PMI – Project Risk Management

Sanjeev, Vivek, Manju

People. Processes. Technology. Results.

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 Agenda

• Risk Management Knowledge Sharing session

– Introductions and Overview 05 mins – Manju

– Risk Management Planning 10 mins – Manju
– Risk Identification 10 mins – Manju
– Qualitative Risk Analysis 10 mins – Vivek
– Quantitative Risk Analysis 10 mins – Sanjeev
– Risk Response Planning 10 mins – Vivek
– Risk Monitoring & Control 10 mins – Manju

• Sample Questions 20 mins

• Open Discussions 10 mins

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 Project Risk Management - Overview

The objectives of Project Risk Management are to increase the probability and
impact of positive events, and decrease the probability and impact of events
adverse to the project.

Key Process Areas

• Risk Management Planning – deciding how to approach, plan, and execute the risk
management activities for a project

• Risk Identification – determining which risks might affect the project and documenting their
characteristics

• Qualitative Risk Analysis– prioritizing risks for subsequent further analysis or action by
assessing and combining their probability of occurrence and impact

• Quantitative Risk Analysis – numerically analyzing the effect on overall project objectives of
identified risks

• Risk Response Planning – developing options and actions to enhance opportunities, and to
reduce threats to project objectives

• Risk Monitoring & Control – tracking identified risks, monitoring residual risks, identifying new
risks, executing risk response plan, and evaluating their effectiveness throughout the project life
cycle

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www.perotsystems.com Proprietary and confidential. © 2006 Perot Systems. All rights reserved. All registered trademarks are the property of their respective owners.
 Risk Management Planning

People. Processes. Technology. Results.

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 Risk Management Planning

Risk Management Planning : Inputs, Tools & Techniques, and

Outputs

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 Risk Management Planning Objectives

• How to approach and conduct Risk Management activities

• Prepare Risk Management Plan

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 Risk Management Planning : Inputs

1. Enterprise Environmental Factors

• Risk Attitudes
• Risk Tolerance
2. Organizational Process Assets
• Risk Categories
• Common Definition of Concepts and terms
• Standard templates
• Roles and Responsibilities
3. Project Scope Statement
4. Project Management Plan

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 Risk Management Planning : Tools &
Techniques

1. Planning Meetings and Analysis

• Basic plan for conducting Risk Management activities
• Risk Cost Elements
• Risk Scheduled Activities
• Risk responsibilities
• Tailoring of Organization templates

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 Risk Management Planning : Outputs

1. Risk Management Plan

• Methodology
• Roles and Responsibilities
• Budgeting
• Timing
• Risk Categories
• Definition of risk probability and impact
• Probability and impact matrix
• Revised stakeholder’s tolerance
• Reporting Format
• Tracking

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 Risk Identification

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 Risk Identification Process

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 Risk Identification Objectives

• Determining Risks that could impact the project

• Documenting project risk characteristics

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 Risk Identification: Inputs

1. Enterprise Environmental Factors

• Published Information
• Commercial databases
• Academic studies
• Benchmarking and other Industry studies
2. Organizational Process Assets
• Historical experiences
3. Project Scope Statement
• Uncertainty in project assumptions
4. Risk Management Plan
• Assignment of roles and responsibilities
• Provision for Risk Management activities in Schedule and Budget
• Categorizing Risks
5. Project Management Plan

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 Risk Identification: Tools & Techniques

1. Documentation Reviews
• Performing structured reviews of Project artifacts
2. Information Gathering Techniques
• Brainstorming
• Delphi Technique
• Interviewing
• Root Cause Identification
• SWOT Analysis
3. Checklist Analysis
• Developing Risk identification checklist based on historical
precedence's
4. Assumptions Analysis
5. Diagramming Techniques
• Cause-and-effect diagram
• System or process flow charts
• Influence diagrams

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 Risk Identification: Outputs

1. Risk Register
• List of identified risks
• List of potential responses to a risk
• Root causes of risk
• Updated risk categories

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 Qualitative Risk Analysis

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 Qualitative Risk Analysis

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 Qualitative Risk Analysis Objectives

• Determining the priority of the identified risks

• Ranking the risk by priority
• Determining the impact on the project objectives

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 Qualitative Risk Analysis : Inputs

1. Organizational Process Assets

• Data about risks on past projects
• Lessons learned knowledge base
2. Project Scope Statement
• Projects of common or recurring type
• Projects using first-of-its-type technology
3. Risk Management Plan
• Roles and responsibilities
• Budget, and schedule activities for risk management
• Risk Categories
• Definition of probability and impact
• Probability and impact matrix
• Revised stakeholders tolerance
4. Risk Register

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 Qualitative Risk Analysis : Tools & Techniques

1. Risk Probability and Impact Assessment

• Risk assessment by interviews
• Meetings with participants
2. Probability and Impact Matrix
• Risk ratings
• Classification of risks as high, moderate and low
• Risk Score Card
3. Risk data Quality Assessment
• Accuracy
• Quality
• Integrity of data about risk
4. Risk categorization
• By sources of risk
• By area of project affected
5. Risk Urgency Assessment

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 Qualitative Risk Analysis : Outputs

1. Risk Register Updates

• Relative ranking or priority list of project risks
• Risks grouped by categories
• List of risks requiring responses in the near term
• List of risks for additional analysis and response
• Watchlists of low priority risk
• Trends in qualitative risk analysis results

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 Quantitative Risk Analysis

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 Quantitative Risk Analysis

Overview
• Performed on the Risks already prioritized by QRA
• Assigns the numerical value to the risk.
• Various techniques for assigning the numerical values – Monte Carlo
Simulation and Decision tree Analysis.

Objectives

• Quantify the possible outcome of risk and its probability

• Identify the realistic and achievable cost, schedule and scope of the
project
• Determine the management decision – GO or NO-GO

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 Quantitative Risk Analysis

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 Quantitative Risk Analysis : Input
1. Organizational Process Asset
• Information on similar risk in other projects, Risk database and study of similar
risk by specialist
2. Project Scope Statement
• Initial Risk identification
3. Risk Management Plan
• Roles and Responsibilities, risk categories, revised stakeholders
4. Risk Register
• List of identified risks, Risk ranking and Risk Categorization
5. Project Management Plan
• Project Schedule Mgt Plan
 Controls Project schedule

• Project Cost Mgt Plan

 Controls Project budget

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 Quantitative Risk Analysis : Tools & Technique

1. Data Gathering
• Interviewing – Info collected for Cost Optimistic (low), Pessimistic (High) and most likely (Medium)

• Expert Judgment – SMEs validate the risk and data

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 Quantitative Risk Analysis : Tools & Technique

2. Modeling Techniques
• Sensitivity Analysis – helps to determine which risks have most impact on project

• EMV Analysis – Expected monetary value is a statistical concept and calculates the
average outcome of future scenario
EMV = Each possible outcome of risk x probability of occurrence

• Decision Tree Analysis – It is a method to determine which of two decisions is the best
to make e.g. Buy-verses-Build scenario, Lease-or-purchase equations, and use in-house
resources rather than outsourcing.

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 Quantitative Risk Analysis : Output

1. Risk Register Updates

• Probabilistic analysis of the project
• Probability of achieving cost and time
objectives
• Prioritized list of Risks –

 that pose greatest threat

or greatest opportunity.
 that influence the critical
path
 That require greatest cost
contingency.

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 Risk Response Planning

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 Risk Response Planning

Risk Response Planning is the process of developing options, and

determining actions to enhance opportunities and reduce threats to the
project objectives.
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 Risk Response Planning Objectives

• How to approach and conduct Risk Response Planning

• Prepare Risk response Plan

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 Risk Response Planning : Inputs

1. Risk Management Plan

• Some components of the Risk Management Plan that are important inputs to Risk
Response Planning may include risk thresholds for low, moderate, and high risks to help
understand those risks for which responses are needed, assignment of personnel and
scheduling and budgeting for risk response planning.
2. Risk Register
• Important inputs to Risk response planning include the relative rating or priority list of
project risks, a list of risks requiring response in the near term, a list of risks for
additional analysis and response, trends in qualitative risk analysis results, root causes,
risks grouped by categories, and a watchlist of low priority risks.

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 Risk Response Planning : Tools &
Techniques
1. Strategies for Negative Risks or Threats
• Avoid
• Transfer
• Mitigate
2. Strategies for Positive Risks or Opportunities
• Exploit
• Share
• Enhance
3. Strategy for both Threats and Opportunities
• Acceptance
4. Strategies for Negative Risks or Threats
• Contingent Response Strategy

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 Risk Response Planning : Outputs

1. Risk Register (Updates)

• Identified Risks, their descriptions, area of project affected, their causes, and how
they may affect project objectives.
• Risk owners and assigned responsibilities
• Prioritized lists of project risks and probabilistic analysis of the project
• Agreed upon response strategies
• Specific actions to implement the chosen response strategy
• Symptoms and warning signs of risks occurrence
• Budget and Schedule activities required to implement the chosen responses
• Contingencies reserves of time and cost designed to provide for stakeholders risk
tolerances
• Contingency plans and triggers that call for their execution
• Fallback plans for use as a reaction to a risk that has occurred, and the primary
response proves to be inadequate
• Residual risks that are expected to remain after planned responses have been
taken, as well as those that have been deliberately accepted.
• Secondary risks that arise as a direct outcome of implementing a risk response.

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 Risk Response Planning : Outputs

• Contingency reserves that are calculated based on the quantitative analysis of the
project and the organisations risks thresholds.
2. Project Management Plan (Updates)
• Risk response strategies, once agreed to, must be fed back in to the appropriate
processes in other knowledge areas, including the project’s budget and schedule.
3. Risk-Related contractual Agreements
• Contractual agreements, such as agreements for insurance, services, and other
items as appropriate, can be prepared to specify each party’s responsibility for
specific risks, should they occur.

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 Risk Monitoring & Control

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 Risk Monitoring & Control Process

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 Risk Monitoring & Control Objectives

• Identify, analyze and plan for newly arising Risks

• Keeping track of the identified risks
• Reanalyzing existing risk
• Monitoring trigger conditions
• Reviewing the execution of risk responses
• Determine the project assumptions if they are still valid
• Determine if Risk, as assessed, has changed from its prior state, with
analysis of trends
• Determine risk management policies and procedures are being followed
• Determine whether Contingency reserves of cost or schedule are modified
in line with the risk of the project

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 Risk Monitoring & Control : Inputs

1. Risk Management Plan

• Risk Owners
• Agreed upon risk Responses
• Specific implementation actions
• Residual and secondary risk
• Low priority risk
• Time and cost contingency reserves
2. Risk Register
3. Approved Change Requests
• Impact on risk register
• Impact on risk response plan
• Impact on risk management plan

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 Risk Monitoring & Control : Inputs

4. Work Performance Information

• Project deliverables status
• Corrective actions
• Performance reports
5. Performance Report
• Project work performance

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 Risk Monitoring & Control : Tools &
Techniques

1. Risk Reassessment
• Identification of new Risk
• Reassessment of the risk
2. Risk audits
• Document the effectiveness of risk response
• Document the effectiveness of risk management process
• Performance reports
3. Variance and Trend Analysis
• Earned Value Analysis
• Trend analysis
3. Reserve Analysis
4. Technical Performance Measurement
5. Status Meetings

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 Risk Monitoring & Control : Outputs

1. Risk Register Updates

• Outcomes of Risk reassessment, Risk Audits and Risk Reviews
• Outcome of Project’s risk, and of risk responses
2. Requested Changes
3. Recommended Corrective Actions
• Contingency Plan
• Workaround Plans
4. Recommended Preventive Actions
5. Organizational Process Assets Updates
6. Project Management Plan Updates

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 Thank you

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