Importance of Project Risk Management The art and science of identifying analyzing and responding to risk throughout the life of a project and in the best interests of meeting project objectives Risk management is often overlooked in projects ID: 1020985
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1. Risk ManagementPMI Knowledge Areas
2. Importance of Project Risk ManagementThe art and science of identifying, analyzing, and responding to risk throughout the life of a project and in the best interests of meeting project objectivesRisk management is often overlooked in projects2
3. Project Management Maturity by Industry Group and Knowledge Area*3KEY: 1 = LOWEST MATURITY RATING 5 = HIGHEST MATURITY RATINGKnowledge AreaEngineering/ ConstructionTelecommunications Information SystemsHi-Tech ManufacturingScope3.523.453.253.37Time3.553.413.033.50Cost3.743.223.203.97Quality2.913.222.883.26Human Resources3.183.202.933.18Communications3.533.533.213.48Risk2.932.872.752.76Procurement3.333.012.913.33
4. Benefits from Software Risk Management Practices*4*Source: Kulik and Weber, KLCI Research Group
5. Risk Can Be Negative & PositiveNegative risk: understanding potential problems that might occur in the project and how they might impede project successPositive risks: risks that result in good things happening (opportunities)5
6. CGI CaseWhat are the negative and positive risks associated with the project CGI was taking on?6
7. Risk UtilityRisk utility or risk tolerance is your willingness to accept or avoid risk.7What is your risk tolerance?
8. Risk UtilityYou are on a TV game show and can choose one of the following. Which would you take? $1,000 in cash A 50% chance at winning $5,000 A 25% chance at winning $10,000 A 5% chance at winning $100,000You have just finished saving for a "once-in-a-lifetime" vacation. Three weeks before you plan to leave, you lose your job. You would:Cancel the vacationTake a much more modest vacationGo as scheduled, reasoning that you need the time to prepare for a job searchExtend your vacation, because this might be your last chance to go first-class8
9. Project Risk Management ProcessesIt is all about planningPlanning risk managementIdentifying risksPerforming qualitative risk analysisPerforming quantitative risk analysisPlanning risk responsesControlling and MonitoringControlling risk9
10. Planning Process Group:Planning Risk ManagementThe main output of this process is a risk management plan—a plan that documents the procedures for managing risk throughout a projectKey Parts to Plan:Budget and scheduleRisk categoriesRisk probability and impactRevised stakeholders’ tolerancesTracking10
11. Contingency and Fallback Plans, Contingency ReservesContingency plans Fallback plans Contingency reserves or allowances11
12. Common Sources of Risk in Information Technology ProjectsThe Standish Group developed an IT success potential scoring sheet based on potential risks12
13. Broad Categories of RiskMarket riskFinancial riskTechnology riskPeople riskStructure/process risk13
14. Risk Breakdown StructureA risk breakdown structure is a hierarchy of potential risk categories for a projectSimilar to a work breakdown structure but used to identify and categorize risks14
15. Potential Negative Risk Conditions Associated With Each Knowledge Area15
16. Planning Process Group:Identifying RisksIdentifying risks is the process of understanding what potential events might hurt or enhance a particular projectRisk identification tools and techniques include:BrainstormingThe Delphi TechniqueInterviewingSWOT analysis16
17. Risk RegisterA risk register is:A document that contains the results of various risk management processes and that is often displayed in a table or spreadsheet formatA tool for documenting potential risk events and related informationRisk events refer to specific, uncertain events that may occur to the detriment or enhancement of the project17
18. Risk Register ContentsAn identification number for each risk eventA rank for each risk eventThe name of each risk eventA description of each risk eventThe category under which each risk event fallsThe root cause of each risk18
19. Risk Register Contents (cont’d)Triggers for each risk; triggers are indicators or symptoms of actual risk eventsPotential responses to each riskThe risk owner or person who will own or take responsibility for each riskThe probability and impact of each risk occurring.The status of each riskInformation Technology Project Management, Seventh Edition19
20. Risk Identification ExerciseIdentify the risks associated with our discussion on CGIComplete a risk register by ranking the risks and filling out the subsequent information20