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Project Management With PMP Exam Preparation

Agenda
Plan Risk Management
Identify Risk
Perform Qualitative Risk Analysis

Perform Quantitative Risk Analysis

Plan Risk Response

Project Risk Management

Project risk management is 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 on projects, but it can
help improve project success by helping select good projects,

determining project scope, and developing realistic estimates

Why Take Risks? Because of Opportunities!

Try to balance risks and opportunities

Risks

Opportunities

Negative Risk
A dictionary definition of risk is the possibility of loss or injury
Negative risk involves understanding potential problems that
might occur on the project and how they might impede project
success
Negative risk management is like a form of insurance; it is an
investment

Risk Can Be Positive

Positive risks are risks that result in good things happening;
sometimes called opportunities
A more general definition of project risk is an uncertainty that
can have a negative or positive effect on meeting project
objectives
The goal of project risk management is to minimize potential
negative risks while maximizing potential positive risks

Risk Utility Risk Tolerance

Risk tolerance addresses the level of risk a project manager

or key stakeholder is willing to take when money at stake is

compared to the potential payoff. Its measured in terms of
the amount of satisfaction or pleasure the individual
receives from a payoff.

Risk Utility Risk Tolerance- Classifications

Classification

Description

Risk-averter

Not likely to take a risk that is considered a

high risk.

Risk-seeker

Prefers an uncertain outcome and may be

willing to pay a penalty to take a high risk.

Risk-neutral

Tolerance to risk is proportional to the

amount of money at stake.

Plan Risk Management

Describing how to approach, plan, and execute the risk

management activities for a project
A plan that documents the procedures for managing risk
throughout a project
The project team should review project documents and

understand the organizations and the sponsors approach to

risk
The level of detail will vary with the needs of the project

Plan Risk Management

Tools
1. Enterprise
Environmental
Factor

2. Organizational
Process Asset
3. Scope statement
4. Project Mgmt Plan

Input

1. Planning Meeting

and analysis

1. Risk Management
Plan

Output

Risk Management Plan Components

Component

Description

Methodology

Defines the tools, approaches, and data

sources that may be used to perform risk
management on the project.
A budget for project risk management
should be established and included in
the risk management plan.
Defines the lead, support, and risk
management team membership for
each type of action in the risk
management plan.

Budgeting

Role &
Responsibility

Risk Management Plan Components

Component
Timing

Description
Defines how often the risk management
activities will be performed throughout
the project life cycle.
Risk categories
Documentation such as risk breakdown
structures (RBSes) or categories from
previous projects will help identify and
organize risks.
Definitions of risk Risks and their probabilities are
probability & impact defined for use in
Qalitative Risk Analysis using a scale of very Unlikely to almost
certain.

Risk Breakdown Structure

A risk breakdown structure (RBS) organizes potential

sources of risk to the project. Functioning much like a work
breakdown structure, an RBS arranges categories into a

hierarchy. This approach allows the project team to define

risk at very detailed levels.

Risk Breakdown Structure Template

IT Project

Business

Technical

Organizational

Project
Management

Competitors

Hardware

Executive
support

Estimates

Suppliers

Software

User support

Communication

Cash flow

Network

Team support

Resources

Identify Risk
Determining which risks might affect the project and
documenting their characteristics
Risk identification is the process to figure out every
possible risk that might affect your project.
Its not about how unlikely the risk is, or how bad the
impact would be it will be figure out later process

Identify Risk
1. Risk management plan
2. Activity cost estimates
3. Activity duration
estimates
4. Scope baseline
5. Stakeholder register
6. Cost management
plan
7. Schedule management
plan
8. Quality management
plan
9. Project documents
10. Enterprise
environmental factors
11. Organizational
process assets

Input

Tools
1. Documentati
on reviews
2. Information
gathering
techniques
3. Checklist
analysis
4. Diagramming
techniques
5. SWOT
analysis
6. Expert
judgment

1. Risk register
updates

Output

Identify Risk - Inputs

1.Enterprise Environmental Factors
Published Information
Commercial databases
Academic studies
Benchmarking and other Industry studies
2.Organizational Process Assets
Historical experiences

Identify Risk Identification - Inputs

3.Project Scope Statement
Uncertainty in project assumptions
4.Risk Management Plan
Assignment of roles and responsibilities
Provision for Risk Management activities in Schedule and
Budget
Categorizing Risks
5.Project Management Plan

Identify Risk Tools & Techniques

1.Documentation Reviews
Performing structured reviews of Project artifacts
2.Information Gathering Techniques
Brainstorming
Delphi Technique
Interviewing
Root Cause Identification

SWOT Analysis

Identify Risk Tools & Techniques

Checklist Analysis
Developing Risk identification checklist based on historical
precedence's
Assumptions Analysis
Diagramming Techniques
Cause-and-effect diagram

System or process flow charts

Influence diagrams

Identify Risk - Output Risk Register

The output of the risk identification process is risk register
is a document that contains results of various risk
management processes, often displayed in a table or
spreadsheet format
is a tool for documenting potential risk events and related
information
Risk events refer to specific, uncertain events that may occur
to the detriment or enhancement of the project

Sample Risk Register

Identified Risks

Potential
Responses

Root Causes

Each risk that you

and team come up
should go here

Your Risk
Identification
meetings should
always include a
discussion of how
to respond to the
risk

This is where the

result of root
cause analysis
lists

Perform Qualitative Risk Analysis

Prioritizing Risks for subsequent further analysis or action

by assessing and combining their probability or occurrence
and impact
Some risks will cause a whole lot of damage to your project
if they happen, while others will barely make a scratch
and you care much more about the risks that will have a big
impact

Perform Qualitative Risk Analysis

Tools
1. Risk register
2. Risk management plan
3. Project scope
statement
4. Organizational process
assets

Input

1. Risk probability
and impact
assessment
2. Probability and
impact matrix
3. Risk data quality
assessment
4. Risk
categorization
5. Risk urgency
assessment
6. Expert judgment

1. Risk register
updates

Output

Perform Qualitative Risk Analysis - Inputs

1.Organizational Process Assets

Data about risks on past projects
Lessons learned knowledge base

Project Scope Statement

Projects of common or recurring type
Projects using first-of-its-type technology

Perform Qualitative Risk Analysis - Inputs

3.Risk Management Plan
Roles and responsibilities
Budget, and schedule activities for risk management
Risk Categories

Definition of probability and impact

Probability and impact matrix
Revised stakeholders tolerance
4.Risk Register

Qualitative Analysis Tools & Techniques

1.Risk Probability and Impact Assessment
Risk assessment by interviews
Meetings with participants
2.Probability and Impact Matrix
Risk ratings
Classification of risks as high, moderate and low

Risk Score Card

Qualitative Analysis Tools & Techniques

3.Risk data Quality Assessment

Accuracy
Quality
Integrity of data about risk
4.Risk categorization
By sources of risk

By area of project affected

5.Risk Urgency Assessment

Probability/Impact Matrix Template

Probability/Impact Matrix Template

Risk Score for a Specific Risk

Probability
0.9

Chart Threshold Limits

Risk Score = P x I
0.05

0.09

0.18

0.36

0.72

0.7

0.04

0.07

0.14

0.28

0.56

0.5

0.03

0.05

0.10

0.20

0.40

0.3

0.02

0.03

0.06

0.12

0.24

0.1

0.01

0.01

0.02

0.04

0.08

0.05

0.10

0.20

0.40

0.80

Impact on an Objective (e.g., cost, time, or

scope)
(Ratio Scale)

Moderate

High

0.05

0.18

Set Chart Threshold Limits here by

changing Moderate and High limits
to desired values.

Qualitative Risk Analysis - Output

Identifi
ed
Risks

Potential
Root
Category Priority Urgency
Responses Causes

Each
risk
that
you
and
team
come
up
should
go
here

Your Risk
Identificati
on
meetings
should
always
include a
discussio
n of how
to
respond
to the risk

This is
where
the
result
of root
cause
analysi
s lists

Source
of Risk
Project
Phase

How
When you
Import Need to deal
ant a
with it
risk is.

Risk Register Assignment

Create a Risk Register of given Case Study use qualitative
risk analysis tools and list the items

Quantitative Risk Analysis

Numerically assigning the effect on overall project objective
of identified risks

Often follows qualitative risk analysis, but both can be done

together or separately
Large, complex project involving leading edge technologies

often require extensive quantitative risk analysis

Perform Quantitative Risk Analysis

1. Risk register
2. Risk management
plan
3. Cost management
plan
4. Schedule
management plan
5. Organizational
process assets

Tools
1.

2.

3.

Input

Data
gathering and
representatio
n techniques
Quantitative
risk analysis
and modeling
techniques
Expert
judgment

1. Risk register
updates

Output

Quantitative Risk Analysis - Inputs

Organizational Process Asset

Information on similar risk in other projects, Risk

database and study of similar risk by specialist

Project Scope Statement

Initial Risk identification

Risk Management Plan

Roles and Responsibilities, risk categories, revised

stakeholders

Quantitative Risk Analysis - Inputs

Risk Register

List of identified risks, Risk ranking and Risk

Categorization

Project Management Plan

Project Schedule Mgt Plan

Controls Project schedule

Project Cost Mgt Plan

Controls Project budget

Quantitative Risk Analysis Tools & Techniques

Data gathering and representation
Interviewing: Taking subjective probability and representing
that data objectively.
Probability distributions: Visually represents risk probability.

Expert judgment: Utilizes subject matter experts to validate

a particular risk.

Quantitative Risk Analysis Tools & Techniques

Quantitative risk analysis and modeling
Sensitivity analysis: Examines how the uncertainty of a project
element affects the objective in question if the other uncertain
elements remain unchanged.
Expected monetary value analysis: Calculates the average

outcome under uncertainty.

Decision tree analysis: Evaluates possible outcomes to help the
decision-maker select the decision that provides the greatest

expected value.
Modeling and simulation: Includes cost risk analysis, which is
most commonly performed using the Monte Carlo method.

Decision Trees and Expected Monetary Value

Decision tree is a diagramming analysis technique used to
help select the best course of action in situations in which
future outcomes are uncertain
Expected monetary value (EMV) analysis is a method of
calculating the average outcome when the future is uncertain.
(Opportunities will have positive values and risks will have
negative values.)
You can draw a decision tree to help find the EMV

Expected Monetary Value (EMV) Example

Decision Tree Example

Airline A Fare
10,000PKR

90%
100,000 PKR
60%

Airline B Fare
8000PKR
100,000 PKR
PIA

10000 + (90% * 0=0) + (100,000 *

10%=10000)=20,000

Air
Blue

8000 + (60% * 0=0) + (100,000 *

40%=40,000)=48,000

Plan Risk Response

Developing options and actions to enhance opportunities,

and to reduce threats to project objectives

After identifying and quantifying risk, you must decide how to

respond to them
How to approach and conduct Risk Response Planning
Prepare Risk response Plan

Plan Risk Response

Tools
1. Risk register
2. Risk management
plan

Input

1. Strategies
for negative
risks or
threats
2. Strategies
for positive
risks or
opportunities
3. Contingent
response
Strategies
4. Expert
judgment

1. Risk Register
updates
2. Risk-related
contract
decisions
3. Project
management
plan updates
4. Project
document
updates

Output

Response Strategies for Negative Risks

Risk Avoidance
Eliminate the threat by eliminating the cause
Risk Mitigation
Reduce the probability or the impact of a threat
Risk Transference
Make another party responsible for the risk through
purchasing of insurance, performance bonds,
warranties, guaranteed or outsourcing the work

Response Strategies for Positive Risks

Risk exploitation (the reverse of avoid)
Add work or change the project to make sure the
opportunity occurs

Risk sharing
Allocate ownership of the opportunity to a third party
( forming a partnership, team or joint venture)
Risk enhancement (the reverse of mitigate)
Increase the likelihood, probability and positive impacts
of the risk event

Questions