Introduction to Risk Management

 Project risk management includes the processes concerned with

conducting risk management planning , identification , analysis ,
responses, and monitoring and control on a project , the objective is
to increase the probability and impact of positive events and
decrease probability and impact of negative events .
 It’s not an optional activity , it’s a systematic and proactive
approach to taking control over projects instead of being controlled
by the project.
 Project Risk is an uncertain event or condition that if occurs has a
negative or positive effect on the project objectives.
 At the early stages of the project the level of risk exposure is at its
maximum but information on the project risks at it’s minimum , the
earlier in the project life cycle that the risks are recognized , the more
realistic the project plans and expectations of results will be .
 Project risk management should be conducted for all projects , the
level of detail, sophistication tools and amount of time and resources
applied to project risk management should be in proportion to the
project characteristics .
 
 Risk Factors are :
1. Probability, likelihood that risk will occur.
2. Impact , effect on the project if risk occur
3. When it will happen ( Expected Timing )
4. Frequency of the event.
 Critical Success Factors for Project Risk management :
1. Recognize the value of risk management , it should be believed
specially by the organization that risk management will bring positive
potential return on investment.
2. Individual Commitment , Risk management is every body’s
responsibility.
3. Open and Honest Communications.
4. Organization Commitment , it can be obtained if risk management
goals are aligned with organization goals and values .
5. Risk effort scaled to project , as the cost of project risk
management should be appropriate with it’s potential value of the
project.
6. Integration with other project management activities.
 Project management can be seen as an attempt to control the
project uncertain environment, it’s effectiveness is increased by using
information and results of risk management
 Note that from risk definition the risk event affects the project
objectives , so objectives should be defined and stated before the
risk management starts.
 It’s the project manager role to tailor risk management activities to
the needs of the project , it’s the initiation phase in risk management ,
main actions required includes :
1. Define objectives against which risks will be identified.
2. Define how risk management elements will be scaled for the
project.
3. Define risk thresholds , tolerances and appetite.
 Risk management process will be iterative through the project life
cycle due to the emergent nature of risks.
 Qualitative analysis used to gain understanding and evaluate
individual risks while Quantitative analysis evaluate project overall
risk.
 Project Network diagram is an important input to Risk management
as you should look for :
1. Estimates , especially ones that contains padding
2. Path Convergence , where more than one path leads to one
activity.
3. Allocation of resources and expert level.
4. Parallel Activities.
5. Critical Path as it should be within project allocated time.
6. Number of near critical pathes.
7.
 One point estimates for activities schedule and cost contains the
higher risk.
 The best way to shorten project schedule is to identify and
eliminate risks,
 Communication management plan is an important input to risk
management, reporting of risk activitites should be stated in
communication management plan.
 There are some specific communication check points such as :
1. When charter is finalized.
2. When WBS is created.
3. When risks score is determined.
4. When risk response plans are created.
5. When creating monthly report.
6. More formal checkpoints are Go/No Go Decisions.
 Organization Process assets are valuable input to risk
management as it provides some useful templates such as :
1. Reporting forms of risks
2. Standard Probability and Impact matrix.
3. Risk ranking standards for Go/No Go Decisions.
4. Procedures for Risk Audits.
 Risk tolerance Areas are usually expressed in terms of project
constraints , Scope , Cost , time , Quality , Resources , Risks and
customer satisfaction.
 Some Project Managers collect the risk thresholds and tolerances
from key stakeholders while they are collecting requirements.