Please enable JavaScript.
Coggle requires JavaScript to display documents.
CH7: Managing Risk - Coggle Diagram
CH7: Managing Risk
Learning Objectives
07-01 Describe the risk management process.
07-02 Understand how to identify project risks.
07-03 Assess the significance of different project risks.
07-04 Describe the five responses to managing risks.
07-05 Understand the role contingency plans play in the risk management process.
07-06 Understand opportunity management and describe the five approaches to responding to opportunities in a project.
07-07 Understand how contingency funds and time buffers are used to manage risks on a project.
07-08 Recognize the need for risk management being an ongoing activity.
07-09 Describe the change control process.
7.2 Step 1:
Risk Identification
Generate a list of all the possible risks
that could affect the project through brainstorming and other problem identifying techniques.
Focus on the events that could produce consequences, not on project objectives.
Use
risk breakdown structure
(RBS) in conjunction with work breakdown structure (WBS)
to identify and analyze risks.
Identify the
macro risks
first then specific areas can be checked.
Use
risk profile
(a list of questions) to address traditional areas of uncertainty on a project.
The Risk Breakdown Structure (RBS) 實例
Partial Risk Profile for Product Development Project 實例
7.3 Step 2:
Risk Assessment
Scenario analysis
assesses the significance of each risk event in terms of
probability and impact
.
Risk assessment
form evaluates the severity, probability of risk events and its detection difficulty.
Risk severity matrix
prioritizes which risks to address.
Failure Mode and Effects Analysis (FMEA) extends the risk severity matrix by including ease of detection in the equation:
Risk Value = Impact x Probability x Detection
Probability analysis
uses
statistical techniques
in assessing project risk.
Decision trees, net present value (NPV), program evaluation and review technique (PERT), PERT simulation
Defined Conditions for Impact Scales of a Risk on Major Project Objectives 實例(examples for negative impacts only)
Risk Assessment Form 實例
Risk Severity Matrix 實例
7.4 Step 3: Risk Response Development
Avoiding Risk
Changing the project plan
to
eliminate
the risk or condition
Mitigating Risk
Reducing the
likelihood
that the event will occur
Reducing the
impact
that the adverse event would have on the project
Transferring Risk
Passing risk to another party
Examples: Fixed-price contracts, insurance, Build-Own-Operate-Transfer (BOOT) provisions
Escalating Risk
Notifying the appropriate people
within the organization of the threat
Retaining Risk
Making a
conscious decision to accept
the risk of an event occurring
7.1 Risk Management Process
Risk Defined
An
uncertain
event or condition that if it occurs, has
a positive or negative effect
on project objectives.
No amount of planning can overcome or control risk.
Risk Management Defined
An attempt to
recognize and manage potential and unforeseen trouble
spots that may occur when the project is implemented.
What can
go wrong
(risk event)
How to
minimize
the risk event’s
impact
(consequences)
What can be done
before
an event occurs (anticipation)
What to do when an event
occurs
(contingency plans)
Risk Event Graph 實例
Benefits of Risk Management
A
proactive
rather than reactive approach
Reduces surprises and negative
consequences
Prepares the project manager to
take appropriate action
Provides
better control
over the future
Improves chances
of reaching project objectives on time, within budget, and of meeting required performance.
The Risk Management Process 實例
7.5 Contingency Planning
Contingency Plan Defined
Is an
alternative
plan that will be used if a possible foreseen risk event becomes a reality.
Is a plan of action that will
reduce or mitigate the negative impact
of the risk event.
Is not a part of the initial implementation plan and only goes into effect after the risk is recognized.
Risks of the absence of a contingency plan
Cause a manager to
delay or postpone
the decision to implement a remedy
Lead to panic and acceptance of the first remedy suggested
Make the decision making under pressure which can be dangerous and costly
Risk Response Matrix 實例
Risk and Contingency Planning
Technical Risks
Backup strategies if chosen technology fails
Assess whether technical uncertainties can be resolved
Schedule Risks
Expedite or “crash” the project to get it back on track
Schedule activities in parallel or use start-to-start lag relationships
Use the best people for high-risk tasks
Cost Risks
Review price to avoid the trap of using one lump sum to cover price risks
Funding Risks
Evaluate the risk of reductions in funding—a cut in the project
7.8 Step 4:
Risk Response Control
Risk Register
Details all identified risks
, including
descriptions, category, probability of occurring, impact, responses, contingency plans, owners, and current status
Risk
Control involves
Executing
the risk response strategy
Monitoring
triggering events
Initiating
contingency plans
Watching
for new risks
Establishing a Change Management System
Monitoring, tracking, and reporting risk
Fostering
an
open
organization environment
Repeating
risk identification/assessment exercises
Assigning and documenting responsibility
for managing risk
7.9 Change Control Management
Sources of Change
Project scope changes
Implementation
of contingency plans
Improvement
changes
Change Management Systems
1.
Identify
proposed changes
List
expected effects of proposed change(s) on schedule and budget
Review, evaluate, and approve or disapprove
of changes formally
Negotiate
and
resolve
conflicts of change, condition, and cost
Communicate
changes to parties affected
Assign
responsibility for implementing change
Adjust
master schedule and budget
Track
all changes that are to be implemented
Change Control Process 實例
Benefits of Change Control Systems
Inconsequential changes
are discouraged by the formal process.
Costs of changes
are maintained in a log.
Integrity of the WBS and performance measures
is maintained.
Allocation and use of contingency and management reserves
are tracked.
Responsibility for implementation
is clarified.
Effect of changes is visible
to all parties involved.
Implementation of change is monitored
.
Scope changes
will be quickly reflected in
baseline and performance measures
.
Sample Change Request 實例
Change Request Log 實例
Key Terms
7.7 Contingency Funding and Time Buffers
Contingency Funds
Are funds to
cover project risks
—
identified and unknown
For control purposes, contingency funds are divided into
Contingency reserves
—cover
identified risks
and allocated to
specific segments or deliverables
of the project
Management reserves
—cover
unidentified risks
and are allocated to risks associated with the
total project
Time Buffers
Are amounts of time used to
cushion against potential delays
in the project
Add to
activities with severe risks
Add to
merge activities
that are
prone to delays
Add to
noncritical activities
to
reduce the likelihood
that they will create another
critical path
Add to activities that require
scare resources
Budget Estimate 實例
7.6 Opportunity Management
An opportunity is an event that can have positive impact on project objectives.
Exploit
Seek to eliminate the uncertainty
associated with an opportunity to ensure that it definitely happens
Share
Allocate some or all of the ownership of an opportunity to another party
who is best able to capture the opportunity for the benefit of the project
Enhance
Take action to
increase the probability
and/or the
positive impact
of an opportunity
Escalate
Notify the appropriate people
within the organization of the opportunity
Accept
Be willing to take advantage of the opportunity
if it occurs,
but not taking action to pursue it
Appendix 7.1
PERT and PERT Simulation
PERT—Program Evaluation and Review Technique
Assumes each activity duration has a range that statistically follows a beta distribution
Uses three time estimates for each activity: optimistic, pessimistic, and a most likely time estimate to represent activity durations
From these three time estimates, a weighted average time estimate and a variance is calculated
Knowing the weighted average and variances for each activity allows the project planner to compute the probability of meeting different project durations
The longer the project duration is, the higher is the probability of meeting that duration
Activity and Project Frequency Distributions
Activity Time Calculations
Activity Time Calculations (Continued)
Activity Times and Variances
Probability of Completing the Project
Hypothetical Network
Possible Project Durations
1 more item...
