Showing posts with label Risk Management. Show all posts
Showing posts with label Risk Management. Show all posts

Tuesday, December 9, 2014

Risk Quantification Analysis

Purpose of risk quantification:

  1. To get a numerical estimate f the overall effect of risk on the project objectives.
  2. Performed on risks that have been prioritized as potentially and substantially impacting the project's competing demands.
Why PMs conduct risk quantification?
  • To establish odds of achieving project goals
  • To justify contingency reserves
  • To validate time, cost, and scope targets
  • To conduct in depth "what if" analyses
Quantitative Risk Analysis eg: Monte Carlo simulation, Decision tree analysis.
  • Gives you - How likely is success?
  • How much contingency?
  • Which risks are high priority?


Tools and techniques used: 
  1. Data gathering and representation techniques
    1. Expert Interviews
    2. Probability Distributions
  2. Quantitative Risk Analysis and Modeling Techniques
    1. Modeling and Simulation
    2. Sensitivity Analysis
    3. Expected Monetary Value Analysis
  3. Expert Judgement
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How do you determine the probability and impact of each risk?


  1. Analysis of plans and related documents
  2. Comparisons with similar systems
  3. Data from engineering or other models
  4. Experience and interviewing
  5. Modeling and simulation
  6. relevant lessons-learned studies
  7. Results from test and prototype development
  8. Sensitivity analysis of alternatives and inputs
  9. Specialist and expert judgments
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Root Cause Analysis and Identification


  • Can be used for risk discovery 
  • Start with stating an outcome the project intends to avoid
  • Then work backwards to uncover sources that could cause the problem


Describing a risk event: 

Cause =>  Risk => Effect

Thursday, October 4, 2012

Benefits of a Change Control System


1.Inconsequential changes are discouraged
by the formal process.
2.Costs of changes are maintained in a log.
3.Integrity of the WBS and performance measures
is maintained.
4.Allocation and use of budget and management reserve funds are tracked.
5.Responsibility for implementation is clarified.
6.Effect of changes is visible to all parties involved.
7.Implementation of change is monitored.
8.Scope changes will be quickly reflected in baseline and performance measures.



Risk - Change Control System Process


1.Identify proposed changes.
2.List expected effects of proposed changes
on schedule and budget.
3.Review, evaluate, and approve or disapprove
of changes formally.
4.Negotiate and resolve conflicts of change, condition, and cost.
5.Communicate changes to parties affected.
6.Assign responsibility for implementing change.
7.Adjust master schedule and budget.
8.Track all changes that are to be implemented

Risk Management Benefits


•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









Tuesday, October 2, 2012

Managing Risk

Terms to be familiar with -

•Risk–Uncertain or chance events that planning can not overcome or control.
•Risk Management–A proactive attempt to recognize and manage internal events and external threats that affect the likelihood of a project’s success.
•What can go wrong (risk event).
•How to minimize the risk event’s impact (consequences).
•What can be done before an event occurs (anticipation).
•What to do when an event occurs (contingency plans).






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