either occurs.

A Closer Look Risk is inherent in every project. It is important to know that risk occurs in the future, not in the past. Anything that has already happened is no longer risky, even if it was a catastrophic event. There are two general categories of risks: (1) known unknowns and (2) unknown unknowns. Let’s use some examples to gain a better understanding of this.

• The 2011 earthquake in Japan: Given that earthquakes happen frequently in the region, most would categorize it as a known unknown. How about the tsunami after the earthquake? It is evident that some earthquakes can cause tsunamis; thus, one can correctly assume that this is a known unknown. How about the threat of radiation leaks at the Fukushima plant after the tsunami washed ashore? The answer here is a bit tougher, and it depends on whether the plant officials had a contingency plan. If they did, it is a known unknown. If not, it is either incompetence or an unknown unknown.

• Hurricane Katrina: The eye of the storm was shown on newscasts, and federal, state, and local officials ordered an evacuation from the region. One notable point here is that even though the danger was communicated, the severity was far more than expected. Thus, while the risk was a known unknown, the actual impact might be correctly labeled as an unknown unknown.

The key takeaway here is that a risk management plan is essential when managing projects. The project manager should do whatever is possible to prevent negative risks from happening. Given that some risks will still arise, a contingency plan should always be in place.

Importance of Scheduling Resources and Costs One of the leading causes of risks in a project is the failure of the project manager to schedule resources and costs before the project begins. Having a project resource schedule in place is important for the reasons listed below:

• allows the project manager the chance to make sure that any existing resources are adequate and available for use because resources are often limited,

• gives the project manager a chance to decide which resources have priority; • helps the project manager to determine where the real critical path of the project is and if there is

anything that might slow down the progress of the project down the road, • helps the project manager determine if outside contractors will need to be used, and • helps the project manager decide if the imposed project duration is realistic (Larson & Gray, 2021).

The failure to schedule resources properly can result in timely and costly delays in the project completion. The lack of availability in resources can mean that outside resources may need to be brought in to help complete the project, leading to higher costs to the organization.

MGT 4301, Project Planning 3

UNIT x STUDY GUIDE Title

According to Larson and Gray (2021), resources can include the components listed below.

Crashing a Project There are times when it may become necessary to crash a project or, in other words, reduce the duration of a project. For example, if your organization is producing a product and it is determined that your product must make it to market sooner rather than later, you may be asked to reduce the time necessary to complete production. There are several ways this can be done, which are listed below:

• adding additional resources, • outsourcing some of the work, • scheduling overtime for employees, • establishing a core team who will only work on the project, or • creating a short-term quick solution and then going back and doing it correctly (Larson & Gray, 2021).

While none of these solutions are the best, sometimes they are the best alternative to missing a project deadline. Unfortunately, crashing a project can sometimes increase the risk of a project being completed late. Crashing the project means that slack (float) on noncritical activities will be reduced. When slack of noncritical activities is reduced, the chance of new critical paths occurring increases; hence, the risk of the project becoming late increases. In addition, compressing will have the following impact on managing the project:

• reduces flexibility by using slack, • increases number of critical activities, • increases interdependencies of paths, • makes resource scheduling tighter (critical), or • increases costs (Larson & Gray, 2021).

MGT 4301, Project Planning 4

UNIT x STUDY GUIDE Title

Conclusion As you can see, risks come in many forms and can occur at any time. A successful project manager always ensures that he or she is prepared for risks to occur by having an action plan in place before the project begins.

Reference Larson, E. W., & Gray, C. F. (2021). Project management: The managerial process (8th ed.). McGraw-Hill

Education. https://online.vitalsource.com/#/books/9781260736205

MGT 4301, Project Planning 1

Course Learning Outcomes for Unit IV Upon completion of this unit, students should be able to:

6. Explain the risk management process, including risk identification, analysis, and response. 6.1 Identify risks within a project and how they may affect the project. 6.2 Describe how a project manager should respond to risks found in a project.

Required Unit Resources Chapter 7: Managing Risk—Read the following sections:

• Introduction • 7.1–7.9 • Summary

Chapter 8: Scheduling Resources and Costs—Read the following sections:

• Introduction • 8.1–8.10 • Summary

Chapter 9: Reducing Project Duration—Read the following sections:

• Introduction • 9.1–9.6 • Summary

Unit Lesson

Risk All projects involve some form of risk. Risk factors are identified and classified as known or unknown and are accounted for accordingly. Risk factors include things that could possibly happen and that the project team is aware of, such as inclement weather, increased supplier costs, and personnel issues, as well as unforeseen things, such as drastic changes in market conditions, fire, and catastrophic weather in areas affecting the project or project suppliers, and changes in customer needs (Larson & Gray, 2021). Once a risk has been identified, it is analyzed both qualitatively and quantitatively. Qualitative analysis is based on historical information, expert judgment, meetings, focus groups, surveys, and ranking charts. Quantitative analysis uses statistical models and methods to determine the likelihood of a risk happening, the impact it would have on the schedule and the cost of the project, and how severe it would be in comparison to other identified risks. Risks have to be determined as acceptable or unacceptable for a project to continue. Unacceptable risks can stop a project before completion. Project managers have options for responding to acceptable risks should they occur; responses include avoiding, transferring, mitigating, or accepting the risk (Larson & Gray, 2021). Avoiding a risk usually involves changing the project management plan to eliminate the risk entirely. Transferring the risk gives it to someone else, usually a third party. Mitigating the risk involves finding ways to lessen its impact on the project, and accepting the risk does not require any action unless the risk actually occurs. The project team knows it might happen but does not do anything about it unless it does happen.

UNIT IV STUDY GUIDE Risks and How to Properly Respond to Them

MGT 4301, Project Planning 2

UNIT x STUDY GUIDE Title

Essentially the same process that is used to manage negative risks is applied to positive risks. The major differences occur in the responses. Instead of avoiding negative risks, project managers often try to exploit positive risks by taking action to ensure that the opportunity occurs. Instead of transferring risks to another party, project managers often share positive risks to increase the likelihood that the opportunity can be exploited. Instead of mitigating negative risks, project managers will take action to enhance the likelihood that the opportunity will occur and/or increase the positive impact of the opportunity. Finally, project managers will often choose to accept both negative and positive risks but be prepared to respond if either occurs.

A Closer Look Risk is inherent in every project. It is important to know that risk occurs in the future, not in the past. Anything that has already happened is no longer risky, even if it was a catastrophic event. There are two general categories of risks: (1) known unknowns and (2) unknown unknowns. Let’s use some examples to gain a better understanding of this.

• The 2011 earthquake in Japan: Given that earthquakes happen frequently in the region, most would categorize it as a known unknown. How about the tsunami after the earthquake? It is evident that some earthquakes can cause tsunamis; thus, one can correctly assume that this is a known unknown. How about the threat of radiation leaks at the Fukushima plant after the tsunami washed ashore? The answer here is a bit tougher, and it depends on whether the plant officials had a contingency plan. If they did, it is a known unknown. If not, it is either incompetence or an unknown unknown.

• Hurricane Katrina: The eye of the storm was shown on newscasts, and federal, state, and local officials ordered an evacuation from the region. One notable point here is that even though the danger was communicated, the severity was far more than expected. Thus, while the risk was a known unknown, the actual impact might be correctly labeled as an unknown unknown.

The key takeaway here is that a risk management plan is essential when managing projects. The project manager should do whatever is possible to prevent negative risks from happening. Given that some risks will still arise, a contingency plan should always be in place.

Importance of Scheduling Resources and Costs One of the leading causes of risks in a project is the failure of the project manager to schedule resources and costs before the project begins. Having a project resource schedule in place is important for the reasons listed below:

• allows the project manager the chance to make sure that any existing resources are adequate and available for use because resources are often limited,

• gives the project manager a chance to decide which resources have priority; • helps the project manager to determine where the real critical path of the project is and if there is

anything that might slow down the progress of the project down the road, • helps the project manager determine if outside contractors will need to be used, and • helps the project manager decide if the imposed project duration is realistic (Larson & Gray, 2021).

The failure to schedule resources properly can result in timely and costly delays in the project completion. The lack of availability in resources can mean that outside resources may need to be brought in to help complete the project, leading to higher costs to the organization.

MGT 4301, Project Planning 3

UNIT x STUDY GUIDE Title

According to Larson and Gray (2021), resources can include the components listed below.

Crashing a Project There are times when it may become necessary to crash a project or, in other words, reduce the duration of a project. For example, if your organization is producing a product and it is determined that your product must make it to market sooner rather than later, you may be asked to reduce the time necessary to complete production. There are several ways this can be done, which are listed below:

• adding additional resources, • outsourcing some of the work, • scheduling overtime for employees, • establishing a core team who will only work on the project, or • creating a short-term quick solution and then going back and doing it correctly (Larson & Gray, 2021).

While none of these solutions are the best, sometimes they are the best alternative to missing a project deadline. Unfortunately, crashing a project can sometimes increase the risk of a project being completed late. Crashing the project means that slack (float) on noncritical activities will be reduced. When slack of noncritical activities is reduced, the chance of new critical paths occurring increases; hence, the risk of the project becoming late increases. In addition, compressing will have the following impact on managing the project:

• reduces flexibility by using slack, • increases number of critical activities, • increases interdependencies of paths, • makes resource scheduling tighter (critical), or • increases costs (Larson & Gray, 2021).

MGT 4301, Project Planning 4

UNIT x STUDY GUIDE Title

Conclusion As you can see, risks come in many forms and can occur at any time. A successful project manager always ensures that he or she is prepared for risks to occur by having an action plan in place before the project begins.

Reference Larson, E. W., & Gray, C. F. (2021). Project management: The managerial process (8th ed.). McGraw-Hill

Education. https://online.vitalsource.com/#/books/9781260736205