®

PMP Exam Preparation Course

Project Risk Management

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Project Risk Management

 Risk is everywhere !!!
 From driving a car to parachuting, its’ inherent in the activities
we choose.
 Within a project, risk are unplanned events or conditions
that can have a positive or negative effect on its success.
 Not all risks are bad, but almost all are seen as threat.

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Project Risk Management

 Positives risks are called opportunities.

 For project managers, risk can mean failure, but the reward
can mean a time or cost savings, as well as other benefits.

 Risk management is the process in which the project

manager and project team identify project risks, analyze and
rank them, and determine what actions, if any, need to be
taken to avert these threats.
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The Importance of Project Risk Management

 Project risk management is the art and science of identifying,

analyzing, and responding to risk throughout the life of a project and
in the best interests of meeting project objectives

 Risk management is often overlooked in projects, but it can help

improve project success by helping select good projects, determining
project scope, and developing realistic estimates

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Project Risk Management Processes

1. Plan Risk Management : deciding how to approach and plan the risk
management activities for the project
2. Identify Risks : determining which risks are likely to affect a project and
documenting the characteristics of each
3. Perform Qualitative risk analysis: prioritizing risks for further analysis or action
based by assessing and combining their probability of occurrence and impact
4. Perform Quantitative risk analysis: numerically estimating the effects of the
identified risks on overall project objectives
5. Plan Risk Responses: taking steps to enhance opportunities and reduce
threats to meeting project objectives
6. Monitor and Control Risks : the process of implementing risk response plans ,
monitoring identified and residual risks, identifying new risks, and evaluating the
effectiveness of risk strategies throughout the life of the project

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Project Risk Management Processes

Risk Management
Planning
Risk
Identification

Risk Response Risk

Monitoring and Analysis
Control

Risk Response
Planning
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11.1 Plan Risk Management

 The main output of risk management planning is a risk management

plan—a plan that documents the procedures for managing risk
throughout a project

 The project team should review project documents and understand

the organization’s and the sponsor’s approaches to risk

 The level of detail will vary with the needs of the project

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11.1 Plan Risk Management

Inputs Tools & Techniques Outputs

1. Project scope statement 1. Planning meetings and 1. Risk management plan

2. Cost management plan analysis
3. Schedule Management Plan
4. Communications
Management Plan
5. Enterprise environmental
factors
6. Organizational process assets

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Plan Risk Management Data Flow Diagram

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Planning for Risk Management

 Risk management planning is about making decisions.

 The risk management process is related to the scope of the

project, the priority of the project within the performing
organization, and the impact of the project deliverables.

 It’s important to complete risk management planning in order

to successfully manage, plan for, analyze, and react to
identified risks.

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11.1 Plan Risk Management : Inputs

1. Project Scope Statement : provides a clear sense of the range of possibilities
associated with the project and its deliverables and establishes the framework
for how significant the risk management effort may ultimately become

2. Cost Management Plan : defines how risk budgets , contingencies , and

management reserves will be reported and accessed .

3. Schedule Management Plan : defines how schedule contingencies will be

reported and assessed .

4. Communications Management Plan : defines the interactions that will occur

on the project, and determines who will be available to share information on
various risks and responses at different times ( and locations )

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11.1 Plan Risk Management : Inputs

5. Enterprise Environmental Factors : That can influence this process
include, but are not limited to risk attitudes and tolerances that describe the
degree of risk that an organization will stand
 Examining Stakeholder Tolerance : Depending on the project, the
conditions, and the potential for loss or reward, stakeholders will have
differing tolerances for risk.

 Consider a project to install new medical equipment in a hospital; there’s

little room for acceptance of errors because life and death are on the line.

 A person’s willingness to accept risk is known as the utility function (Risk

Tolerance).
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11.1 Plan Risk Management : Inputs

6. Organizational Process Assets : that might be useful in this process include ,
but are not limited to :
 Risk Categories
 Common Definitions of concepts and terms
 Risk statement formats
 Standard templates
 Roles and responsibilities , authority levels for decision making
 Lessons learned and stakeholder registers .

Relying on Risk Management Policies :

 Organizations often have a predefined approach to risk management.
 The policies can define the activities to initiate, plan, and respond to risk.
 Risk management policies are considered part of the organizational
process assets. 13
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11.1 Plan Risk Management : Tools & Techniques

1. Planning Meetings and Analysis
 Through planning meetings, the risk management plan is created.

 Risk Management plan templates, performing organization policies,

and the risk tolerance level of the stakeholders aid the creation of
the risk management plan.

 Attendees should include:

 The project manager, project team leaders, key stakeholders,
personnel specific to risk management or any other person or
authority involved or who have input required for the risk
management processes.
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11.1 Plan Risk Management : Output

1. Risk Management Plan

 Methodology

 Roles and responsibilities

 Budget and schedule

 Risk categories

 Risk probability and impact

 Risk documentation : revised stakeholder’s tolerances, reporting formats and

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Examining the Risk Management Plan

 The risk management plan is responsible for
determining:
 How risk will be identified
 How quantitative analysis will be completed
 How qualitative analysis will be completed
 How risk response planning will happen
 How risks will be monitored
 How ongoing risk management activities will happen throughout
the project life cycle

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Methodology
 The methodology is concerned with how the risk
management processes will take place. The methodology
asks the following:
 What tools are available to use for risk management?
 What approaches are acceptable within the performing organization?
 What data sources can be accessed and used for risk management?
 What approach is best for the project type, and the phase of the project,
and which is most appropriate given the conditions of the project?
 How much flexibility is available for the project given the conditions, the
timeframe, and the project budget?

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Roles and Responsibilities

 The roles and responsibilities identify the groups and
individuals that will participate in the leadership and
support of each of the risk management activities within
the project plan.

 In some instances, risk management teams outside of

the project team may have a more realistic, unbiased
approach to the risk identification, impact, and overall
risk management needs than the actual project team.

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Budgeting

 Based on the size, impact, and priority of the project, a budget may
need to be established for the project’s risk management activities.

 A project with high priority and no budget allotment for risk

management activities may face uncertain times ahead.

 A realistic dollar amount is needed for risk management activities if

the project is to be successful.

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Timing /Scheduling
 The risk management process needs a schedule to
determine how often and when risk management
activities should happen throughout the project.
 If risk management activities should happen throughout
the project, then the project could be delayed because
of the time needed to identify, assess, and respond to
the risks.
 A realistic schedule should be developed early in the
project to accommodate risks, risk analysis, and risk
reaction.
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Risk Analysis Scoring - Definitions of risk

probability and impact & probability impact matrix
 Prior to beginning quantitative and qualitative analysis, a
clearly defined scoring system and interpretation of the
scoring system must be in place.

 Altering the scoring process during risk analysis – or

from analysis to analysis – can skew the seriousness of
a risk, its impact, and the effect of the risk on the
project.

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Risk Categories
 Based on the nature of the work, there should be
identified categories of risks within the project.
 RBS is one approach to identifying the risk categories.

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Sample RBS

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11.2 Identify Risks

 Risk identification is the process of identifying the risks
and then documenting how their presence can affect the
project.
 Risk identification is an iterative process and can be
completed by the project manager, the project team,
and a risk management team.
 In some instances, stakeholders and even people
outside of the project can complete additional waves of
risk identification.
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11.2 Identify Risks

Inputs Tools & Techniques Outputs

1. Risk management plan 1. Documentation reviews 1. Risk register

2. Activity Cost Estimates 2. Information gathering techniques
3. Activity Duration Estimates 3. Checklist analysis
4. Scope baseline 4. Assumptions analysis
5. Stakeholder register 5. Diagramming techniques
6. Cost management Plan 6. SWOT analysis
7. Schedule management plan 7. Expert Judgement
8. Quality management plan
9. Project documents
10. Enterprise environmental factors
11. Organizational process assets

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Identify Risks Data

Flow Diagram

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11.2 Identify Risks : Inputs

1. Risk Management Plan :The risk management plan is one of the key
inputs to the risk identification process.
2. Activity Cost Estimates
3. Activity Duration Estimates
4. Scope Baseline
5. Stakeholder Register
6. Cost Management Plan
7. Schedule Management Plan
8. Quality Management Plan

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11.2 Identify Risks : Inputs

9. Project Documents : that can be useful in this process, include , but are not
limited to :
 Assumptions Log

 Work performance reports

 Earned value reports

 Network diagrams, baselines and other project information proven to be valuable in

identifying risks

10. Enterprise Environmental Factors : include, but are not limited to :

 Published information, academic studies, published checklists ,benchmarking, industry
studies, and risk attitudes

11. Organizational Process Assets : Project files ,organizational and project

process controls, Risk statement templates, and lessons learned .
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11.2 Identify Risks – Tools & Techniques

 Risk identification should be a methodical, planned
approach.
 A systematic, scientific approach is best.
1. Reviewing Project Documents
 The project plan, scope, and other project files should be reviewed.
 Constraints and assumptions should be reviewed, considered, and
analyzed for risks.
 This structure review takes a very broad look at the project plan,
the scope, and the activities defined within the project.

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11.2 Identify Risks – Tools & Techniques

2. Information Gathering Techniques

 Brainstorming

 Delphi Technique

 Interviewing

 Root Cause Analysis

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Brainstorming the Project

 Brainstorming is likely the most common approach to risk
identification.
 It’s usually completed together as a project team to identify
the risks within the project.
 A multidisciplinary team, hosted by a project facilitator, can
also complete brainstorming.
 This approach can include subject matter experts, project
team members, customers, and other stakeholders who
contribute to the risk identification process.

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Using the Delphi Technique

 The Delphi Technique is an anonymous method to query experts
about foreseeable risks within a project, phase, or component of a
project.

 The result of the survey are analyzed by a third party, organized,

and then circulated to the experts.

 There can be several rounds of anonymous discussion with the

Delphi Technique – without fear of backlash or offending other
participants in the process.

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Identifying Risks Through Interviews

 Interviewing subject-matter experts and project stakeholders is an
excellent approach to identifying risks on the current project based
on the interviewee’s experience.

 The interviewee, through questions and discussion, shares his

insight on what risks he perceives within the project.

 The goal of the process is to learn from the expert what risks may
be hidden within the project, what risks this person has
encountered on similar work, and what insight the person has into
the project work.
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Root Cause Analysis

 Root cause analysis is a specific technique to identify a

problem, discover the underlying causes that lead to it,and
develop a preventive action

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3. Checklists Analysis :
1. Risk checklists can be developed based on historical information
and knowledge that has been accumulated from previous similar
projects and from other sources of information .

2. The lowest level of RBS can also be used as a checklist

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4. Examining the Assumptions

 Assumption analysis is the process of examining the
assumptions to see what risk may stem from false
assumptions.

 Examining assumptions is about finding the validity of the

assumptions.

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5. Diagramming Techniques
 There are several diagramming techniques that can be
utilized by the project team to identify risks:
 Ishikawa
 Flow charts
 Influence diagrams

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6. Analyzing SWOT
SWOT means strengths, weaknesses, opportunities, and threats.
 Strengths : the technology to be installed in the project has been installed
by other large companies in our industries

 Weaknesses: we have never installed this technology before.

 Opportunities: the new technology will allow us to reduce our cycle time
for time-to-market on new products.

 Threats: the time to complete the training and simulation may overlap with
product updates, new versions, and external changes to our technology
portfolio.

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11.2 Identify Risks - Output

Risk Register

 The main output of the risk identification process is a list

of identified risks and other information needed to begin
creating a risk register

 The risk register is a project plan component that

contains all the information related to the risk
management activities.

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Risk Register Contents

 List of identified risks

 List of Potential Responses

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11.3 Perform Qualitative Risk Analysis

 The Qualitative Risk Analysis process involves determining
what impact the identified risks will have on the project
objectives and the probability they’ll occur.

 It also ranks the risks in priority order according to their effect

on the project objectives.

 This helps the team determine if Quantitative Risk Analysis

should be performed or if you can skip right to developing
response plans.
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11.3 Perform Qualitative Risk Analysis

Inputs Tools & Techniques Outputs

1. Risk register 1. Risk probability and impact 1. Risk register (updates)

2. Risk management plan assessment
3. Project scope statement 2. Probability and impact matrix
4. Organizational process assets 3. Risk data quality assessment
4. Risk categorization
5. Risk urgency assessment
6. Expert Judgement

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11.3 Perform Qualitative Risk Analysis

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11.3 Perform Qualitative Risk Analysis - Inputs

 The Qualitative Risk Analysis process has four inputs:
 Organizational process assets

 Project scope statement

 Risk management plan

 The risk register

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11.3 Perform Qualitative Risk Analysis – Tools &

Techniques

 The Qualitative Risk Analysis process includes the following

tools and techniques:
 Risk probability and impact assessment

 Probability and impact matrix

 Risk data quality assessment

 Risk categorization

 Risk urgency assessment

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Risk Probability and Impact Assessment

 This tool and technique assess the

probability that the risk events you’ve
identified will occur and it determines the
effect their impacts have on the project
objectives, including time, scope, quality, and
cost.

 Analyzing risks in this way allows you to

determine which risks require the most
aggressive management.

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Risk Probability and Impact Assessment

 Probability
 Probability is the likelihood that an event will occur. The classic example is flipping a
coin.
 There is a .50 probability of getting heads and a .50 probability of getting tails on the
flip.

 Impact
 Impact is the amount of pain (or the amount of gain) the risk event poses to the
project.
 The risk impact scale can be a relative scale that assigns values such as high-
medium-low (or some combination of these) or a numeric scale known as a cardinal
scale.
 Cardinal scale values are actual numeric values assigned to the risk impact. Cardinal
scales are expressed as values from 0.0 to 1.0 and may be stated in equal (linear) or
unequal (nonlinear) increments.

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Risk Impact Scale

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Assessing Probability and Impact

 The idea behind both probability and impact values is to
develop predefined measurements that describe what value
to place on a risk event.

 During the Qualitative Risk Analysis process, you’ll determine

and assess probability and impact for every risk identified
during the Risk Identification process.

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Probability and Impact Matrix

 A probability and impact matrix assigns an overall risk rating to
each of the project’s identified risks.

 The combination of probability and impact results in a classification

usually expressed as high, medium, or low.

 According to A Guide to the PMBOK, high risks are considered a

red condition, medium risks are considered a yellow condition, and
low risks are considered a green condition.

 This type of ranking is known as an ordinal scale because the

values are rank-ordered from high to low.

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Sample Probability and Impact Matrix

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Risk Data Quality Assessment

 The data quality assessment involves determining the usefulness of
the data gathered to evaluate risk. Most importantly, the data must
be unbiased and accurate.

 You will want to examine elements like the following when

performing this tool and technique:
 The quality of the data used

 The availability of data regarding the risks

 How well the risk is understood

 The reliability and integrity of the data

 The accuracy of the data

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Risk Categorizations

 This tool and technique is used to determine the effects risk

has on the project.

 You can examine not only the categories of risk determined

during the Risk Management Planning process (and
described in the RBS) but also the project phase and the
WBS to determine the elements of the project that are
affected by risk.

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Risk Urgency Assessment

 Using this tool you’ll determine how soon the potential risks
may occur and quickly determine responses for those risks
that could occur soon.

 You should consider the risk triggers, the time to develop and
implement a response, and the overall risk rating when
determining how quickly responses are needed.

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11.3 Perform Qualitative Risk Analysis - Output

Risk Register (update)
 The goal of the Qualitative Risk Analysis process is to rank the
risks and determine which ones need further analysis and,
eventually, risk response plans.

 You’ll update the register with the following information:

 Risk ranking (or priority) for the identified risks

 Risks grouped by categories

 List of risks requiring near-term responses

 List of risks for additional analysis and response

 Watch list of low-priority risks

 Trends in Qualitative Risk Analysis results

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11.4 Perform Quantitative Risk Analysis

 The Quantitative Risk Analysis process evaluates the
impacts of risk prioritized during the Qualitative Risk Analysis
process and quantifies risk exposure for the project by
assigning numeric probabilities to each risk and their impacts
on project objectives.

 This quantitative approach is accomplished using techniques

like Monte Carlo simulation and decision tree analysis.

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Quantifying Risk
 To paraphrase A Guide to the PMBOK, the purpose of this
process is to perform the following:
 Quantify the project’s possible outcomes and probabilities.

 Determine the probability of achieving the project objectives.

 Identify risks that need the most attention by quantifying their

contribution to overall project risk.

 Identify realistic and achievable schedule, cost, or scope targets.

 Determine the best project management decisions possible when

outcomes are uncertain.

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11.4 Perform Quantitative Risk Analysis

 Quantitative Risk Analysis—like Qualitative Risk Analysis—
examines each risk and its potential impact on the project
objectives.

 You may choose to use both of these processes to assess risk or

only one of them, depending on the complexity of the project and
the organizational policy regarding risk planning.

 The Quantitative Risk Analysis process can follow either the Risk
Identification process or the Qualitative Risk Analysis process.

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11.4 Perform Quantitative Risk Analysis

Inputs Tools & Techniques Outputs

1. Risk register 1. Data gathering and 1. Risk register (updates)

2. Risk management plan representation techniques
3. Cost management plan 2. Quantitative risk analysis and
4. Schedule management plan modelling techniques
5. Organizational process assets 3. Expert Judgement

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11.4 Perform Quantitative Risk Analysis

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11.4 Perform Quantitative Risk Analysis - Inputs

1. Organizational process assets

2. Project scope statement

3. Risk management plan

4. Risk register

5. Project management plan : Cost management plan and

schedule management plan

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11.4 Perform Quantitative Risk Analysis – Tools &

Techniques
1. Data Gathering and Representation Techniques
 The data gathering techniques includes interviewing techniques,
probability distributions, and expert judgment. Let’s look at each of
them.

 Interviewing
 Project team members, stakeholders, and subject matter experts
are prime candidates for risk interviews.

 Ask them about their experiences on past projects and about

working with the types of technology or processes you’ll use during
this project.
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Data Gathering and Representation Techniques

 Probability Distributions
 According to A Guide to the PMBOK, continuous probability
distributions include normal, lognormal, triangular, beta, and
uniform distributions.

 Distributions are graphically displayed and represent both the

probability and time or cost elements

 Triangular distributions use estimates based on the three-point

estimate (the pessimistic, most likely, and optimistic values).

 This means that during your interviews, you’ll gather these pieces
of information from your experts. Then you’ll use them to quantify
risk for each WBS element.
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Quantitative Risk Analysis and Modeling Techniques

 There are four techniques encompassed in this tool and
technique:
1. Sensitivity Analysis,

2. Expected Monetary Value Analysis,

3. Decision Tree Analysis, &

4. Modeling And Simulation.

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Sensitivity Analysis

 Sensitivity analysis is a quantitative method of analyzing the

potential impact of risk events on the project and determining
which risk event (or events) has the greatest potential for
impact by examining all the uncertain elements at their
baseline values.

 One of the ways sensitivity analysis data is displayed is a

tornado diagram.

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Tornado Diagram

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Expected Monetary Value (EMV) Analysis

 Expected monetary value (EMV) analysis is a statistical technique

that calculates the average, anticipated impact of the decision.

 EMV is calculated by multiplying the probability of the risk times its

impact and then adding them together.

 For example, one risk may cost the project an additional $10,000 if
it occurs, but there’s only a 20-percent chance of the event
occurring.

 In the simplest form, the expected monetary value of this individual

risk impact is thus $2,000. Project managers can also find the
expected monetary value of a decision by creating a decision tree.

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Expected Monetary Value (EMV) Example

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Decision Tree Analysis

 Decision trees are diagrams that show the sequence of
interrelated decisions and the expected results of choosing
one alternative over the other.

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Decision Tree Analysis an Example

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Decision Tree Analysis an Example

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Decision Tree Analysis an Example

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Decision Tree Analysis an Example

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Decision Tree Analysis an Example

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Decision Tree Analysis an Example

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Decision Tree Analysis an Example

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Modeling and Simulation

 Project simulations allow the project team to play “what-if” games
without affecting any areas of production. The Monte Carlo
technique is the most common simulation.

 Monte Carlo, typically completed through a computer software

program, completely simulates a project with values for all possible
variables to predict the most likely model.

 For the exam, remember that simulation techniques are used to

predict schedule or cost risks. Schedule simulations are usually
performed using the precedence diagramming method, while cost
simulation typically uses the WBS as its basis.

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Expert Judgment
 Experts can come from inside or outside the organization and
should have experience that’s applicable to your project.

 For example, if your project involves manufacturing a new product

or part, you might want to consider experts like engineers or
statisticians.

 If you’re dealing with sensitive data in an information technology

project, consider bringing on a security expert.

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11.4 Perform Quantitative Risk Analysis Outputs

1. Risk Register (Updates)

 Probabilistic analysis of the project

 Probability of achieving cost and time objectives

 Prioritized list of quantified risks

 Trend in Quantitative risk analysis results

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11.5 Plan Risk Responses

 Risk response planning is all about options and actions.

 It focuses on how to decrease the possibility of risks from

adversely affecting the project’s objectives, and on how to
increase the likelihood of positive risks that can aid the
project.

 Risk response planning assigns responsibilities to people

and groups close to the risk event.

 Risks will increase or decrease based on the effectiveness of

risk response planning.
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11.5 Plan Risk Responses

Inputs Tools & Techniques Outputs

1. Risk management plan 1. Strategies for negative risk or 1. Risk register (updates)
2. Risk register threats 2. Risk-related contractual
2. Strategies for positive risk or agreements
Opportunities 3. Project management plan
3. Contingent response (updates)
strategies 4. Project Document Updates
4. Expert Judgment

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11.5 Plan Risk Responses

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11.5 Plan Risk Responses : Inputs

 The risk management plan is needed during the risk response planning,
but the risk register is also needed to provide the following:
 A list of prioritized risks

 A risk ranking

 A prioritized list of quantified risk

 A probabilistic analysis of the project

 The probability of the project meeting the cost and schedule goals

 The list of potential responses decided upon when risks were first identified

 Any risk owners that have been identified

 A list of risks with common causal factors

 Trends from qualitative and quantitative analysis

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11.5 Plan Risk Responses– Tools & Techniques

 Strategies for Negative Risks or Threats

 After identifying and quantifying risks, you must decide

how to respond to them

 Four main response strategies for negative risks:

 Avoid

 Transfer

 Mitigate

 Accept

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11.5 Plan Risk Responses– Tools & Techniques

 Strategies for Negative Risks or Threats

 Avoiding the Negative Risks and Threats

 Avoidance is simply avoiding the risk.

 Examples of avoidance include the following:

 Changing the project plan to eliminate the risk

 Clarifying project requirements to avoid discrepancies

 Hiring additional project team members that have experience with the
technology that the project deals with

 Using a proven methodology rather than a new approach

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Strategies for Negative Risks or Threats

 Transferring the Negative Risk

 Transference is the process of transferring the risk (and the

ownership of the risk) to a third party. The risk doesn’t disappear,
it’s just someone else’s problem. Transference of a risk usually
costs a premium for the third party to own and manage that risk.
Common examples of risk transference include
 Insurance

 Performance bonds

 Warrantees
Most Effective in dealing with Financial Risk
 Guarantees

 Fixed-priced contracts
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Strategies for Negative Risks or Threats

 Mitigating the Negative Risk
 Mitigating risks is an effort to reduce the probability and/or impact
of an identified risk in the project. Mitigation is done—based on the
logic—before the risk happens.

 The cost and time to reduce or eliminate the risks is more cost
effective than repairing the damage caused by the risk. The risk
event may still happen, but hopefully the cost and impact of the risk
will both be very low.

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Mitigating the Negative Risk

 Examples of mitigation include:
 Adding activities to the project to reduce the risk probability or
impact

 Simplifying the processes within the project

 Completing more tests on the project work before implementation

 Developing prototypes, simulations, and limited releases

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Accepting the Negative Risk

 Acceptance indicates a decision not to make any changes to the project
plan to deal with a risk or that a suitable response strategy cannot be
identified. This strategy can be used for both negative and positive risks

 There are two types of acceptance:

Active acceptance: may include developing a contingency plan to

execute should a risk occurs.

Passive acceptance: requires no action. The project team will deal

with the risk as it occurs.

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Response Strategies for Positive Risks

 Exploit

 Share

 Enhance

 Acceptance

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Managing the Positive Risk and Opportunities

 Exploiting the Positive Risk or Opportunities

 When an organization would like to ensure that a positive risk

definitely happens, it can exploit the risk.

 Positive risk exploitation can be realized by adding resources to

finish faster than what was originally planned, increasing quality to
recognize sales and customer satisfaction, utilizing a better way of
completing the project work—or any other method that creates the
positive outcomes of the identified risk.

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Managing the Positive Risk and Opportunities

 Sharing the Positive Risk
 The idea of sharing a positive risk really means sharing a mutually
beneficial opportunity between two organizations or projects, or
creating a risk-sharing partnership.

 When a project team can share the positive risk, ownership of the
risk is given to the organization that can best capture the benefits
from the identified risk.

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Managing the Positive Risk and Opportunities

 Enhancing the Positive Risks

 This risk response seeks to modify the size of the identified
opportunity. The goal is to strengthen the cause of the opportunity
to ensure that the risk event does happen.

 Enhancing a project risk looks for solutions, triggers, or other drives

to ensure that the risk does come to fruition so the rewards of the
risk can be realized by the performing organization.

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Accepting the Risks

 Risk acceptance is the process of simply accepting the risks

because no other action is feasible; or the risks are deemed to be
of small probability, impact, or both and that a formal response is
not warranted.

 Passive acceptance requires no action; the project team deals with

the risks as they happen.

 Active acceptance entails developing a contingency plan should the

risk occur. Acceptance may be used for both positive and negative
risks.

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Accepting the Risks

 A contingency plan is a predefined set of actions the project

team will take should certain events occur. Events that trigger
the contingency plan should be tracked.

 A fallback plan is a reaction to a risk that has occurred when

the primary response proves to be inadequate.

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Contingency Response Strategies

 A contingency allowance is the amount of money the project
will likely need in the contingency reserve based on the
impact, probability, and expected monetary value of a risk
event.

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11.5 Plan Risk Responses- Output

 The major output of risk response planning is the risk register
updates. These risk responses are documented in the risk register
and guide the reaction to each identified risk.

 They include the following:

 A description of the risk, what area of the project it may affect, the
causes of the risk, and its impact on project objectives

 The identities of the risk owners and their assigned

responsibilities

 The outputs of qualitative and quantitative analysis

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11.5 Plan Risk Responses- Output

 Risk strategies and the specific actions necessary to implement
those strategies

 Symptoms and warning signs, sometimes called triggers, of each

risk event

 A description of the response to each risk, such as avoidance,

transference, mitigation, or acceptance

 The actions necessary to implement the responses

 The budget and schedule for risk responses

 Both the contingency and fallback plans

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Working with Residual Risks

 The risk response plan also acknowledges any residual risks that
may remain after planning, avoidance, transfer, or mitigation.

 Residual risks are typically minor and have been acknowledged

and accepted. Management may elect to add both contingency
costs and time to account for the residual risks within the project.

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Accounting for Secondary Risks

 Secondary risks are risks that stem from risk responses.

 For example, transference may elect to hire a third party to

manage an identified risk.

 A secondary risk caused by the solution is the failure of the

third party to complete their assignment as scheduled.

 Secondary risks must be identified, analyzed, and planned

for, just as any another identified risk.

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Risk related contract decisions

 When multiple entities are involved in a project, contractual
agreements may be necessary to identify the responsible parties for
identified risks.

 The contract may be needed for insurance purposes, customer

acceptance, or the acknowledgement of responsibilities between
the entities completing the project.

 Transference is an example of contractual agreements for the

responsibility of risks within a project.

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Updating the Project Plan

 The risk reactions, contingency plans, and fallback plans

should all be documented and incorporated into the project
plan—for example, updating the schedule, budget, and WBS
to accommodate additional time, money, and activities for
risk responses.

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11.5 Plan Risk Responses– Outputs

Project Document Updates :

 Project documents that may get updated , include, but are not
limited to :
 Assumptions Log Updates

 Technical documentation updates

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11.6 Monitor and Control Risks

 Risks must be actively monitored and new risks must be responded
to as they are discovered.

 Risk monitoring and control is the process of monitoring identified

risks for signs that they may be occurring, controlling identified risks
with the agreed responses, and looking for new risks that may
creep into the project.

 Risk monitoring and control also is concerned with the

documentation of the success or failure of risk response plans, and
keeping records of metrics that signal risks are occurring, fading, or
disappearing from the project.

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11.6 Monitor and Control Risks

 There are several goals to risk monitoring and control:
 To confirm risk responses are implemented as planned

 To determine if risk responses are effective or if new responses are

needed

 To determine the validity of the project assumptions

 To determine if risk exposure has changed, evolved, or declined due to

trends in the project progression

 To monitor risk triggers

 To confirm policies and procedures happen as planned

 To monitor the project for new risks

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11.6 Monitor and Control Risks

Inputs Tools & Techniques Outputs

1. Risk register 1. Risk reassessment 1. Risk register (updates)

2. Project Management Plan 2. Risk audits 2. Change Requests
3. Work performance 3. Variance and trend analysis 3. Organizational process assets
information 4. Technical performance (updates)
4. Performance reports measurement 4. Project management plan
(updates)
5. Reserve analysis
5. Project Document Updates
6. Status meetings

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11.6 Monitor and Control Risks

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11.6 Monitor and Control Risks : Inputs

 The risk register The risk register is central repository for all
project risk information. It includes the identified risks, the potential
responses, the root causes of risks, and any identified categories of
risk.

 Project Management Plan : contains risk management plan : that

defines the organization’s approach to risk management. It is not
the strategy for specific risks within a project, but the overall
strategy for risk analysis and planning.

 Project performance Project performance focuses on the balance

of the project schedule, costs, and scope. Should any of these
factors suffer, new risks are likely to enter the project.
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11.6 Monitor and Control Risks : Inputs

 Work performance information :
 The results of project work can inform the project manager and the project team of new
and pending risks. In addition, project team members may create reports to monitor or
document risks. These reports are known as issue logs, action items, jeopardy
warnings, and escalation notices.

 Deliverables status

 Schedule progress

 Costs incurred

 Performance Reports : These reports take information from performance

measurements and analyze it to provide project work performance
information including variance analyses, earned value data , and forecasting
data
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11.6 Monitor and Control Risks – Tools &

Techniques
 Risk Reassessment
 Identification of new risk, reassessment of current risk etc…

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11.6 Monitor and Control Risks – Tools &

Techniques
 Risk Response Audits
 A risk response audit examines the planned risk response, how
well the planned actions work, and the effectiveness of the risk
owner in implementing the risk response.

 The audits happen throughout the project to measure the

effectiveness of mitigating, transferring, and avoiding risks.

 The risk response audit should measure the effectiveness of the

decision and its impact on time and cost.
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11.6 Monitor and Control Risks – Tools &

Techniques

 Periodic Risk Reviews

 The periodic risk review is a regularly scheduled discussion
throughout the project to ascertain the level of foreseeable risks,
the success of risk responses in the project to date, and a review of
pending risks.

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11.6 Monitor and Control Risks – Tools &

Techniques

 Earned Value Analysis

 Earned value analysis measures project performance. When
project performance is waning, the project is likely missing targeted
costs and schedule goals.

 The results of earned value analysis can signal that risks are
happening within the project—or that new risks may be developing.

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11.6 Monitor and Control Risks – Tools &

Techniques

 Technical Performance Measurement

 Throughout the project, the project team’s technical competence
with the technology being used in the project should increase.

 The level of technical achievement should be in proportion to the

expected level of technical performance within the project.

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11.6 Monitor and Control Risks – Tools &

Techniques
 Additional Risk Planning
 Most likely, new risks will become evident during the project
implementation.

 The project team, project manager, and key stakeholders that

discover the risks should communicate the risk.

 The risk must then be acknowledged, documented, analyzed, and

planned for. The project team must be encouraged to communicate
the discovery of new risks.

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11.6 Monitor and Control Risks - Outputs

1. Risk register updates

2. Change Requests : recommended corrective actions or

recommended preventive actions

3. Organizational process assets updates

4. Project management plan updates

5. Project Document Updates

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Results of Good Project Risk Management

 Unlike crisis management, good project risk management

often goes unnoticed

 Well-run projects appear to be almost effortless, but a lot of

work goes into running a project well

 Project managers should strive to make their jobs look

easy to reflect the results of well-run projects

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