Description
Project Risk Management
Project Risk Management
Click to edit Master subtitle style
.
Risk Management: Outline
n n n n n n
Risk management Definition Objectives Risk analysis Risk evaluation Development of mitigation plans
Why Risk Management?
n n
n n
Nasa took Consequences from the Columbia Disaster: Manager Fired The Final report Says: Missing Risk Awareness and lacking moral courage of employees Indian Government ignored warning received prior to 26/11 developments Don’t forget
¨ ¨ ¨ ¨ ¨
Enron Debacle MCI/ Worldcom collapse .COM over valuation and burst Bear and stuns / Lehman brother going bankrupt Private / Cooperative banks going out of business India?
What is Risk Management?
n
Uncertainty of occurrence of any unforeseen events
The Uncertainty Paradigm
Project M anager What to do Ends Uncertainty
Project Execution How - M eans Certainty
High
Old Paradigm New Paradigm
Top M anagement/Client
Project Team How to do M eans Uncertainty
Final Product
Project Definition What - Ends Certainty
Low
Resolving Project Uncertainty
High
Laufer, “...Key… ”
Idea
Low
Who Uses Risk Management?
Risk Management practices are widely used in public and the private sectors, covering a wide range of activities or operations. These include:
• •
Finance and Investment Insurance Health Care Public Institutions Governments
•
•
•
Who Uses Risk Management?
n n
n
Effective Risk Management is a recognised and valued skill. Educational institutions have formal study courses and award degrees in Risk Management. The Risk Management process is well established.
Who Uses Risk Management?
Risk Management is now an integral part of business planning.
N e xt
RISK
n
Risk can be defined as the likelihood of occurrence of an undesirable event combined to the magnitude of its impact
What is Risk?
n
A Risk is a Potential Event with Negative Consequences that Has Not Happened Yet.
¨
However a Risk could also be defined as the event with unforeseen positive consequences. A source of problem during a project Avoid labeling the cost of a risk as a risk (e.g. schedule slippage). Find the sources! Strike at the root of the problem, not the leaves! In the widest sense everything is a risk There are better ways of handling recurrent problems!
n
A Possibility of Loss — Not the Loss Itself!
¨ ¨ ¨
n
Something that Makes the Project Special
¨ ¨
Project Risk Management
n n n n
Risk Identification Risk Quantification Risk Response Development Risk Response Control
Objectives of Risk Management
n
Improve the predictability of a project!!
n n
n
Raising awareness and visibility of risks Managing risks by mitigation actions to prevent major disasters Preparing for contingency
n n
Not to eliminate risks always But, to identify them and minimize their effects through:
n n
improved awareness of their likelihood of occurrence and potential impact and; development and implementation of appropriate mitigation plans
Project Predictability
What is Risk Management
n
Risk analysis
¨ ¨ ¨
Identification of risks Estimation of their likelihood of occurrence Estimation of their causes and the magnitude of their potential impact
n n
Risk evaluation Development of risk mitigation plans
Who is involved in Risk Management
When to do Risk Management
n n n n n n
Business Case Analysis Preparation for Outsourcing (Partner Selection, Frame Contracts) Status and review of requirements Details contract and project planning Milestones and Project execution Transition and Maintenance
RISK Management is a continuous Process
Generic Risk Management Process
Risk Analysis/ Identification
n n n n n n
Determining Which Risks Are Likely to Affect Project Should Be Performed Regularly Address Internal and External Risks Opportunities (Positive Outcomes) Threats (Negative Outcomes) Identify Causes (What Could Happen) and Effects (What Will Ensue)
Risk Identification
Inp uts Product Description Other Planning Inputs Historical Information Tools & Techniques Checklist s Flowchartin g Interviewin g Outp uts Source of Risk Potential Risk Events Risk Symptoms Inputs to Other Processes
Inputs to Risk Identification
n
Product Description
¨ ¨
Proven Technology = Less Risk Innovation = More Risk Work Breakdown Structure (WBS) Cost Estimates Staffing Plan Procurement Management Plan Project Files Commercial Databases Project Team Knowledge
n
Other Planning Inputs
¨ ¨ ¨ ¨
n
Historical Information
¨ ¨ ¨
Outputs from Risk Identification
n
Sources of Risk
¨ ¨ ¨ ¨ ¨
Changes In Requirements Design Errors, Omissions, Misunderstandings Poorly Defined/Understood Roles/Responsibilities Poor Estimates Insufficiently Skilled Staff Natural Disaster or Staff Departure Triggers Foreshadow Future Problems As Constraints or Assumptions
n n n
Potential Risk Events
¨ ¨ ¨
Risk Symptoms Inputs to Other Processes
Risk Analysis Method
n
Describe the Risks
¨ ¨
n
Analyze and Prioritize Risks
¨ ¨ ¨
Brainstorming potential risks Walkthrough of the risk identification checklist Walkthrough risk sheet and estimate the probability and cost of each risk Calculate risk rating of each risk (e.g. likelihood * consequence) Prioritize in risk classes concentrate on class “High”
Risk Description
n n n n n
Probability of Occurrence Range of Possible Outcomes Expected Timing Severity/ probability Frequency of Risk
Risk Quantification
n n n n
Evaluating Risks And Risk Interactions Assess Range of Possible Outcomes Determine Which Risk Events Warrant Response Complications:
¨ ¨ ¨ ¨
Opportunities And Threats Interaction Single Risk Cause Multiple Effects Opportunity For One, Threat To Another False Impression of Precision And Reliability
Risk Quantification
In put s Stakeholde r Risk Tolera Sources nce of Risk Potential Risk Events Cost Estimates Activity Duration Estima tes Tools & Techniques Expected Monetary Val Statistical ue Sums Simula Decision tion Trees Expert Judgement Out puts Opportunities to Pursue, Threats to Respond To Opportunities to Ignore, Threats to Accept
Risk likelihood
Risk Consequence
Risk Response Development
n
n
Enhancement Steps For Opportunities
Responses To Threats ¨ Avoidance (Elimination Of Threat) ¨ Mitigation (Reduce Probability or Buy Insurance) ¨ Acceptance (Active or Passive)
Risk Mitigation and Contingency Planning
n
List Mitigation Actions
¨ ¨ ¨
Start with most severe risks List possible actions to reduce probability and/or cost Some risks can be avoided (e.g. avoid a specific requirement) Only for the most severe risks that cannot be mitigated List actions to take should the risk materialize
n
Contingency Planning
¨ ¨
Risk Response Development
Inputs T ools & T echniques O utputs • O pportunities to P ursue, • P rocurem ent • R isk M anagem ent T hreats to R espond T o • C ontingency P lanning P lan • O pportunities to Ignore, • A lternative Strategies • Inputs to O ther T hreats to A ccept • Insurance P rocesses • C ontingency P lans • R eserves • C ontractual A greem ents
Risk Management Matrix
Risk Management Matrix (Example)
Initial Risk Imp act Risk Description Human Interaction and Interfaces Extensive and Unkno wn Proj ect Communicati ons Any High Risk Managem ent Strat egy Prototype User Interface Early Involve Real Users (Prototype) Set Up Project Review Meetings and Newsletter ELIMINA TE NO MATTER WH AT STRATE GY Residual Risk
H
H
M / L
M
H
L
H
L
NO NE
H
H / M
Any High Risk
H
Risk Response Control
n n n n
Executing Risk Management Plan Repeat Risk Management Cycle Cannot Identify All Risks/Probabilities Control and Iteration Are Required
Risk Status
Risk Template:
Risk Example:
Risk Response Control
I n p u ts T o o ls & T e c h n iq u e s O u tp u ts • R is k M a n a g e m e n t P la n o r k a r o u n d s • W • C o r r e c tiv e A c ti • A c tu a l R is k E v e n ts • A d d itio n a l R is k • U p d a te s to R is k • A d d itio n a l R is k R e s p o n se D e v e lo p m e n M a n a g e m e n t P t I d e n tific a tio n
Monitor and Review
q q
q
The initial assessment made of the existence and level of risks must be evaluated on a regular basis. You need to measure the effectiveness of risk profiles and update as necessary. Risks identified as “High” are tracked at the Program Level. The status of each step in the risk reduction plan is updated and reported at the regularly scheduled reviews by the Project Manager.
q q
Actions are initiated as required where risk reduction plan activities are not being accomplished. Special briefings of program risks to program management will also be scheduled as needed.
Monitor and Review
q
q
Medium” Risks are monitored on Project Management level. Re-Assess Risks regularly: q Probability and damage of controlled risks changed? q New risks identified? Analyze them
Using Risk Management
The starting point is the Action Plan: 1. Allocate responsibilities, e.g., a Risk Management Champion and a working party. 2. Evaluate how Risk Management processes can be best applied in your environment. 3. Survey existing skills and do a training needs assessment. 4. Catalogue existing sources of data or information that can help in identifying risks.
Using Risk Management
5. 6.
7. 8. 9.
Flow chart existing processes. Communicate and consult – within Customs, with other Agencies, the trading community and transport industry. Obtain IT tools or set up processes for effectively operating a selectivity system. Provide training in profiling/selectivity skills. Test and gain confidence in the Risk Management process.
Thank You…
n
Thank You…
doc_893977062.pptx
Project Risk Management
Project Risk Management
Click to edit Master subtitle style
.
Risk Management: Outline
n n n n n n
Risk management Definition Objectives Risk analysis Risk evaluation Development of mitigation plans
Why Risk Management?
n n
n n
Nasa took Consequences from the Columbia Disaster: Manager Fired The Final report Says: Missing Risk Awareness and lacking moral courage of employees Indian Government ignored warning received prior to 26/11 developments Don’t forget
¨ ¨ ¨ ¨ ¨
Enron Debacle MCI/ Worldcom collapse .COM over valuation and burst Bear and stuns / Lehman brother going bankrupt Private / Cooperative banks going out of business India?
What is Risk Management?
n
Uncertainty of occurrence of any unforeseen events
The Uncertainty Paradigm
Project M anager What to do Ends Uncertainty
Project Execution How - M eans Certainty
High
Old Paradigm New Paradigm
Top M anagement/Client
Project Team How to do M eans Uncertainty
Final Product
Project Definition What - Ends Certainty
Low
Resolving Project Uncertainty
High
Laufer, “...Key… ”
Idea
Low
Who Uses Risk Management?
Risk Management practices are widely used in public and the private sectors, covering a wide range of activities or operations. These include:
• •
Finance and Investment Insurance Health Care Public Institutions Governments
•
•
•
Who Uses Risk Management?
n n
n
Effective Risk Management is a recognised and valued skill. Educational institutions have formal study courses and award degrees in Risk Management. The Risk Management process is well established.
Who Uses Risk Management?
Risk Management is now an integral part of business planning.
N e xt
RISK
n
Risk can be defined as the likelihood of occurrence of an undesirable event combined to the magnitude of its impact
What is Risk?
n
A Risk is a Potential Event with Negative Consequences that Has Not Happened Yet.
¨
However a Risk could also be defined as the event with unforeseen positive consequences. A source of problem during a project Avoid labeling the cost of a risk as a risk (e.g. schedule slippage). Find the sources! Strike at the root of the problem, not the leaves! In the widest sense everything is a risk There are better ways of handling recurrent problems!
n
A Possibility of Loss — Not the Loss Itself!
¨ ¨ ¨
n
Something that Makes the Project Special
¨ ¨
Project Risk Management
n n n n
Risk Identification Risk Quantification Risk Response Development Risk Response Control
Objectives of Risk Management
n
Improve the predictability of a project!!
n n
n
Raising awareness and visibility of risks Managing risks by mitigation actions to prevent major disasters Preparing for contingency
n n
Not to eliminate risks always But, to identify them and minimize their effects through:
n n
improved awareness of their likelihood of occurrence and potential impact and; development and implementation of appropriate mitigation plans
Project Predictability
What is Risk Management
n
Risk analysis
¨ ¨ ¨
Identification of risks Estimation of their likelihood of occurrence Estimation of their causes and the magnitude of their potential impact
n n
Risk evaluation Development of risk mitigation plans
Who is involved in Risk Management
When to do Risk Management
n n n n n n
Business Case Analysis Preparation for Outsourcing (Partner Selection, Frame Contracts) Status and review of requirements Details contract and project planning Milestones and Project execution Transition and Maintenance
RISK Management is a continuous Process
Generic Risk Management Process
Risk Analysis/ Identification
n n n n n n
Determining Which Risks Are Likely to Affect Project Should Be Performed Regularly Address Internal and External Risks Opportunities (Positive Outcomes) Threats (Negative Outcomes) Identify Causes (What Could Happen) and Effects (What Will Ensue)
Risk Identification
Inp uts Product Description Other Planning Inputs Historical Information Tools & Techniques Checklist s Flowchartin g Interviewin g Outp uts Source of Risk Potential Risk Events Risk Symptoms Inputs to Other Processes
Inputs to Risk Identification
n
Product Description
¨ ¨
Proven Technology = Less Risk Innovation = More Risk Work Breakdown Structure (WBS) Cost Estimates Staffing Plan Procurement Management Plan Project Files Commercial Databases Project Team Knowledge
n
Other Planning Inputs
¨ ¨ ¨ ¨
n
Historical Information
¨ ¨ ¨
Outputs from Risk Identification
n
Sources of Risk
¨ ¨ ¨ ¨ ¨
Changes In Requirements Design Errors, Omissions, Misunderstandings Poorly Defined/Understood Roles/Responsibilities Poor Estimates Insufficiently Skilled Staff Natural Disaster or Staff Departure Triggers Foreshadow Future Problems As Constraints or Assumptions
n n n
Potential Risk Events
¨ ¨ ¨
Risk Symptoms Inputs to Other Processes
Risk Analysis Method
n
Describe the Risks
¨ ¨
n
Analyze and Prioritize Risks
¨ ¨ ¨
Brainstorming potential risks Walkthrough of the risk identification checklist Walkthrough risk sheet and estimate the probability and cost of each risk Calculate risk rating of each risk (e.g. likelihood * consequence) Prioritize in risk classes concentrate on class “High”
Risk Description
n n n n n
Probability of Occurrence Range of Possible Outcomes Expected Timing Severity/ probability Frequency of Risk
Risk Quantification
n n n n
Evaluating Risks And Risk Interactions Assess Range of Possible Outcomes Determine Which Risk Events Warrant Response Complications:
¨ ¨ ¨ ¨
Opportunities And Threats Interaction Single Risk Cause Multiple Effects Opportunity For One, Threat To Another False Impression of Precision And Reliability
Risk Quantification
In put s Stakeholde r Risk Tolera Sources nce of Risk Potential Risk Events Cost Estimates Activity Duration Estima tes Tools & Techniques Expected Monetary Val Statistical ue Sums Simula Decision tion Trees Expert Judgement Out puts Opportunities to Pursue, Threats to Respond To Opportunities to Ignore, Threats to Accept
Risk likelihood
Risk Consequence
Risk Response Development
n
n
Enhancement Steps For Opportunities
Responses To Threats ¨ Avoidance (Elimination Of Threat) ¨ Mitigation (Reduce Probability or Buy Insurance) ¨ Acceptance (Active or Passive)
Risk Mitigation and Contingency Planning
n
List Mitigation Actions
¨ ¨ ¨
Start with most severe risks List possible actions to reduce probability and/or cost Some risks can be avoided (e.g. avoid a specific requirement) Only for the most severe risks that cannot be mitigated List actions to take should the risk materialize
n
Contingency Planning
¨ ¨
Risk Response Development
Inputs T ools & T echniques O utputs • O pportunities to P ursue, • P rocurem ent • R isk M anagem ent T hreats to R espond T o • C ontingency P lanning P lan • O pportunities to Ignore, • A lternative Strategies • Inputs to O ther T hreats to A ccept • Insurance P rocesses • C ontingency P lans • R eserves • C ontractual A greem ents
Risk Management Matrix
Risk Management Matrix (Example)
Initial Risk Imp act Risk Description Human Interaction and Interfaces Extensive and Unkno wn Proj ect Communicati ons Any High Risk Managem ent Strat egy Prototype User Interface Early Involve Real Users (Prototype) Set Up Project Review Meetings and Newsletter ELIMINA TE NO MATTER WH AT STRATE GY Residual Risk
H
H
M / L
M
H
L
H
L
NO NE
H
H / M
Any High Risk
H
Risk Response Control
n n n n
Executing Risk Management Plan Repeat Risk Management Cycle Cannot Identify All Risks/Probabilities Control and Iteration Are Required
Risk Status
Risk Template:
Risk Example:
Risk Response Control
I n p u ts T o o ls & T e c h n iq u e s O u tp u ts • R is k M a n a g e m e n t P la n o r k a r o u n d s • W • C o r r e c tiv e A c ti • A c tu a l R is k E v e n ts • A d d itio n a l R is k • U p d a te s to R is k • A d d itio n a l R is k R e s p o n se D e v e lo p m e n M a n a g e m e n t P t I d e n tific a tio n
Monitor and Review
q q
q
The initial assessment made of the existence and level of risks must be evaluated on a regular basis. You need to measure the effectiveness of risk profiles and update as necessary. Risks identified as “High” are tracked at the Program Level. The status of each step in the risk reduction plan is updated and reported at the regularly scheduled reviews by the Project Manager.
q q
Actions are initiated as required where risk reduction plan activities are not being accomplished. Special briefings of program risks to program management will also be scheduled as needed.
Monitor and Review
q
q
Medium” Risks are monitored on Project Management level. Re-Assess Risks regularly: q Probability and damage of controlled risks changed? q New risks identified? Analyze them
Using Risk Management
The starting point is the Action Plan: 1. Allocate responsibilities, e.g., a Risk Management Champion and a working party. 2. Evaluate how Risk Management processes can be best applied in your environment. 3. Survey existing skills and do a training needs assessment. 4. Catalogue existing sources of data or information that can help in identifying risks.
Using Risk Management
5. 6.
7. 8. 9.
Flow chart existing processes. Communicate and consult – within Customs, with other Agencies, the trading community and transport industry. Obtain IT tools or set up processes for effectively operating a selectivity system. Provide training in profiling/selectivity skills. Test and gain confidence in the Risk Management process.
Thank You…
n
Thank You…
doc_893977062.pptx