•A proactive rather than reactive
approach.
•Reduces surprises and negative
consequences.
•Prepares the project manager to
take advantage
of appropriate risks.
•Provides better control over the
future.
•
Improves chances of reaching
project performance objectives within budget and on time.
•Step 1: Risk Identification
–Generate
a list of possible risks through brainstorming, problem identification and risk
profiling.
•Macro risks first, then specific
events
•Step 2: Risk Assessment
–Scenario
analysis for event probability and impact
–Risk
assessment matrix
–Failure
Mode and Effects Analysis (FMEA)
–Probability
analysis
•Decision trees, NPV, and PERT
–Semiquantitative
scenario analysis
Failure Mode and Effects Analysis
(FMEA)
Impact × Probability × Detection = Risk Value
•Step 3: Risk Response Development
–Mitigating
Risk
•Reducing the likelihood an
adverse event will occur.
•Reducing impact of adverse event.
–Avoiding
Risk
•Changing the project plan to
eliminate the risk or condition.
–Transferring
Risk
•Paying a premium to pass the risk
to another party.
•Requiring
Build-Own-Operate-Transfer (BOOT) provisions.
–Retaining
Risk
•Making a conscious decision to
accept the risk.
•Contingency Plan
–An
alternative plan that will be used if a possible foreseen risk event actually
occurs.
–A
plan of actions that will reduce or mitigate the negative impact (consequences)
of a risk event.
•Risks of Not Having a Contingency
Plan
–Having
no plan may slow managerial response.
–Decisions
made under pressure can be potentially dangerous and costly.
Opportunity Management Tactics
•Exploit
–Seeking
to eliminate the uncertainty associated with an opportunity to ensure that it
definitely happens.
•Share
–Allocating
some or all of the ownership of an opportunity to another party who is best
able to capture the opportunity for the benefit of the project.
•Enhance
–Taking
action to increase the probability and/or the positive impact of an
opportunity.
•Accept
–Being
willing to take advantage of an opportunity if it occurs, but not taking action
to pursue it.
•Contingency Funds
–Funds
to cover project risks—identified
and unknown.
•Size
of funds reflects overall risk of a project
–Budget reserves
•Are
linked to the identified risks of specific work packages.
–Management reserves
•Are
large funds to be used to cover major unforeseen risks (e.g., change in project
scope) of the total project.
•Time Buffers
–Amounts of time used to
compensate for unplanned delays in the project schedule.
•Severe
risk, merge, noncritical, and scarce resource activities
•Step 4: Risk Response Control
–Risk
control
•Execution of the risk response
strategy
•Monitoring of triggering events
•Initiating contingency plans
•Watching for new risks
–Establishing
a Change Management System
•Monitoring, tracking, and
reporting risk
•Fostering an open organization
environment
•Repeating risk
identification/assessment exercises
•Assigning and documenting
responsibility for managing risk
•Sources of Change
–Project
scope changes
–Implementation
of contingency plans
–Improvement
changes
