Description
Risk is a probability that some adverse circumstance will occur; a measure of the potential harm or loss associated with an activity executed in an uncertain environment
1
Project Risk Management
2
? Risk is a probability that some adverse circumstance
will occur; a measure of the potential harm or loss
associated with an activity executed in an uncertain
environment.
? Projects involve an amount of risk that has implication
on its performance.
? A proactive approach to project management demands
that as part of the planning phase of project, a thorough
risk assessment is done to identify potential problems
that are likely to affect its success.
? The purpose is to identify risks and formulate
appropriate strategies to deal with them, and minimize
their effect on the project.
Introduction
3
? Risk management in projects involves:
• Identifying risks.
• Assessing and analyzing the likelihood and impacts of
risks.
• Trying to reduce the uncertainties (by gathering more
information or making different decisions).
• Trying to lessen the impacts of risks.
• Developing contingency plans for critical risks.
• Monitoring risks as the project progresses.
4
Risk Management Process
Risk
identification
Risk
analysis
Risk
monitoring
Risk
planning
Potential risks Prioritized
risk list
Risk avoidance
& contingency
Risk
assessment
5
1. Risk identification
? The focus should be on:
o Technology risks: speed, performance.
o People risks: skills, availability, training.
o Organizational risks: structure, resources.
o Estimation risks: time, deadlines, size.
? A brainstorming session with the project team can be
helpful way to ensure that all important risks are
identified.
2. Risk analysis
? Assess probability and seriousness.
? Probability may be very low, low, moderate, high and
very high.
? Risk effects might be catastrophic, serious, tolerable or
insignificant.
(See diagram next page)
6
Risk Probability Effects
Required training for
staff not available
Moderate Tolerable
Time to complete project
is underestimated
Staff illness
Organizational financial
problems force reduction
in project budget
Defective inputs /
components
Key staff ill at critical
times
Impossible to recruit staff
with required skills
Matrix for Risk Analysis
7
3. Risk planning
o Consider each risk and develop a strategy to manage
it.
o Avoidance strategies: the probability that the risk
will arise is reduced.
o Minimization strategies: the impact of the risk on
the project or product will be reduced.
o Contingency plans: if the risk arises, contingency
plans are plans to deal with that risk – for instance,
having a back-up supplier for a key material; having
an alternate distribution channel to send products to
China (air instead of boat).
8
4. Risk monitoring
o Assess each identified risk regularly to decide
whether or it is becoming less or more probable.
o Also assess whether the effects of the risk have
changed.
o Each key risk should be discussed at management
progress meetings.
9
Look at this!
10
Risk Management Matrix (Example)
Risk Strategy
Recruitment problems Early recruitment, proper
timing, training existing staff etc.
Organizational financial
problems
Prepare report to management
showing contribution of project
to business goals
Defective inputs/components Replace with those of known
reliability
Staff illness Reorganize team for more work
overlaps, make people
understand each other’s job
11
Risk Type Potential Indicators
People
?poor staff morale,
?poor relationships amongst team
members,
?job availability
Organization
?organizational gossip,
?lack of action by senior management
Tools
?reluctance by team members to use
tools,
?complaints about use of tools
Requirements
?many change requests,
?customer complaints
Estimation
?failure to meet agreed schedule,
?failure to clear reported defects
Risk Indicators (Example)
12
? Every step of the way you must keep in mind that there
are two types of risk that can affect your project: firstly,
the risks that you already know about and secondly, the
risks that you are not aware of.
? Your task is to ensure that the risks you are aware of are
much more than the ones not known.
? Create contingency plans for the risks you know about
and build enough time into your project schedule to
mitigate unknown risks; to enhance chances of project
success.
13
Risk Action
PRACTICE WINDOW
You have been appointed the Project Manager of a major
project on the construction of the Prime Minister’s official
residence in Nairobi. Identify potential risks and possible
actions to tackle them
14
“Good risk management will not prevent bad
things from happening; but when bad
things happen, good risk management will
have anticipated them and will reduce their
negative effects”
Samuel Obino Mokaya, 2009
THANK YOU
Telephone: 0722845562, 0734615008
E-mail: o’[email protected],
[email protected]
doc_768192196.ppt
Risk is a probability that some adverse circumstance will occur; a measure of the potential harm or loss associated with an activity executed in an uncertain environment
1
Project Risk Management
2
? Risk is a probability that some adverse circumstance
will occur; a measure of the potential harm or loss
associated with an activity executed in an uncertain
environment.
? Projects involve an amount of risk that has implication
on its performance.
? A proactive approach to project management demands
that as part of the planning phase of project, a thorough
risk assessment is done to identify potential problems
that are likely to affect its success.
? The purpose is to identify risks and formulate
appropriate strategies to deal with them, and minimize
their effect on the project.
Introduction
3
? Risk management in projects involves:
• Identifying risks.
• Assessing and analyzing the likelihood and impacts of
risks.
• Trying to reduce the uncertainties (by gathering more
information or making different decisions).
• Trying to lessen the impacts of risks.
• Developing contingency plans for critical risks.
• Monitoring risks as the project progresses.
4
Risk Management Process
Risk
identification
Risk
analysis
Risk
monitoring
Risk
planning
Potential risks Prioritized
risk list
Risk avoidance
& contingency
Risk
assessment
5
1. Risk identification
? The focus should be on:
o Technology risks: speed, performance.
o People risks: skills, availability, training.
o Organizational risks: structure, resources.
o Estimation risks: time, deadlines, size.
? A brainstorming session with the project team can be
helpful way to ensure that all important risks are
identified.
2. Risk analysis
? Assess probability and seriousness.
? Probability may be very low, low, moderate, high and
very high.
? Risk effects might be catastrophic, serious, tolerable or
insignificant.
(See diagram next page)
6
Risk Probability Effects
Required training for
staff not available
Moderate Tolerable
Time to complete project
is underestimated
Staff illness
Organizational financial
problems force reduction
in project budget
Defective inputs /
components
Key staff ill at critical
times
Impossible to recruit staff
with required skills
Matrix for Risk Analysis
7
3. Risk planning
o Consider each risk and develop a strategy to manage
it.
o Avoidance strategies: the probability that the risk
will arise is reduced.
o Minimization strategies: the impact of the risk on
the project or product will be reduced.
o Contingency plans: if the risk arises, contingency
plans are plans to deal with that risk – for instance,
having a back-up supplier for a key material; having
an alternate distribution channel to send products to
China (air instead of boat).
8
4. Risk monitoring
o Assess each identified risk regularly to decide
whether or it is becoming less or more probable.
o Also assess whether the effects of the risk have
changed.
o Each key risk should be discussed at management
progress meetings.
9
Look at this!
10
Risk Management Matrix (Example)
Risk Strategy
Recruitment problems Early recruitment, proper
timing, training existing staff etc.
Organizational financial
problems
Prepare report to management
showing contribution of project
to business goals
Defective inputs/components Replace with those of known
reliability
Staff illness Reorganize team for more work
overlaps, make people
understand each other’s job
11
Risk Type Potential Indicators
People
?poor staff morale,
?poor relationships amongst team
members,
?job availability
Organization
?organizational gossip,
?lack of action by senior management
Tools
?reluctance by team members to use
tools,
?complaints about use of tools
Requirements
?many change requests,
?customer complaints
Estimation
?failure to meet agreed schedule,
?failure to clear reported defects
Risk Indicators (Example)
12
? Every step of the way you must keep in mind that there
are two types of risk that can affect your project: firstly,
the risks that you already know about and secondly, the
risks that you are not aware of.
? Your task is to ensure that the risks you are aware of are
much more than the ones not known.
? Create contingency plans for the risks you know about
and build enough time into your project schedule to
mitigate unknown risks; to enhance chances of project
success.
13
Risk Action
PRACTICE WINDOW
You have been appointed the Project Manager of a major
project on the construction of the Prime Minister’s official
residence in Nairobi. Identify potential risks and possible
actions to tackle them
14
“Good risk management will not prevent bad
things from happening; but when bad
things happen, good risk management will
have anticipated them and will reduce their
negative effects”
Samuel Obino Mokaya, 2009
THANK YOU
Telephone: 0722845562, 0734615008
E-mail: o’[email protected],
[email protected]
doc_768192196.ppt