MAnaging Project Risk - A Practical Approach - gt islig

Managing Project RisksA Practical Approach

Why do project fail??“Everything's under control”Copyright © FORTE Management Consulting 2

AGENDA Risk Management – Context The Risk Management Process– Planning• Risk Identification• Risk Analysis & Assessment• Risk Response Planning– Implementation• Risk Monitoring & Control• Tools & Techniques Summary and CloseCopyright © FORTE Management Consulting 3

PM Knowledge Areas Integration Management Scope Management Time Management Cost Management Quality Management Human Resource Management Communications Management Risk Management Procurement ManagementCopyright © FORTE Management Consulting 4

Definition & Relevance A Risk is:– An uncertain event or condition that, if it occurs, has apositive or negative effect on at least one projectobjective such as time, cost, scope or quality (PMBOK ®Guide) Risk Management is currently a top priority inorganizations across a number of industries Chief Risk Officer (CRO) is a position that we’reseeing more and more …Copyright © FORTE Management Consulting 5

Google … “Risk”:: 35,400,000 hits. “Risk Management”: : 6,260,000 hits. “Project Risks”: : 202,000 hits. “Project Risk Management”: : 167,000 hits. “Project Time Management”: : 90,100 hits. “Project Quality Management”: : 67,200 hits. “Project Cost Management”: : 64,100 hits. “Project Integration Management”: : 56,300 hits. “Project Scope Management”: : 53,600 hits.Copyright © FORTE Management Consulting 6

The Risk Management Process Risk Planning– What needs to be done– When will it be done– Who is to do it– How will it be doneCopyright © FORTE Management Consulting 7

Risk IdentificationWhat:– Identify and log all risks that might happenWhen:– At the beginning of the planning phase– An ongoing processWho:– The PM– The Project Team– Key StakeholdersHow:– Historical information, lessons learnt, etc.– Brainstorming– Delphi technique– Rationalize– Quantity is Quality in Risk IdentificationCopyright © FORTE Management Consulting 8

Risk Categories Technical Financial Political Organizational Physical Legal …Copyright © FORTE Management Consulting 9

Risk Analysis & AssessmentWhat– Analyse each risk– Assess the probability and impact– Develop the appropriate response plansWhen– Once the risk has been identifiedWho– The risk owner– The PM and the project team– SME’sHow– Basic– AdvancedCopyright © FORTE Management Consulting 10

Sources & Impact of Risk Sources– Internal• Scope• Time• Cost• Team• …– External• Political• Legal• … Impact– Cost– Time– Scope/QualityCopyright © FORTE Management Consulting 11

Risk Parameters A Risk has two parameters:– The Probability of the event happening (1-5)– The Impact to the project if it happens (1-5)Copyright © FORTE Management Consulting 12

Basic Risk AssessmentProbability531High ProbabilityLow Impact[Accept it]Low ProbabilityLow Impact[Forget it]1 3ImpactHigh ProbabilityHigh Impact[Mitigate, Avoid, …]Low ProbabilityHigh Impact[Transfer, Avoid, …]Copyright © FORTE Management Consulting 135

Thresholds & Tolerance Levels Risk Severity Index = Probability x Impact Lower Threshold (e.g. RSI is 1-3): 1Forget it Which risks warrant a response plan? Tolerance to Cost increases Tolerance to Time extensions Tolerance to Scope/Quality changesCopyright © FORTE Management Consulting 14

Advanced Risk Analysis Probability:– % backed by statistical evidence Impact– “$$ $$” additional cost– “x” days/weeks/months additional time As objective as possible Confidence levelsCopyright © FORTE Management Consulting 15

Advanced Risk Analysis - CostRiskProbabilityCost ImpactExpected Value(Cost)1 20% $40,000 $8,0002 25% $20,000 $5,0003 60% $25,000 $15,0004 30% $30,000 $9,0005 40% $20,000 $8,000Total Expected Value of theproject risks (Cost)$45,000Copyright © FORTE Management Consulting 16

Advanced Risk Analysis - TimeRiskProbabilitySchedule ImpactExpected Value(Schedule)1 20% 15 days 3 days2 25% 30 days 7.5 days3 60% 5 days 3 days4 30% 10 days 3 days5 40% 20 days 8 daysTotal Expected Value of the projectrisks (Schedule)24.5 daysCopyright © FORTE Management Consulting 17

Risk Response PlanningStrategies– Acceptance– Avoidance– Transfer– Mitigation– Contingency Planning– Fallback Plan … Plan “B”– ReservesMonitoring & Control– Monitoring– TriggersCopyright © FORTE Management Consulting 18

Risk Acceptance Take it with stride … No action needed Only acknowledgementCopyright © FORTE Management Consulting 19

Risk Avoidance Eliminate root cause Change method, or approach Change sequencing Replace resources Change timing Implications: Cost, Time, ScopeCopyright © FORTE Management Consulting 20

Risk Transfer Outsource– To a Consultant– To a Contractor Buy insurance BudgetCopyright © FORTE Management Consulting 21

Risk Mitigation Prevent or reduce Probability Prevent or reduce Impact BudgetCopyright © FORTE Management Consulting 22

Contingency Planning If in spite of all, the risk materialises Acknowledge that the risk has occurred Initiate action Release fundsCopyright © FORTE Management Consulting 23

Fallback Plan What if the Contingency Plan doesn’t t work? What are the constraints? What options do we have?Copyright © FORTE Management Consulting 24

Budget Reserves Contingency Reserve– To address known unknowns Management Reserve– To address unknown unknownsCopyright © FORTE Management Consulting 25

Risk Monitoring & Triggers A trigger is an early warning sign that a risk hasoccurred or is about to occur The risk owner keeps a fing… an eye on thetrigger Monitor changes to:– The risk characteristics– The environment– The project If the risk occurs, activate the Contingency PlanCopyright © FORTE Management Consulting 26

Tools The Risk Register The Risk Form Analytical IT toolsCopyright © FORTE Management Consulting 27

The Risk RegisterRisk IDProbabilityImpactRSIOwnerTriggerResponse PlanStatusCopyright © FORTE Management Consulting 28

The Risk Form Risk ID Probability, Impact, RSI Timing Owner Trigger Response Plan Budget StatusCopyright © FORTE Management Consulting 29

Risks vs. Issues Risks– Probability– Impact– RSI– Response– Risk Register– Risk Form Issues– Priority– Impact– ISI– Escalation– Issues Log– Issue FormCopyright © FORTE Management Consulting 30

Recap Risk Management is a core PMresponsibility It involves all key stakeholders It is scalable It is a people-driven process Judgment plays a key role Statistical data, and expert opinions form acritical input It is a continuing, iterative process whichimpacts every other PM Knowledge areaCopyright © FORTE Management Consulting 31

Questions?Copyright © FORTE Management Consulting 32