PROJECT RISK

MANAGEMENT

Instructor: Arsalan Akram

Lecture 5, BSIT 7th
University of Okara Special Thanks

Risk Management, IT Project Management 1

 LEARNING OBJECTIVES
UNDERSTAND RISK AND THE IMPORTANCE OF GOOD
PROJECT RISK MANAGEMENT
LIST COMMON SOURCES OF RISKS ON INFORMATION
TECHNOLOGY (IT) PROJECTS
DESCRIBE THE PROCESS OF IDENTIFYING RISKS AND
CREATE A RISK REGISTER
DISCUSS QUALITATIVE RISK ANALYSIS AND EXPLAIN HOW
TO CALCULATE RISK FACTORS, CREATE
PROBABILITY/IMPACT MATRIXES, AND APPLY THE TOP TEN
RISK ITEM TRACKING TECHNIQUE TO RANK RISKS
DISCUSS
Risk Management, HOW TO CONTROL RISKS
IT Project Management 2
 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

Risk Management, IT Project Management 3

 ROJECT MANAGEMENT MATURITY BY
INDUSTRY GROUP AND KNOWLEDGE AREA*
KEY: 1 = LOWEST MATURITY RATING 5 = HIGHEST MATURITY RATING

Engineering/ Telecommunications Information Hi-Tech

Knowledge Area Construction Systems Manufacturing

Scope 3.52 3.45 3.25 3.37

Time 3.55 3.41 3.03 3.50
Cost 3.74 3.22 3.20 3.97
Quality 2.91 3.22 2.88 3.26
Human Resources 3.18 3.20 2.93 3.18

Communications 3.53 3.53 3.21 3.48

Risk 2.93 2.87 2.75 2.76
Procurement 3.33 3.01 2.91 3.33 

*Ibbs, C. William and Young Hoon Kwak. “Assessing Project Management Maturity,”
Project Management Journal (March 2000).
Risk Management, IT Project Management 4
 BENEFITS FROM SOFTWARE RISK
MANAGEMENT PRACTICES*

Risk Management, IT Project Management 5

*Source: Kulik and Weber, KLCI Research Group

 GLOBAL ISSUES
• MANY PEOPLE AROUND THE WORLD SUFFERED FROM
FINANCIAL LOSSES AS VARIOUS FINANCIAL MARKETS
DROPPED
• ACCORDING TO A GLOBAL SURVEY OF 316 FINANCIAL
SERVICES EXECUTIVES, OVER 70 PERCENT OF
RESPONDENTS BELIEVED THAT THE LOSSES STEMMING
FROM THE CREDIT CRISIS WERE LARGELY DUE TO
FAILURES TO ADDRESS RISK MANAGEMENT ISSUES
• THEY IDENTIFIED SEVERAL CHALLENGES IN
IMPLEMENTING RISK MANAGEMENT
Risk Management, IT Project Management 6
 RISK
• A GENERAL DEFINITION OF PROJECT RISK IS AN
UNCERTAINTY THAT CAN HAVE A NEGATIVE OR
POSITIVE EFFECT ON MEETING PROJECT OBJECTIVES.
• NEGATIVE RISK INVOLVES UNDERSTANDING
POTENTIAL PROBLEMS THAT MIGHT OCCUR IN THE
PROJECT AND HOW THEY MIGHT DELAY PROJECT
SUCCESS
• POSITIVE RISKS ARE RISKS THAT RESULT IN GOOD
THINGS HAPPENING; SOMETIMES CALLED
OPPORTUNITIES
Risk Management, IT Project Management 7
 RISK UTILITY

• RISK UTILITY OR RISK TOLERANCE IS THE AMOUNT OF

SATISFACTION OR PLEASURE RECEIVED FROM A POTENTIAL
PAYOFF
• UTILITY RISES AT A DECREASING RATE FOR PEOPLE WHO ARE
RISK-AVERSE
• THOSE WHO ARE RISK-SEEKING HAVE A HIGHER TOLERANCE FOR
RISK AND THEIR SATISFACTION INCREASES WHEN MORE PAYOFF
IS AT STAKE
• THE RISK-NEUTRAL APPROACH ACHIEVES A BALANCE BETWEEN
RISK AND PAYOFF

Risk Management, IT Project Management 8

 RISK UTILITY FUNCTION AND
RISK PREFERENCE

Risk Management, IT Project Management 9

 PROJECT RISK MANAGEMENT PROCESSES
• PLANNING RISK MANAGEMENT : DECIDING HOW TO APPROACH
AND PLAN THE RISK MANAGEMENT ACTIVITIES FOR THE PROJECT

• IDENTIFYING RISKS: DETERMINING WHICH RISKS ARE LIKELY TO

AFFECT A PROJECT AND DOCUMENTING THE CHARACTERISTICS OF
EACH

• PERFORMING QUALITATIVE RISK ANALYSIS: PRIORITIZING

RISKS BASED ON THEIR PROBABILITY AND IMPACT OF
OCCURRENCE

Risk Management, IT Project Management 10

 PROJECT RISK MANAGEMENT
PROCESSES (CONT’D)
• PERFORMING QUANTITATIVE RISK ANALYSIS: NUMERICALLY
ESTIMATING THE EFFECTS OF RISKS ON PROJECT OBJECTIVES

• PLANNING RISK RESPONSES: TAKING STEPS TO ENHANCE

OPPORTUNITIES AND REDUCE THREATS TO MEETING PROJECT
OBJECTIVES

• CONTROLLING RISK: MONITORING IDENTIFIED AND

RESIDUAL RISKS, IDENTIFYING NEW RISKS, CARRYING OUT
RISK RESPONSE PLANS, AND EVALUATING THE EFFECTIVENESS
OF RISK STRATEGIES
Risk Management, IT Project ManagementTHROUGHOUT THE LIFE OF THE PROJECT
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Risk Management, IT Project Management 12
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