Lecture Project management in practice - Chapter 14: Project risk management

Lecture Project management in practice - Chapter 14: Project risk management, this chapter presents the following content: Risk event graph, risk management process, contingency funds and risk, risk monitoring and review,...

CHAPTER 14 Project Risk Management Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e 14-1 Risk Event Graph Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e 14-2 Risk Management Process Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e 14-3 Risk Management Process (cont.) • Step 1: Establishing the risk context • Step 2: Risk identification • Step 3: Risk analysis • Step 4: Risk evaluation • Step 5: Risk treatment Step 6: Contingency planning Copyright â 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e 14-4 Step 1: Establishing the Risk Context • What is the organisation’s context for risk? • How does this affect the project environment? • How are ‘individual’ risk tolerances levelled? • Do you use the ‘As Low As Reasonably Possible’ (ALARP) approach? Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e 14-5 Step 2: Risk Identification • WBS • RBS • Risk Profiles • Lessons learned • Delphi method • SWOT • Others… Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e 14-6 Step 2: Risk Identification (cont.) The Risk Breakdown Structure (RBS)  Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e 14-7 Step3: Risk Analysis • Probability refers to the probability of the event (This is otherwise known as the likelihood of the risk occurring.) • Impact refers to the impact of the event (This is otherwise known as the consequence of the risk if the event occurs.) Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e 14-8 Step 3: Risk Analysis Simple ‘inherent’ risk analysis Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e 14-9 Step 3: Risk Analysis (cont.) mpact considered over multiple criteria Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e 14-10 Step 3: Risk Analysis (cont.) Decision tree analysis Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e 14-11 Step 4: Risk Evaluation • The purpose of risk evaluation is to assist in making decisions, based on the outcomes of the risk analysis, about which risks need treatment and the priority for treatment implementation • Risk evaluation involves comparing the level of risk found during the analysis process with risk criteria established when the context was considered • Based on this comparison, the need for treatment can be considered (AS/NZS/ISO 31000:2009) Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e 14-12 Step 5: Risk Treatment for Threat Risks • Mitigating risk • Avoiding risk • Transferring risk • Accepting (retaining) risk Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e 14-13 Step 5: Risk Treatment (cont.) Mitigation and residual risk assessment Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e 14-14 Step 5: Risk Treatment for Opportunity Risks • Exploit • Share • Enhance • Accept Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e 14-15 Step 6: Contingency Planning contingency plan is an alternative plan that will be used if a possible foreseen risk event becomes a reality (an issue) Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e 14-16 Step 6: Contingency Planning (cont.) Risk contingency plan Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e 14-17 Step 6: Contingency Planning (cont.) Common methods for handling risk • Technical risks • Schedule risks • Cost risks • Funding risks Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e 14-18 Contingency Funds and Risk • Budget reserves • Management reserves • Time buffers ow are risk contingencies managed in your organisations? Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e 14-19 Risk Management Plan • Risk context • Risk methodology • Risk roles and responsibilities • Risk escalation process • Risk reporting • Risk audits and health checks Lessons learned Copyright â 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e 14-20 Risk Monitoring and Review Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e 14-21 Key Terms • • • • • • • • • • • • • Whys ALARP AS/NZS/ISO 31000:2009 assumptions constraints contingency plan contingency planning decision trees decision tree analysis Delphi Method Failure Mode and Effects Analysis (FMEA) impact (consequence) mitigation strategy (risk response) Monte Carlo technique opportunity risk PERT PERT simulation probability (likelihood) risk analysis risk breakdown structure (RBS) risk context risk evaluation risk identification Risk Management Plan risk monitoring and review risk profile Risk Register risk severity matrix root cause analysis threat risk Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e 14-22 ... McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice, 1e 1 4-1 2 Step 5: Risk Treatment for Threat Risks • Mitigating risk • Avoiding risk • Transferring risk. .. Larson, Gray, Project Management in Practice, 1e 1 4-1 9 Risk Management Plan • Risk context • Risk methodology • Risk roles and responsibilities • Risk escalation process • Risk reporting • Risk audits... Common methods for handling risk • Technical risks • Schedule risks • Cost risks • Funding risks Copyright © 2013 McGraw-Hill Education (Australia) Pty Ltd Pearson, Larson, Gray, Project Management in Practice,