PM 0016 PROJECT RISK MANAGEMENT

Q1. Explain the various tools and techniques of qualitative risk analysis process.
The major inputs required for qualitative risk analysis are: Risk register: The outputs obtained from the risk identification process form the initial entries into this risk register. This in turn forms the input to risk qualitative analysis. Risk management plan: The roles and responsibilities to perform the risk management, schedule activities, the probability and impact matrix form the main elements for qualitative risk analysis. Project scope statement: The project scope statement is used to evaluate the complex projects which use first of its kind or more advanced technology. Organizational process assets: Information and studies about pervious projects and risk database obtained from proprietary sources form the assets that influence the qualitative risk analysis The tools and techniques used in qualitative risk analysis are: 1. Assessment of risk probability and impact: The risk probability assessment identifies the possibility of risk occurrence. The risk impact assessment identifies the negative and positive effects of risk on the project objectives and extent to which it can impact the project. 2. Probability and impact matrix: Since qualitative risk analysis is based on subjective evaluation, the rating for each risk may vary from person to person, depending on the bias of the person and how risk averse they are. To avoid this difference, most of the organisations have a standard rating system, which gives a common understanding of what each rating means.. 3. Risk data quality assessment: A qualitative risk analysis needs accurate data. The risk data are analysed to make sure that these data are accurate for risk management. If data collected has insufficient quality, then higher-quality data are gathered. A risk data quality assessment may include determining the extent of understanding of the risk, data available for each risk and quality of data for each risk. 4. Risk categorisation: This grouping of the various risks together based on their cause will help us to know which work package, process, people and other potential causes have the most risk associated with them.

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5. Risk urgency assessment: Risk that need immediate response comes under risk urgency assessment. The qualitative risk analysis provide final risk severity rating by combining the assessment of risk urgency with risk rating obtained by the probability and impact matrix. 6. Expert judgment: Experts are those who have previous experience in similar kind of projects. Experts judgment is obtained by interviewing the experts.

Q2. The risk mitigation methodology desribes the approach to control implementation. Explain the steps of the methodology.
The risk mitigation methodology are as given below 1. Prioritise actions: Based on the risk levels presented in the risk assessment report, the implementation actions are prioritised. In allocating resources, top priority should be given to risk items with unacceptably high risk rankings (example, risk assigned a very high or high risk level). These vulnerability/threat pairs will require immediate corrective action to protect an organisations interest and mission. \ 2. Evaluate recommended control options: The controls recommended in the risk assessment process may not be the most appropriate and feasible options for a specific organisation. During this step, the feasibility (example: compatibility, user acceptance) and effectiveness (example: degree of protection and level of risk mitigation) of the recommended control options are analysed. 3. Conduct cost-benefit analysis: To assist management in decision making and to identify cost-effective controls, a cost benefit analysis is conducted. This results in cost-benefit analysis describing the cost and benefits of implementing or not implementing the controls. 4. Select control: On the basis of the results of the cost-benefit analysis, management determines the most cost-effective control(s) for reducing risk to the organizations mission. The controls selected should combine technical, operational, and management control elements to ensure adequate security for the organization. 5. Assign responsibility: Appropriate person (in-house personnel or external contracting staff) who have the appropriate expertise and skill-sets to implement the selected control are identified, and responsibility is assigned. This results in a list of responsible persons to handle risk situation exclusively. 6. Develop a safeguard implementation plan: During this step, a safeguard implementation plan (or action plan) is developed. The safeguard implementation plan prioritises the implementation actions and projects in the order of their start and completion dates.

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7. Implement selected control(s): Depending on individual situations, the implemented controls may lower the risk level but not eliminate the risk. Risk mitigation is systematic reduction in the extent of exposure to a risk and/or the likelihood of its occurrence. Also called risk reduction. The risk mitigation plan communicates how each risk will be dealt with and the action steps that are necessary to handle them.The goals and mission of an organisation should be considered in selecting any of these risk mitigation options. Priority should be given to the threat and vulnerability pairs that have the potential to cause significant mission impact or harm.

Q3. There are two main strategies to handle risks, negative risks and positive risk. Explain the response strategies for threats.
The four main response strategies to deal with threats are: 1.Avoid: Risk avoidance involves varying the project plan to remove the threat to the project plan. Risk avoidance is done by altering the project plan to cut out the risk or the state that causes the risk in order to secure the project objectives from its impact. It involves planning different ways in which you can deal with an event if and when it occurs, instead of trying to maintain its probability or impact. Depending on the project angle, this may be a strategy of choice in situations where the effects of a given risk may be known to be restricted in a manner which is competent and acceptable. 2. Transfer: Risk transfer involves shifting the impact of a risk event and the ownership of the risk response to a third party. This strategy is common with a financial risk exposure and involves payment of a risk premium to the party assuming the risk. Risk transfer is done by transferring the risk to a third party who is capable of shielding the project in whole or in part, from any risks which could endanger the project. Risk Transfer is most efficient in dealing with financial risks and always involves payment of a risk premium. 3. Mitigate: Risk Mitigation decreases the probability or impact of a potential risk even to a more acceptable level. This includes reducing the consequences of the risk. Mitigation involves adapting a less complex process, conducting extra test on the product, designing redundancy into a system, and devising a quality control or reconciliation. Risk mitigation is done to reduce the anticipation and/or impact of a risk to within a tolerable threshold and avoid dealing with
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the after-effects. Mitigate costs appropriate given the likely impact and probability of the risk. 4. Accept: Risk acceptance is done by deciding not to make any changes to the project plan in order to deal with a risk or where a suitable response strategy cannot be identified. This strategy can be applied for both negative and positive risks. There are two types of acceptance: Active acceptance: It includes creating an emergency plan to execute when risk occurs. An emergency plan is developed in advance to respond to the risks. Passive acceptance: It requires no action. The project team has to deal with the risk as and when it occurs.

Q4. What are the tips to remove the top three project estimating risks? Explain in brief.
The tips to remove the top three project estimating mistakes are: 1. Confirm all assumptions (Trust No One) Client confusion often lands the project managers in a messy situation. Never accept a client or other project manager's verbal confirmation as final. It is very much possible that clients sometimes are not clear about what they say. For example, if a client says that he has 25 32-bit Windows XP Professional workstations, do not assume it to be true until you visit the clients. Otherwise, during the deployment stages can put you in a situation where your client expects you to manage this changed configuration without spending extra. By doing this, you can mitigate "known unknowns". 2. Do not expect trouble-free projects (Plan for Unknown unknowns) You have certain amount of information only upon which you can base project estimates. It is important that time is allotted for unpredicted problems, changes, incompatibilities, and other issues as project cost estimates is a combination of time and material. You need to determine the bare minimum amount of time that is required to complete a project. Identify steps or stages that are likely to encounter trouble. Be sure to build appropriate time into original project planning documents, recommendations, proposals, and costs to accommodate inevitable problems. While you cannot compensate for all "unknown unknowns, risks you can atleast take steps to mitigate contingencies. 3. Specify exactly what estimates include (Put it all in Writing) Page 4

PM 0016 PROJECT RISK MANAGEMENT

Miscommunication triggers a series of problems. You may say to clients that a project estimate includes the time, equipment, and software to deploy a new customised database. Clients do not distinguish between all the needs. The items covered while building project estimates and proposals must be clearly stated. Be sure to include all requirements clearly or project agreement and state additional labour, equipment, and software covered by the project's cost estimate which may be required to complete the project. For example, for a custom database roll-out, the costs of a new server include one new server with all other additional software. Specify all these requirements in the contract in order to avoid discrepancies. If you do the homework discussed earlier; you can avoid the potential "known unknown risks. If you review dependencies carefully, allow time for unforeseen issues, and document the project's specifics in writing, you will be much better positioned to accommodate "unknown unknowns" risks when they arise.

Q5. An organization building a risk based culture must offer incentives for incorporating risk into project planning and control process. Analyze the concept of performance incentive.
Performance Incentives: Now let us analyse the concept of performance incentive. Incentives are offered to motivate the employees to build a risk culture in the organization. It is an expectation that encourages people to behave in a certain way. Incentives aim at providing value for money and add to organizational success.Pay for performance is a payment device in which organisations are rewarded for achieving performance-based targets. An organisation building a risk-based culture must offer incentives for incorporating risk into the project planning and control process. The senior management supports when project management identifies and foresees business risk that saves company time and money. Project managers who manage risks effectively are likely to be more successful in acquiring additional resources because they tend to have backup and contingency plans ready when risks occur. Categories of incentive: Incentives can be classified in different ways in which they motivate employees to take a particular course of action. One common and useful classification divides incentives into three broad classes: Remunerative incentives (or financial incentives): It exist where an employee can expect some form of material reward especially money in exchange for acting in a particular way.
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Moral incentives: These exist where a particular choice is widely regarded as the right thing to do, or where the failure to act in a certain way is condemned as indecent. Example: A person acting on a moral incentive can anticipate a sense of self-esteem, and approval or even admiration from his community; a person acting against a moral incentive can expect a sense of guilt, and condemnation or even ostracism from the community. Coercive incentives: A person can expect that the failure to act in a particular way will result in physical force being used against them (or their loved ones) by others in the community for example, by inflicting pain in punishment, or by imprisonment, or by confiscating or destroying their possessions. Some of the other classifications are as follows: Straight piece rate: An employee is paid immediately for the number of pieces produced per day. In this plan, quality may suffer. Straight piece rate with a guaranteed base wage: An employee is paid immediately for output set by management even if employee produces less than the target level output. If employee exceeds this target output, he is given wage in direct percentage to the number of pieces produced by him.

Q6. Explain project review s and risk reassessment briefly.

Project Reviews and Risk Reassessment: You must perform scheduled maintenance in the form of review. In order to revalidate the project objectives, plans and assumption, projects require cycles of reviews and regular reassessment to keep the project on track. Another reason is for co-located teams, the project review is an opportunity to reinforce the value of the project, recognise and reward significant accomplishments and motivate the team members. Loss of interest on very long projects is one of the reasons that these projects are at higher-risks. Reminding the team that why the project matters is an effective way to reduce this risk. The limited planning and technical complexity also contributes to project risks of lengthy projects and project reviews is a better way to manage it. During the review some reviews find few issues, requiring minimal attention and the project continues as planned. Other reviews reveal changes or additional planning that is necessary and the project continues but only after the changes is made. The third possible outcome of a project review is a recommendation to cancel future project work. Page 6

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Few things are important for this: 1. Schedule the review: Every six months a project review should be implemented to check the status of the project. The best way to review a project is to get away from the usual work place and assemble all key project team members face-to-face. Before the review starts assign an owner to prepare it. 2. Objectives for the review: Review of cumulative impact of project changes. Through review of project objectives and specifications. Recognition of significant project accomplishments. 3. Conduct the review: During the review, assign participants responsibility for capturing decisions and action items in writing and maintain a separate list of any project issues that require later attention but are beyond the scope of the review meeting. Discuss the positives of the project then the problems an risks you have encountered in the project, also capture all suggestions, recommendation during the review finally close the review by summarizing the results. 4. Follow up after the review: Document what was discussed in the review. Submit all recommendations requiring changes to your projects. When changes are approved, implement them. Finally personally thank your team members for their contributions.

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