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Risk
⚫ Risks are uncertain events which may or may not occur, but
which would matter if they did happen
⚫ Project Riskis an uncertain event or condition that, if it occurs,hasa
positive or negative effect on at least one of the project objectives (such
asCost, Scope,Schedule,Quality,etc)
⚫ Therefore each risk shouldrelate to at least one project objective,and
some risks mayaffect more than one objective
⚫ Risk mayhaveone or more causes; Acause maybe arequirement,
assumption, constraint, or condition that creates the possibility of
negative or positive outcomes
Project Risk Management 3
4
Project Risk Management
⚫ Riskis anuncertain event orconditionthat, if occurs, hasaneffect onat
least oneproject objective.
⚫ Riskmanagement objectives:
⚫increasetheprobability andimpactof positiveevents(opportunities).
⚫decreasetheprobability andimpactof negativeevents(threat).
⚫ T
erms &concepts:
⚫Uncertainty: alackofknowledgeaboutaneventthatreducesconfidence
⚫Riskaverse:someonewhodoesnotwanttotakerisks.
⚫Risktolerances: areaof risk that areacceptable/unacceptable.
⚫Riskthresholds: thepoint at whicharisk becomeunacceptable
Project Risk Management
Risk factors
1.
Theprobability
that it will occur
2.
Therangeof
possible
outcome
(impact)
3.
Expected
timing
(when) inthe
project life
cycle
4.
Theanticipated
frequencyof
riskevent
(howoften)
⚫ BecauseRMshould be embedded in the planningand operational
documents ofthe project, it isestablishedaspart ofthe project; RMis
not an optional activity
⚫ Known risks are those that are identified andanalyzed;it may be possible
to plan for them usingthe RiskManagement processes
⚫ Unknown riskscannot be managed proactively
⚫ Riskrelates both i.e. threats to project success (Negative Risk),and
opportunities (PositiveRisk) to enhance chances of the project’s success
Project Risk Management 7
Risk
Definitions
⚫ Risk Event
⚫ “Adiscreteoccurrencethat mayaffectthe project for better or worse”
⚫ Maybe favorable or unfavorable
⚫ Risk Probability
⚫ “Thelikelihood of occurrence.The ratio of the number of chancesbywhich an event mayhappen
(or not happen),to the sum of the chancesof both happening and not happening.”
⚫ Amount at Stake
⚫ “Theextent of adverse consequenceswhich could occur to the project”
⚫ Known Situation (not a risk category)
⚫ Known-unknown
⚫ “Identifiableuncertainty”
⚫ Situationthat we know mayhappen,but not howor whether it will affect us
⚫ The subject of risk management
⚫ Unknown-unknown
⚫ “Anitem or situation whose existencewecannot imagine”
8
Identifying Risk by Uncertainty
Project Risk Management 9
KNOWN
UNKNO
WN
KNOW
N
EVENT
S
KNOW
N
EVENT
S
UNKNOWN
UNKNOWN
KNOWN UNKNOWN
IMP
ACT
IMP
ACT
KNOWN
KNOWN
(Certainty)
UNKNOWN
UNKNOWN
(Ignorant Bliss)
UNKNOWNEVENTS
KNOWNIMP
ACT
(NeedsCauseAnalysis)
KNOWNEVENTS
UNKNOWNIMP
ACT
(NeedsRiskManagement)
Example of RBS
Project Risk Management 10
Technical External Organizational
Project
Management
Project
Requirements
Technology
Complexity And
Interfaces
Performances
And Reliability
Quality
Subcontractors
And Suppliers
Regulatory
Market
Customer
Weather
Project
Dependencies
Resources
Funding
Prioritization
Estimating
Planning
Controlling
Communication
The Risk Break Down Structure (RBS) lists the categories and sub-categories within which risks may arise for a typical project.
Different RBSs will be appropriate for different types of projects and different types of organizations. One benefit of this
approach is to remind participants in a risk identification exercise of the many sources from which project risk may arise.
⚫ Threats
⚫ Avoid
⚫ Transfer
⚫ Mitigate
⚫ Accept
Project Risk Management 11
⚫ Opportunities
⚫ Exploit
⚫ Share
⚫ Enhance
⚫ Accept
Strategies for Handling Risks
• Some responses are designed for use only if certain events occur
• Events that trigger the contingency response, such as missing
intermediate milestones or gaining higher priority with a supplier
should be defined and tracked
Some Definitions
⚫ AContingency/ Fall Back Plan is developed bythe team, if the response
strategy is foundto be not effective while implementation. (Plan Bif PlanA
fails)
⚫ Secondary Risk is the risk arises due to implementation of original risk
response plan.Team shall review any possibility of secondary risk while
finalizingrisk response strategy.(Acontingency reserve will cover cost
overrun in critical path but this maystrain the fundingand total cost)
⚫ Residual Risk is the risk that will remain even after implementation of risk
response strategy (No 100%Solution) (Insurance will cover hospital charges
for an accident but what about the disability)
The seven Risk Management Processes
PROCE
S S #
PROCESS NAME
PROCE
SS
GROUP
DESCRIPTION
1
Plan Risk Define how to conduct risk management
Management activities for a project.
Identify individual project risks as well as
2 Identify Risks sources of overall project risk, and
document their characteristics.
3
Perform
Qualitative Risk
Analysis
Planning
Prioritize individual project risks for further
analysis or action by assessing their
probability of occurrence and impact as
well asother characteristics.
Numerically analyze the combined effect of
4
Perform Quantitative
Risk Analysis
identified individual project risks and other
sources of uncertainty on overall project
objectives.
The seven Risk Management Processes
PROCE
S S #
PROCESS NAME
PROCE
SS
GROUP
DESCRIPTION
5 Plan Risk Responses Planning
Develop options, select strategies, and
agreeing on actions to address overall project risk
exposure, as well as to treat individual project
risks
6
Implement Risk
Responses
Executing Implement agreed-upon risk response plans.
7 Monitor Risks
Monitoring
&
Controllin
g
Monitor the implementation of agreed-upon risk
response plans, track identified risks, identify and
analyze new risks, and evaluate risk process
effectiveness throughout the project.
PRM & PPM.pptx
PRM & PPM.pptx
PRM & PPM.pptx
PRM & PPM.pptx
PRM & PPM.pptx
⚫ Threats
⚫ Avoid
⚫ Transfer
⚫ Mitigate
⚫ Accept
Project Risk Management
20
⚫ Opportunities
⚫ Exploit
⚫ Share
⚫ Enhance
⚫ Accept
Strategies for Handling Risks
• Some responses are designed for use only if certain events occur
• Events that trigger the contingency response, such as missing
intermediate milestones or gaining higher priority with a supplier
should be defined and tracked
.1 Strategies for negative risks or threats
⚫Avoid
⚫ Risk avoidance involves changing PM plan
⚫T
o eliminate the threat posed byanadverse risk
⚫T
o isolate the project’sobjectives from the risk impact
⚫Torelax the objective that is in jeopardysuch asextending the
schedule or reducingthe scope
⚫Some risks that arise only in the early stage of the project can
be avoided byclarifyingthe requirements, obtaining
information, improving communication or acquiring expertise
Project Risk Management
21
.1 Strategies for negative risks or threats (contd.)
⚫Transfer
⚫ Risk transference requires the negative impact of the threat along with ownership
of the response to athird party
⚫ Transferring the risk gives responsibility of management of the risk to the third
party – it does not eliminate the risk
⚫ Transferring liability for a risk is most effective in dealing with financial risk
exposure
⚫ Involves payment of premiums to the party taking on the risk
⚫ Transference tools can be quite diverse and include
⚫ Insurance, performance bonds, warranties,guarantees, etc
⚫ Contracts maybe used to transfer liabilityfor specific risks to athird party
⚫ Cost type contracts,fixed price contracts maytransfer risks to the seller
⚫Mitigate
⚫ Taking early action to reduce the probability and/or impact of arisk is more
effectivethan trying to repair the damage after the risk has occurred
⚫ Adopting less complex processes, conducting more tests, choosing amore stable
supplier are mitigation actions
⚫ Wherever it is not possible to reduce the probability,amitigation response may
address the risk impact by targeting linkages that determine the severity
Project Risk Management
22
.2 Strategies for positive risks or opportunities
⚫ Exploit
⚫ T
o realize the opportunity
⚫ This strategy seeks to eliminate the uncertainty associated with aparticular upside risk by
makingthe opportunity definitelyhappen
⚫ Directly exploiting responses include assigning more talented resources to the project
to reduce the time to completion or to provide better quality than planned
⚫ Share
⚫ Allocatingownership to third party who is best able to capture the opportunity for the
benefit of the project
⚫ Forming risk-sharing partnerships, teams, special-purposecompanies,or joint ventures to
manageopportunities
⚫ Enhance
⚫ This strategy modifies the size of an opportunity by increasing probability and/or
positive impact risks
⚫ Seekingto facilitate or strengthen the cause of the opportunity, and proactively targeting and
reinforcingits trigger condition might increase its probability
⚫ Impactdrivers canalso be targeted seeking to increase the project’s susceptibility to the
opportunity
Project Risk Management
23
⚫Strategies for both threats and opportunities
⚫Accept
⚫ It isseldom possible to eliminate all risk from aproject
⚫ Indicates that the project team hasdecided not to change the project
management plan to deal with the risk, or is unable to identify anysuitable
responsestrategy
⚫ Maybe adopted for threats and opportunities
⚫ The strategy canbe active or passive
⚫ Passivestrategy does not require anyaction except to document the strategy,
leavingthe project team to deal with the threats or opportunities asthey occur
⚫ Anexample of an active strategy could be to provide for the contingency
reserves including amountsof time, money,resources to handle the risks
⚫ Accepting an opportunity is being willing to take advantageof it if it comes
along, but not activelypursuingit
Project Risk Management
24
11.5 – Plan Risk Responses:
Tools & Techniques
Risk Responses
PRM & PPM.pptx
PRM & PPM.pptx
PROJECT
PROCUREMENT MANA
GEMENT
Getting Some Help
What is Procurement?
⚫ Procurement is a Business Management Function that
manage the entire process of acquisition of external
resources in efficient and economical manner
OR
⚫ Procurement is the act of buying goods, services or
worksfrom an externalsource.
⚫ It is favourable that the goods, services or works are
appropriate and that they are procured at the best
possible COST to meet the needs of the acquirer in
terms of quality and quantity
, time, andlocation.
What is Difference?
T
erms purchasingand procurement interchangeably
, but despite their
similarities theydo have different meanings
Procurement involves the process of selecting vendors, establishing
payment terms, strategic vetting, selection, the negotiation of contracts
and actual purchasingof goods.
Vs.
Purchasing is asubset of procurement. Purchasing generallyrefers
simply to buying goods or services.Purchasingoften includes receiving
and payment aswell.
Project Procurement Management
⚫ Project Procurement Management is about establishing, maintaining and
closing relationships with suppliers of goods and services for the project.
The definition of project procurement management from the PMBOK is:
“the processes necessary to purchase or acquire the products,
services, or results needed from outside the project team”
⚫ Includes the processes necessary to purchase or acquire products,
services, or results needed from outside the project team.
⚫ The organization can be either the buyer or seller.
⚫ Project Procurement Management includes the contract management and
change control processes required to develop and administer contracts or
purchase orders issued by authorized project team members.
⚫ contractual obligations placed on the project team by the contract.
31
Project Manager’s Role in Procurements
⚫ For the project managers, this is a big responsibility, as well as a huge
opportunity to showcase their skills and prove that they can accomplish tasks
requiring outside resources
⚫ Key roles:
⚫ Know the procurement process
⚫ Understand contract terms and conditions
⚫ Make sure the contract contains all project management requirements
such as attendance at meeting, reports, actions and communications
deemed necessary
⚫ Identify risks and incorporate mitigation and allocation of risks into the
contract
⚫ Help tailor the contract to the unique needs of the project
⚫ Align schedule of the contract and schedule of the project
⚫ Involved in contract negotiation
⚫ Make sure procurement process done smoothly
⚫ Work with contract manager to manage changes to the contract
PMm
ustbeassignedbeforecontract signed!
The three Procurement Management
Processes
PROCE
S S #
PROCESS NAME
PROCE
SS
GROUP
DESCRIPTION
1
Plan
Procurement
Management
Planning
Document project procurement decisions, specify
the approach,and identify potential sellers.
2
Conduct
Procurements
Executing
Obtain seller responses, select aseller,and award a
contract.
3
Monitor
Procurements
Monitoring
&
Controllin
g
Manage procurement relationships, monitor
contract performance, make changes and
corrections asappropriate,and close out contracts.
PRM & PPM.pptx
PRM & PPM.pptx
PRM & PPM.pptx

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PRM & PPM.pptx

  • 1. Risk ⚫ Risks are uncertain events which may or may not occur, but which would matter if they did happen ⚫ Project Riskis an uncertain event or condition that, if it occurs,hasa positive or negative effect on at least one of the project objectives (such asCost, Scope,Schedule,Quality,etc) ⚫ Therefore each risk shouldrelate to at least one project objective,and some risks mayaffect more than one objective ⚫ Risk mayhaveone or more causes; Acause maybe arequirement, assumption, constraint, or condition that creates the possibility of negative or positive outcomes Project Risk Management 3
  • 2. 4
  • 3. Project Risk Management ⚫ Riskis anuncertain event orconditionthat, if occurs, hasaneffect onat least oneproject objective. ⚫ Riskmanagement objectives: ⚫increasetheprobability andimpactof positiveevents(opportunities). ⚫decreasetheprobability andimpactof negativeevents(threat). ⚫ T erms &concepts: ⚫Uncertainty: alackofknowledgeaboutaneventthatreducesconfidence ⚫Riskaverse:someonewhodoesnotwanttotakerisks. ⚫Risktolerances: areaof risk that areacceptable/unacceptable. ⚫Riskthresholds: thepoint at whicharisk becomeunacceptable
  • 4. Project Risk Management Risk factors 1. Theprobability that it will occur 2. Therangeof possible outcome (impact) 3. Expected timing (when) inthe project life cycle 4. Theanticipated frequencyof riskevent (howoften)
  • 5. ⚫ BecauseRMshould be embedded in the planningand operational documents ofthe project, it isestablishedaspart ofthe project; RMis not an optional activity ⚫ Known risks are those that are identified andanalyzed;it may be possible to plan for them usingthe RiskManagement processes ⚫ Unknown riskscannot be managed proactively ⚫ Riskrelates both i.e. threats to project success (Negative Risk),and opportunities (PositiveRisk) to enhance chances of the project’s success Project Risk Management 7 Risk
  • 6. Definitions ⚫ Risk Event ⚫ “Adiscreteoccurrencethat mayaffectthe project for better or worse” ⚫ Maybe favorable or unfavorable ⚫ Risk Probability ⚫ “Thelikelihood of occurrence.The ratio of the number of chancesbywhich an event mayhappen (or not happen),to the sum of the chancesof both happening and not happening.” ⚫ Amount at Stake ⚫ “Theextent of adverse consequenceswhich could occur to the project” ⚫ Known Situation (not a risk category) ⚫ Known-unknown ⚫ “Identifiableuncertainty” ⚫ Situationthat we know mayhappen,but not howor whether it will affect us ⚫ The subject of risk management ⚫ Unknown-unknown ⚫ “Anitem or situation whose existencewecannot imagine” 8
  • 7. Identifying Risk by Uncertainty Project Risk Management 9 KNOWN UNKNO WN KNOW N EVENT S KNOW N EVENT S UNKNOWN UNKNOWN KNOWN UNKNOWN IMP ACT IMP ACT KNOWN KNOWN (Certainty) UNKNOWN UNKNOWN (Ignorant Bliss) UNKNOWNEVENTS KNOWNIMP ACT (NeedsCauseAnalysis) KNOWNEVENTS UNKNOWNIMP ACT (NeedsRiskManagement)
  • 8. Example of RBS Project Risk Management 10 Technical External Organizational Project Management Project Requirements Technology Complexity And Interfaces Performances And Reliability Quality Subcontractors And Suppliers Regulatory Market Customer Weather Project Dependencies Resources Funding Prioritization Estimating Planning Controlling Communication The Risk Break Down Structure (RBS) lists the categories and sub-categories within which risks may arise for a typical project. Different RBSs will be appropriate for different types of projects and different types of organizations. One benefit of this approach is to remind participants in a risk identification exercise of the many sources from which project risk may arise.
  • 9. ⚫ Threats ⚫ Avoid ⚫ Transfer ⚫ Mitigate ⚫ Accept Project Risk Management 11 ⚫ Opportunities ⚫ Exploit ⚫ Share ⚫ Enhance ⚫ Accept Strategies for Handling Risks • Some responses are designed for use only if certain events occur • Events that trigger the contingency response, such as missing intermediate milestones or gaining higher priority with a supplier should be defined and tracked
  • 10. Some Definitions ⚫ AContingency/ Fall Back Plan is developed bythe team, if the response strategy is foundto be not effective while implementation. (Plan Bif PlanA fails) ⚫ Secondary Risk is the risk arises due to implementation of original risk response plan.Team shall review any possibility of secondary risk while finalizingrisk response strategy.(Acontingency reserve will cover cost overrun in critical path but this maystrain the fundingand total cost) ⚫ Residual Risk is the risk that will remain even after implementation of risk response strategy (No 100%Solution) (Insurance will cover hospital charges for an accident but what about the disability)
  • 11. The seven Risk Management Processes PROCE S S # PROCESS NAME PROCE SS GROUP DESCRIPTION 1 Plan Risk Define how to conduct risk management Management activities for a project. Identify individual project risks as well as 2 Identify Risks sources of overall project risk, and document their characteristics. 3 Perform Qualitative Risk Analysis Planning Prioritize individual project risks for further analysis or action by assessing their probability of occurrence and impact as well asother characteristics. Numerically analyze the combined effect of 4 Perform Quantitative Risk Analysis identified individual project risks and other sources of uncertainty on overall project objectives.
  • 12. The seven Risk Management Processes PROCE S S # PROCESS NAME PROCE SS GROUP DESCRIPTION 5 Plan Risk Responses Planning Develop options, select strategies, and agreeing on actions to address overall project risk exposure, as well as to treat individual project risks 6 Implement Risk Responses Executing Implement agreed-upon risk response plans. 7 Monitor Risks Monitoring & Controllin g Monitor the implementation of agreed-upon risk response plans, track identified risks, identify and analyze new risks, and evaluate risk process effectiveness throughout the project.
  • 18. ⚫ Threats ⚫ Avoid ⚫ Transfer ⚫ Mitigate ⚫ Accept Project Risk Management 20 ⚫ Opportunities ⚫ Exploit ⚫ Share ⚫ Enhance ⚫ Accept Strategies for Handling Risks • Some responses are designed for use only if certain events occur • Events that trigger the contingency response, such as missing intermediate milestones or gaining higher priority with a supplier should be defined and tracked
  • 19. .1 Strategies for negative risks or threats ⚫Avoid ⚫ Risk avoidance involves changing PM plan ⚫T o eliminate the threat posed byanadverse risk ⚫T o isolate the project’sobjectives from the risk impact ⚫Torelax the objective that is in jeopardysuch asextending the schedule or reducingthe scope ⚫Some risks that arise only in the early stage of the project can be avoided byclarifyingthe requirements, obtaining information, improving communication or acquiring expertise Project Risk Management 21
  • 20. .1 Strategies for negative risks or threats (contd.) ⚫Transfer ⚫ Risk transference requires the negative impact of the threat along with ownership of the response to athird party ⚫ Transferring the risk gives responsibility of management of the risk to the third party – it does not eliminate the risk ⚫ Transferring liability for a risk is most effective in dealing with financial risk exposure ⚫ Involves payment of premiums to the party taking on the risk ⚫ Transference tools can be quite diverse and include ⚫ Insurance, performance bonds, warranties,guarantees, etc ⚫ Contracts maybe used to transfer liabilityfor specific risks to athird party ⚫ Cost type contracts,fixed price contracts maytransfer risks to the seller ⚫Mitigate ⚫ Taking early action to reduce the probability and/or impact of arisk is more effectivethan trying to repair the damage after the risk has occurred ⚫ Adopting less complex processes, conducting more tests, choosing amore stable supplier are mitigation actions ⚫ Wherever it is not possible to reduce the probability,amitigation response may address the risk impact by targeting linkages that determine the severity Project Risk Management 22
  • 21. .2 Strategies for positive risks or opportunities ⚫ Exploit ⚫ T o realize the opportunity ⚫ This strategy seeks to eliminate the uncertainty associated with aparticular upside risk by makingthe opportunity definitelyhappen ⚫ Directly exploiting responses include assigning more talented resources to the project to reduce the time to completion or to provide better quality than planned ⚫ Share ⚫ Allocatingownership to third party who is best able to capture the opportunity for the benefit of the project ⚫ Forming risk-sharing partnerships, teams, special-purposecompanies,or joint ventures to manageopportunities ⚫ Enhance ⚫ This strategy modifies the size of an opportunity by increasing probability and/or positive impact risks ⚫ Seekingto facilitate or strengthen the cause of the opportunity, and proactively targeting and reinforcingits trigger condition might increase its probability ⚫ Impactdrivers canalso be targeted seeking to increase the project’s susceptibility to the opportunity Project Risk Management 23
  • 22. ⚫Strategies for both threats and opportunities ⚫Accept ⚫ It isseldom possible to eliminate all risk from aproject ⚫ Indicates that the project team hasdecided not to change the project management plan to deal with the risk, or is unable to identify anysuitable responsestrategy ⚫ Maybe adopted for threats and opportunities ⚫ The strategy canbe active or passive ⚫ Passivestrategy does not require anyaction except to document the strategy, leavingthe project team to deal with the threats or opportunities asthey occur ⚫ Anexample of an active strategy could be to provide for the contingency reserves including amountsof time, money,resources to handle the risks ⚫ Accepting an opportunity is being willing to take advantageof it if it comes along, but not activelypursuingit Project Risk Management 24 11.5 – Plan Risk Responses: Tools & Techniques
  • 27. What is Procurement? ⚫ Procurement is a Business Management Function that manage the entire process of acquisition of external resources in efficient and economical manner OR ⚫ Procurement is the act of buying goods, services or worksfrom an externalsource. ⚫ It is favourable that the goods, services or works are appropriate and that they are procured at the best possible COST to meet the needs of the acquirer in terms of quality and quantity , time, andlocation.
  • 28. What is Difference? T erms purchasingand procurement interchangeably , but despite their similarities theydo have different meanings Procurement involves the process of selecting vendors, establishing payment terms, strategic vetting, selection, the negotiation of contracts and actual purchasingof goods. Vs. Purchasing is asubset of procurement. Purchasing generallyrefers simply to buying goods or services.Purchasingoften includes receiving and payment aswell.
  • 29. Project Procurement Management ⚫ Project Procurement Management is about establishing, maintaining and closing relationships with suppliers of goods and services for the project. The definition of project procurement management from the PMBOK is: “the processes necessary to purchase or acquire the products, services, or results needed from outside the project team” ⚫ Includes the processes necessary to purchase or acquire products, services, or results needed from outside the project team. ⚫ The organization can be either the buyer or seller. ⚫ Project Procurement Management includes the contract management and change control processes required to develop and administer contracts or purchase orders issued by authorized project team members. ⚫ contractual obligations placed on the project team by the contract. 31
  • 30. Project Manager’s Role in Procurements ⚫ For the project managers, this is a big responsibility, as well as a huge opportunity to showcase their skills and prove that they can accomplish tasks requiring outside resources ⚫ Key roles: ⚫ Know the procurement process ⚫ Understand contract terms and conditions ⚫ Make sure the contract contains all project management requirements such as attendance at meeting, reports, actions and communications deemed necessary ⚫ Identify risks and incorporate mitigation and allocation of risks into the contract ⚫ Help tailor the contract to the unique needs of the project ⚫ Align schedule of the contract and schedule of the project ⚫ Involved in contract negotiation ⚫ Make sure procurement process done smoothly ⚫ Work with contract manager to manage changes to the contract PMm ustbeassignedbeforecontract signed!
  • 31. The three Procurement Management Processes PROCE S S # PROCESS NAME PROCE SS GROUP DESCRIPTION 1 Plan Procurement Management Planning Document project procurement decisions, specify the approach,and identify potential sellers. 2 Conduct Procurements Executing Obtain seller responses, select aseller,and award a contract. 3 Monitor Procurements Monitoring & Controllin g Manage procurement relationships, monitor contract performance, make changes and corrections asappropriate,and close out contracts.