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Chapter Four Demystifying Risk: Using Pmi Pmbok

The document discusses project risk management based on the PMBOK guide. It summarizes the six key processes in PMBOK for managing project risk: 1) plan risk management, 2) identify risks, 3) perform qualitative risk analysis, 4) perform quantitative risk analysis, 5) plan risk responses, and 6) control risks. However, it notes that PMBOK has limitations and does not address issues like building an organizational risk culture or integrating risk and costs. The document provides details on some of the individual risk management processes.

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meron berhanu
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Download as PPT, PDF, TXT or read online on Scribd
86 views

Chapter Four Demystifying Risk: Using Pmi Pmbok

The document discusses project risk management based on the PMBOK guide. It summarizes the six key processes in PMBOK for managing project risk: 1) plan risk management, 2) identify risks, 3) perform qualitative risk analysis, 4) perform quantitative risk analysis, 5) plan risk responses, and 6) control risks. However, it notes that PMBOK has limitations and does not address issues like building an organizational risk culture or integrating risk and costs. The document provides details on some of the individual risk management processes.

Uploaded by

meron berhanu
Copyright
© © All Rights Reserved
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Chapter Four

DEMYSTIFYING RISK: USING


PMI PMBOK
The PMBOK is a Guide intended to help practitioners recognize the general process
of project risk management practice and the associated inputs, tools and techniques.

Despite its popular use as a guide to simplify the process it is only a start in regards
to future needs.

 Process focused.
 Single project oriented.
 Emphasis on quantitative.
 Focused on methods and procedures, not people.
 Not related to cost.
 Not related to quality.
 Ignores business wide risk.
 Does not incorporate contingency into planning.
 Ignores risk as opportunity.
Project Risk Management Processes (PMBOK)

PMBOK provides the following complete step-by-step process on managing PRM


 Plan risk management:
 Identify risks
 Perform qualitative risk analysis
 Perform quantitative risk analysis
 Plan risk responses
 Control risks
Plan Risk Management
 Risk management Plan is the process of defining how to conduct risk management activities for a
project
The project team should review project charter, project documents as well as
organization’s risk management policies, risk categories, lessons-learned reports from
past projects, and templates for creating a risk management. It is also important to review
the risk tolerances of various stakeholders.

Issues not addressed in PMBOK include


 Building a risk-based organizational culture
 Program and portfolio management
 Interface management
 Risk and cost integration
 Business plan
 Work Breakdown Structure (WBS)
 Information and network system
WBS for establishing a Construction site.
WBS for Retail Website
 Depending upon the size and complexity of the project the
following elements will be present in a risk management plan.

Methodology
Roles, Responsibilities and Authority.
Budgeting
Timing
Risk categories
Scoring and interpretation
Revised stakeholder risk tolerance
Tracking
 Risk documentation
 Different individuals and organizations have different tolerances for and
attitudes toward risk. The three types of stakeholder attitudes toward risk
are

 risk seeker – a willingness to take risks – and accept the


outcome – in anticipation of positive outcomes.

 risk averse – a reluctance to take risks or to expose projects to


the possible adverse consequences of unplanned events or
conditions.

 risk neutral – an indifference to risk whereby it does not play a


role in decision making.
Topic Questions to Answer
Methodology How will risk management be performed on this project? What tools and data sources are
available and applicable?
Roles and responsibilities Which people are responsible for implementing specific tasks and providing deliverables
related to risk management?
Budget and schedule What are the estimated costs and schedules for performing risk-related activities?

Risk categories What are the main categories of risks that should be addressed on this project?

Risk probability and impact How will the probabilities and impacts of risk items be assessed? What scoring and
interpretation methods will be used for the qualitative and quantitative analysis of risks?

Revised stakeholders’ Have stakeholders’ tolerances for risk changed? How will those changes affect the project?
tolerances
Tracking How will the team track risk management activities? How will lessons learned be
documented and shared? How will risk management processes be audited?

Risk documentation What reporting formats and processes will be used for risk management activities?
Identify Risks
 Identifying risks is the process of determining which risks are
likely to affect a project and documenting the characteristics of each.
 Identify risks by sources (risk categories) such as technical, external,
organizational, external etc. that vary across different types of
projects.
 A risk breakdown structure (RBS) helps the project team to look at
many sources from which project risk may arise in a risk
identification exercise.
Identifying risks – Input
 Project charter
 Work breakdowns structure (WBS)
 Product description
 Schedule and cost estimates
 Resource plan
 Assumption and constraint lists
 Historical information
 Project files
 Published information
Identifying risks – Tools and techniques
Information gathering techniques
 Brainstorming
 The Delphi Technique
 Interviewing
SWOT analysis
Checklist analysis
Assumptions analysis
Documentation reviews
Diagramming techniques
 Cause and effect diagrams.
 System or process flow charts.
 Influence diagrams
Example : Cause and Effect Diagrams
• Also known as Ishikawa or fishbone

Testing Inadequate Time Project Prioritization

Product
Delivered Late

Personnel Materials Insufficient Bad Specs


Resources

Potential Causes Effect


The primary output of the risk identification process is the ‘Risk Register’.

The preparation of the risk register begins in the identify Risks process with the
following information, and then becomes available to other project management and risk
management processes:

 List of identified risks and the root causes of those risks.


Triggers for each risk : indicators of symptoms of actual risk events
Perform Risk Analysis
After identifying and categorizing risks follows risk assessment , to
establish the level of risks in terms of possibility and consequence.

The risk analysis will determine which risk factors would potentially
have a greater impact on the project by analyzing risks in terms of
probability and impact.

There are two methods used for determining the level of risk :
qualitative and quantitative
Qualitative analysis Quantitative analysis

• Uses subjective values: Green, • Relies on a numeric value


Yellow, Red • Uses objective data
• Requires common • Requires understanding of
understanding of ordinal ranking probability theory
system
• Removes some uncertainty
• May be less precise than • Should be based on historical
quantitative analysis data
• Should be defined in terms of
the parameters of the project
Qualitative Risk Analysis Process
Quantitative Risk Analysis-Input
 Similar to qualitative risk analysis input plus
 Cost management plan
 Schedule management plan

Quantitative Risk Analysis-Tools and techniques

Interviewing

Modeling techniques
 Sensitivity analysis
 Expected value analysis
 Simulations
Expert judgement
Quantitative Risk Analysis- Output
Probabilistic analysis of the project
Probability of achieving cost and time objectives
Prioritized list of quantified risks.
Trends in quantitative risk analysis results
Plan Risk Responses

Involves developing options and actions to enhance opportunities and to


reduce threats to project objectives.
Control Risks
Summary of Risk Management Process

1. Plan Risk Management—Defining how to conduct risk management activities for


a project.
2. Identify Risks—Determining which risks may affect the project and documenting
their characteristics.
3. Perform Qualitative Risk Analysis—Prioritizing risks by assessing and
combining their probability of occurrence and impact.
4. Perform Quantitative Risk Analysis—Numerically analyzing the effect of
identified risks on overall project objectives.
5. Plan Risk Responses—Developing options and actions to enhance opportunities
and to reduce threats to project objectives.
6. Control Risks—Implementing risk response plans, tracking identified risks,
monitoring residual risks, identifying new risks, and evaluating risk process
effectiveness throughout the project

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