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Risk Management

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5 views21 pages

Risk Management

Uploaded by

katwilson2479
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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RISK MANAGEMENT

➢ RISKS ARE UNCERTAIN EVENTS THAT HAPPEN IN THE DEVELOPMENT


PROCESS.
➢ RISKS HAVE TO BE IDENTIFIED, ANALYZED AND PREVENTED FROM
OCCURRING IN THE PROJECT.
FRAMEWORK FOR DEALING WITH RISK

1. Risk identification:-what risks might there be?


2. Risk assessment:- (analysis and prioritization) which are the most serious risks?
3. Risk planning :-what are we going to do about them?
4. Risk monitoring :-what is the current state of the risk?
1.RISK IDENTIFICATION

Approaches to identifying risks include:


1.Use of checklists – usually based on the experience of past project.
2.Brainstorming – getting knowledgeable stakeholders together to pool concerns
3.Causal mapping – identifying possible chains of cause and effect
• Casual mapping can be represented as a cognitive map that describes the causes and
effects that influence the outcomes in the activity development.
• The outcome can be a negative or a positive influence depends on the particular factor.
✓ For example:- high staff turnover can be a positive factor but unstable requirements have
a negative impact.
• Casual maps usually represent people’s perspective towards the development of the
project.
FACTORS IN IDENTIFYING RISKS

1.Nature of Application
2.Experience of Staff
3.Quality of plan
4.Requirements- software and hardware
2.RISK ASSESSMENT

• A systematic process of evaluating the potential risks that may be involved in a projected activity
or undertaking.
• Risk exposure for every risk has to be calculated with the probability of occurrence.
➢ Risk exposure is expected loss due to a risk and it is defined as
Risk exposure = (probability of occurrence) X (value of damage)
OR
Risk exposure = Probability of Risk × Impact of Risk
• Probability of Risk: The likelihood that the risk will happen
• Impact of Risk: The estimated cost or loss if the risk occurs
FEW RISK EXPOSURE ASSESSMENTS ARE

• Requirement specification changes during coding phase


• Staffs' inability to complete the task assigned,hence affecting the critical activities.
• Specification process takes much longer than expected.
• Module testing produces errors of design phase.
EXAMPLE PROBABILTY COST
RISK PLANNING AND REDUCTION

❖ Risk prevention:-some risks can be prevented from occurring and can be reduced. Example:-risk of staff
being unavailable for meeting can be reduced by early scheduling.
❖ Risk acceptance: A risk that has already occurred according to the prioritization process cannot be
avoided. Accept the risk that happens and minimizes the damage and the costs of action.
❖ Risk avoidance: Some risks that happen regularly can be categorized and avoided before it occurs.
❖ Risk reduction: Risk reduction attempts to reduce the occurrence of risk whereas risk mitigation ensures
that the risk impact is much lesser when actually occurs.
Example: Earthquake
❖ Risk transfer: Certain complex risks can be transferred to other organizations where experienced
professionals can carry out the possibility of its occurrence.
RISK MONITORING

➢ Risk monitoring is a planned process of assessing whether the predicted risks occur or
not.
➢ It also collects information of the future risk analysis and attempts to determine what
has caused the particular risk.
EVALUATING RISKS USING PERT(PROGRAM
EVALUATION AND REVIEW TECHNIQUE):-
• It helps to analyze the project work schedule by focusing on each task and calculate the
minimum time required to complete the project.
❖It is a technique in which planning, scheduling, organizing, coordinating and
controlling of uncertain activities is done.
• It is similar to the Critical Path Method (CPM), but instead of using single estimation for
duration of each task, PERT requires 3 estimates:-
• Most likely time (m)=>expected time taken by task to complete under normal circumstances.
• Optimistic time(a) => the shortest time to complete the activity.
• Pessimistic time(b)=> worst possible time to complete the activity.
• PERT then combines these three estimates to form a single expected
duration
Estimated time( Te)=( a+4m+b)/6
Standard deviation(s)
• measures the uncertainty or risk in the time estimate of a task.
• s =(b-a)/6
• Smaller s → task duration is more predictable.
• Larger s → task duration is less predictable/riskier
VARIANCE= Square of s
HOW TO DRAW PERT CHART

activity_name 2
1
duration
• PERT is based on AOA(activity on arrow).
• Arrow shows dependency.
• Tasks are ranked on priority basis.
QUESTION
ANSWER
CALCULATING THE Z VALUES

• It calculated for each node that has a target date.


• It is equivalent to the number Of standard deviations between the node’s expected and
target dates.
• It is calculated using the formula
• z = (T-Te)/s
• Here, T=target date
• Te= expected date
ADVANTAGES OF PERT

● Estimation of completion time of project is given by the PERT.


● It supports the identification of the activities with slack time.
● The start and dates of the activities of a specific project is determined.
● It helps project manager in identifying the critical path activities.
● It makes well organized diagram for the representation of large amount of data.
DISADVANTAGES OF PERT

● The complexity of PERT is more which leads to the problem in implementation.


● The estimation of activity time are subjective in PERT which is a major disadvantage.
● Maintenance is also expensive and complex.
● It under-estimates the expected project completion time as there is chances that other
paths can become the critical path if their related activities are postponed.
Aspect PERT CPM

PERT is a technique of project management


It is a technique used to manage only certain (i.e.,
Definition which is used to manage uncertain( time is
time is known) activities of any project.
unknown) activities of any project.

It is event-oriented technique which means that It is activity-oriented technique which means that
Orientation
network is constructed on the basis of event. network is constructed on the basis of activities.

Model Type It is a probability model. It is a deterministic model.

It majorly focuses on time as meeting time target


It majorly focuses on Time-cost trade off as
Focus or estimation of percent completion is more
minimizing cost is more important.
important.

It is appropriate for high precision time


Precision It is appropriate for reasonable time estimation.
estimation.

Nature of Job It has Non-repetitive nature of job. It has repetitive nature of job.

There is no chance of crashing as there is no There may be crashing because of certain time
Crashing
certainty of time. bound.

It uses dummy activities for representing


Dummy Activities It doesn’t use any dummy activities.
sequence of activities.

It is suitable for projects which required research


Sustainability It is suitable for construction projects.
and development.

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