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Section 8 Final

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9 views

Section 8 Final

Uploaded by

xandriajane27
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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SECTION 8:

Project Risk
Management
Risks are present in all projects, whatever their size or
complexity and in whatever industry or business sector.
Risk are those factor that might cause a project to fail to
meet its objectives.
Once identified and assessed, risks need to be managed
so that they do not have a big impact on a project.
8.1 Project Risks
Are defined as the undesirable event, the chance
this event, the chance this event might occur and
the consequences of all possible outcomes.
Project Risk
8.2
Management
 The process concerned with identifying, analysing and
responding to project risk
 Should be performed on a regular basis throughout the
project.
8.3 Effective Risk Management
1. Identify Uncertainties- explore the contracts and relationship for areas of
uncertainty.

2. Analyze Risks- specify how each uncertainty can impact performance


duration, cost and meeting requirements

3. Prioritize Risks- establish risks to be eliminated (too severe), requiring


committed management attention, minor in effect.

4. Mitigate Risks- take advance action to reduce effect. It is better to spend on


mitigation than to include contingency.

5. Plan for Emergencies- for all significant risks, have an emergency plan in
place.

6. Measure and Control- Track the effects of the risks identified and manage
to a successful conclusion.
Risk Management
8.4
Major Steps
1. Identification- identify all the possible risks events that could effect
the project.
 Internal risks: things that the team can control or influence (staff
assignments and cost estimates)
 External risks- things beyond the control or influence of the team
(government bureaucracy)
• Causes-and-effects: what could happen and what will occur
• Effects-and-causes : what outcomes are to be avoided or encouraged
and how each might occur.
2. Assessment
 Asses each risks in terms of probability, impact severity and
controllability.
 Involves risk analysis to develop understanding of each risks, its
consequence and the likelihood of those consequences.
 Involves evaluating risk and risk interactions to make a decision about
the level of priority of each risk.
 Assess the range of possible project outcomes and determines which
risk events warrant response.
8.5. Essential steps for performing a risk assessment :

4. Assess inherent
1. Identify relevant business
likelihood and impact of
objectives
risks

2. Identify events that


5. Evaluate portfolio of
could affect the
risks and determine risk
achievement of objectives

6. Assess residual
3. Determine risk tolerance likelihood and impact of
risks
8.6 Mitigation
Mitigation Option Examples
Reduce the probability • Implement quality assurance.
• Review contract conditions.
• Conduct further project analysis
• Increase supervision requirements
• Regularly analyze the project environment.
• Partnering/teaming agreements .

Reduce the consequences. • Contingency planning.


• Provide greater cost and time contingencies.
• Increase charge for project.
Transfer the risk • Subcontract some of the risky parts of the project.
• Risk sharing agreements with costumer, other companies or
government agencies
• Umbrella insurance
Accept the risk • Management of the risk using existing procedures.

Avoid the risk • Cease the activity affected by the risk.


8.7. Monitoring
Monitor and control risks dynamically
Program review
Earned value reporting
Critical path assessment
Feedback loop
Typical Risks Categories:
Useful Checklist
1. Technical Feasibility
 Organizational lack of familiarity with the technology
 Relative level of technical complexity > Maturity of the
technology (new vs. tried and tested)
 Interconnectivity of technology with existing systems
 Existing assets are underutilized in this project
 Obsolete approach for program delivery
 Customer demand projections incorrect
 Uncertainty over ownership and control
7. Project Organization
 Unavailability of key project personnel
 Change of key volunteers
 Unsatisfactory choice of subcontractors
 Engineering design not kept to schedule inadequate coordination of partners and subcontractors
 Staff not trained in time
 Inadequate contract documentation

8. Security and Cultural/Societal


 Heterogenous presence of cultures, customs & tradition and religion.
 Stability of security
 Peace and order
 Internal and external security (Organisational)

When should Risk Management be performed?


 Program planning
 During solicitation
 During performance
 After performance
 A continuous process risk evolve in
 Communication is key!
2. Political and External Market  Contract disputers escalation procedure inadequate
 Regulatory Environment Unfavorable  Excessive liability
 Organizational changes in priorities  Team unfamiliar with procurement method
 Viability of project
 Changes in decision makers 5. Human Behavior
 Natural Hazards  Unavailability of internal technical knowhow
 Political changes (new laws, tax policies etc.)  Unavailability of External technical expertise
 Lack of staff support for project
3. Financial and Economic  Delays in partner-beneficiary approvals
 Project costs can exceed budget  Delays in documentation
 High inflation or cost increases
 Cash flow profile unfavorable 6. Scope and Schedule
 Funding not approved by  Unreality of stated deadline
beneficiaries/stakeholders  Inadequate project definition
 Excessive price fluctuation on imported  Standards incompatible with requirements
components  Design incorporates high maintenance materials
 Required investment too high for return  Lack of resource availability
 Poor coordination or resources
4. Legal and Contractual  Requirement inflexibility
 Breach of contract/termination
 Penalty clauses
 Excessive warranties
 Contract claims/failure to perform

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