PROJECT RISK MANAGEMENT

Mohamed Seleam Abou Hatab

PMP, PMI-RMP, PMI-SP, PMI-PBA
Sr. Project Management Consultant
 PROJECT RISK

Individual project Risk

+ Opportunity Uncertain event or condition that, if occurs,
has an effect (impact) on at any of the project
objectives (Time, Cost, Quality, Scope)
Impact could be +ve or –ve
Cause

Impact Overall Project Risk

Event
(Condition) The effect of uncertainty on the project as a
whole, Arising from all sources of uncertainty

-
Threat
 RISK
 CAN NEVER BE TOTALLY ELIMINATED.

 GREATEST IN THE BEGINNING OF A

PROJECT.

 SHOULD BE ADDRESSED
PROACTIVELY AND CONSISTENTLY
THROUGHOUT THE PROJECT
3
 PROJECT RISK MANAGEMENT

 IS THE SYSTEMATIC PROCESS OF IDENTIFYING, ANALYZING, AND

RESPONDING TO PROJECT RISKS

MAXIMIZING THE PROBABILITY AND CONSEQUENCES

OF POSITIVE EVENTS (OPPORTUNITIES) TO PROJECT
OBJECTIVES
AND
MINIMIZING THE PROBABILITY AND CONSEQUENCES
OF ADVERSE EVENTS (THREATS) TO PROJECT OBJECTIVES
 PROJECT RISK MANAGEMENT
PROCESSES
Perform Planning Executing Controlling
Plan Risk Qualitative
Management Risk
Analysis

Plan Risk implement Monitor

Response Risk Risk
Identify Risks Response
Perform
Quantitative
Risk
Analysis
 Project Management Process Groups
Knowledge Areas
Monitoring and Controlling Closing Process
Initiating Process Group Planning Process Group Executing Process Group
Process Group Group
4- Project Integration Management 4.1 Develop Project Charter 4.2 Develop Project Management Plan 4.3 Direct and Manage Project 4.5 Monitor and Control Project 4.7 Close Project
Work Work or phase
4.4 Manage Project Knowledge 4.6 Perform Integrated Change
Control
5- Project Scope Management 5.1 Plan Scope Management 5.5 Validate Scope
5.2 Collect Requirements 5.6 Control Scope
5.3 Define Scope
5.4 Create WBS
6- Project Schedule Management 6.1 Plan Schedule Management 6.6 Control Schedule
6.2 Define Activities
6.3 Sequence Activities
6.4 Estimate Activity Durations
6.5 Develop Schedule
7- Project Cost Management 7.1 Plan Cost Management 7.4 Control Costs
7.2 Estimate Costs
7.3 Determine Budget
8- Project Quality Management 8.1 Plan Quality Management 8.2 Manage Quality 8.3 Control Quality

9- Project Resource Management 9.1 Plan Resource Management 9.3 Acquire Resources 9.6 Control Resources
9.2 Estimate Activity Resources 9.4 Develop Team
9.5 Manage Team
10- Project Communications 10.1 Plan Communications Management 10.2 Manage Communications 10.3 Monitor Communications
Management

11- Project Risk Management 11.1 Plan Risk Management 11.6 Implement Risk 11.7 Monitor Risks
11.2 Identify Risks Responses
11.3 Perform Qualitative Risk Analysis
11.4 Perform Quantitative Risk Analysis
11.5 Plan Risk Responses

12- Project Procurement Management 12.1 Plan Procurement Management 12.2 Conduct Procurements 12.3 Control Procurements 6

13- Project Stakeholder Management 13.1 Identify Stakeholders 13.2 Plan Stakeholder Engagement 13.3 Manage Stakeholder 13.4 Monitor Stakeholder
Engagement Engagement
 PLAN RISK MANAGEMENT

 THE PROCESS OF DECIDING HOW TO

APPROACH AND CONDUCT THE RISK
MANAGEMENT ACTIVITIES FOR A PROJECT
 DESCRIBES HOW RISK IDENTIFICATION,
QUALITATIVE AND QUANTITATIVE
ANALYSIS, RESPONSE PLANNING,
MONITORING, AND CONTROL WILL BE
STRUCTURED AND PERFORMED DURING
THE PROJECT LIFE CYCLE
 PLAN RISK MANAGEMENT
Inputs Tools & Techniques Outputs
1. Project charter 1. Expert judgment 1. Risk Management
Plan
2. Project management Plan 2. Data analysis
•All components •Stakeholder analysis

3. Project documents 3. Meetings

•Stakeholder register

4. (EEF)

5. (OPA)
 Timing Probability
Tracking Impact
Matrix
Funding Reporting
Format

Roles &
Responsibility Categories

Risk Strategy Stakeholders’

Risk appetite

Definitions of
Methodology RM Plan P&I

How risk management will be structured and performed on the project

 Sample Risk Management Plan
Roles and
Required Work Time Methodology Budget
Responsibilities

Identify Risks Abdo 3 weeks Brainstorming $2000

Perform Qualitative Risk Omar 2 weeks P & I assessment $4000

Analysis

Perform Quantitative Risk Salma 1 week Monte Carlo $2500

Analysis

Plan Response to Risks Ali 2 week Response $6000

strategies

Implement risk response Risk response At the right time Agreed upon Contingency
owners responses reserves

Monitoring Risks Ahmed All Project period Audit $18,000

 ORGANIZATIONS’ RISK APPETITE
• ADDRESS THE LEVEL OF RISK A PROJECT MANAGER OR A KEY STAKEHOLDER IS WILLING
TO TAKE WHEN MONEY AT STAKE IS COMPARED TO THE POTENTIAL PAYOFF.

11

Risk Averter Risk Seeker Risk Neutral

RISK CATEGORIES
DEFINITION OF RISK PROBABILITY AND IMPACT
 Prob. & Impact Matrix
Probability Impact
Very Low Low Moderate High Very High

Very High

High

Moderate

Low

Very Low
Probability Impact
Very Low Low Moderate High Very High
0.05 0.10 0.20 0.40 0.80

Very High .045 .09 .18 .36 .72

90%

.035 .07 .14 .28 .56

High 70%

.025 .05 .10 .20 .40

Moderate 50%

.015 .03 .06 .12 .24

Low 30%

.01 .01 .02 .04 .08

Very Low
10 %
 IDENTIFY RISKS

 INVOLVES DETERMINING WHICH RISK EVENTS MIGHT

AFFECT THE PROJECT AND DOCUMENTING THEIR
CHARACTERISTICS.

 EVERYONE SHOULD BE INVOLVED IN RISK IDENTIFICATION

 IDENTIFY RISKS
Inputs Tools & Techniques Outputs
1. Expert judgment 1. Risk register
1. Project manage. Plan 2. Risk report
2. Data gathering
• Requirements management Plan 3. Project documents updates
• Brainstorming
• Schedule manage. Plan • Assumption log
• Checklists
• Cost manage. Plan • Issue log
• Interviews
• Quality manage. Plan • Lessons learned register
3. Root cause analysis
• Resource manage. plan
• Assumption & constraint analysis
• Risk manage. Plan
• SWOT analysis
• Scope baseline
• Document analysis
• Schedule baseline
4. Interpersonal & teams skills
• Cost baseline
• Facilitation
2. Project documents
5. Prompt lists
• Assumption log
(political- economic- social-technological-
• Cost estimates
legal- environmental)
• Duration estimates
6. Meetings
• Issue log
• Lessons learned register
• Requirements documentation
• Resource requirements
• Stakeholder register
3. Agreements
4. Procurement doc.
5. EEF
6. OPA
 SWOT ANALYSIS
 Examines project from all SWOT perspectives:

 Strength
 Weakness
 Opportunity
 Threats
Summary identification Analysis Response
ID O/T Description of Risk Category Potential Owner Prob. Schedule Cost Quality Score Strategy Tactic Fallback
response
R1 T the probability of tech. call Site
worker xxxxx falls ambulance Engineer
and injured

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 PERFORM QUALITATIVE RISK ANALYSIS

METHOD FOR PRIORITIZING THE IDENTIFIED

RISKS FOR FURTHER ACTIONS.
THE PROCESS OF ASSESSING THE IMPACT AND
LIKELIHOOD OF IDENTIFIED RISKS.
SHOULD BE REVISED DURING THE PROJECT LIFE
CYCLE.
 PERFORM QUALITATIVE RISK ANALYSIS

Inputs Tools & Techniques Outputs

1.Project manage. Plan 1.Expert judgment 1. Project documents
•Risk manage. Plan 2. Data gathering updates
•Interviews • Assumption log
2. Project documents 3. Data analysis • Issue log
•Assumption log •Risk data quality assessment • Risk register
•Risk register •Risk probability & impact • Risk report
•Stakeholder register assessment
•Assessment of other risk
3. EEF parameters
4. Interpersonal & teams skills
4. (OPA) • Facilitation
5. Risk categorization
6. Data representation
•Probability & impact matrix
•Hierarchal charts
7. Meetings
Summary identification Analysis Response
ID O/T Description of Risk Category Potential Owner Prob. Schedule Cost Quality score Strategy Tactic Fallback
response
R1 T the probability of tech. call Site M VL H L MH
worker xxxxx falls ambulance Engineer
and injured

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Probability Impact
Very Low Low Moderate High Very High

Very High R-4, R11, R13,

R-1, R-22 R-2, R-18 R-16

High

R-17 R-3, R-5 R-20

Moderate

R-6, R-12, R-15, R19 R-7 R-9

Low

Very Low
Hierarchical charts
Bubble charts
 ASSESSMENT OF OTHER RISK PARAMETERS

A short period indicates high Urgency Proximity A short period indicates high
urgency proximity.

A short period indicates low Dormancy Manageability management easy,

dormancy. manageability high

outcome easily controlled, Controllability Detectability risk occurrence detected easily,

controllability high. detectability high
A risk is connected to many other Where risk has a major effect on
Connectivity Strategic impact
risks, connectivity is high. strategic goals, strategic impact is
high
Propinquity

Where a risk is
perceived as very
significant, propinquity is
high
Summary identification Analysis Response
ID O/T Description of Risk Category Potential Owner Prob. Schedule Cost Quality score Strategy Tactic Fallback
response
R1 T the probability of tech. call Site M VL H L MH
worker xxxxx falls ambulance Engineer
and injured

Watch list 26
 Perform Risk Quantitative Analysis

It is the process of numerically

assessing the probability and

impact of each risk and
determining the extent of the
overall project risk.
 PERFORM QUANTITATIVE RISK ANALYSIS

Inputs Tools & Techniques Outputs

1.Project manage. Plan 1. Expert judgment 1. Project documents

•Risk manage. Plan 2. Data gathering updates
•Scope baseline •Interviews • Risk report
•Schedule baseline 3. Interpersonal & team skills
•Cost baseline •Facilitation
2. Project documents 4. Representations of uncertainty
•Assumption log 5. Data analysis
•Basis of estimates •Simulations
•Cost estimates •Sensitivity analysis
•Cost forecasts •Decision tree analysis
•Duration estimates •Influence diagrams
•Milestone list
•Resource requirements
•Risk register
•Risk report
•Schedule forecasts
3. EEF
4. OPA
 Decision Tree Analysis
60,000 , 80%

51k

31k 15,000 , 20%

Main
Decision
????

18k
40,000 , 60%

28k
29
10,000 , 40%
 REPRESENTATIONS OF UNCERTAINTY

Distribution Type Description

Uniform All values are likely to occur (straight line display)

Normal Most values in a sampling are close to the mean (bell-shaped
density curves with a single peak display)
Triangular Most optimistic, most likely, and most pessimistic values are
analyzed (triangle-shaped display)
 EXPECTED MONETARY VALUE
Project BUDGET baseline = $500,000

Risk Event Probability × Impact Expected Value

1. Weather Snowstorm in March (T) 0.60 x -$60,000 -36,000

2. There is a 20% probability of the price

0.20 x $100,000 20,000
of construction material dropping (O)

3. Labor quality (T) 0.10 x $ -100,000 -10,000

Total value of risk events 26,000

Project budget/ cost baseline $500,000

Adjusted total project baseline 526,000

 SENSITIVITY • WHICH RISKS HAVE THE MOST POTENTIAL IMPACT?
ANALYSIS • TYPICAL DISPLAY IS A TORNADO DIAGRAM

33

Examines uncertainty of each project element affects the objective being examined WHEN all other elements are fixed.
 INFLUENCE DIAGRAM
• INFLUENCE DIAGRAMS ARE GRAPHICAL AIDS TO
DECISION MAKING UNDER UNCERTAINTY
 PLAN RISK RESPONSE

 THE PROCESS OF DEVELOPING OPTIONS

AND DETERMINING ACTIONS TO
ENHANCE OPPORTUNITIES & REDUCE
THREATS TO THE PROJECTS OBJECTIVES.
 PLAN RISK RESPONSES
Inputs Tools & Techniques Outputs
1. Project manage. Plan 1. Expert judgment 1. Change requests
•Resource manage. plan 2. Data gathering 2. Project management plan updates
•Risk manage. Plan •.Interviews •Schedule manage. Plan
•Cost baseline 3. Interpersonal & teams skills •Cost manage. Plan
2. Project documents •Facilitation •Quality management Plan
•Lessons learned register 4. Strategies for threats •Resource management plan
•Project schedule 5. Strategies for opportunities •Procurement management plan
•Project team assignments 6. Contingent response strategies •Scope baseline
•Resource calendars 7. Strategies for overall project risk •Schedule baseline
•Risk register 8. Data analysis •Cost baseline
•Risk report •Alternative analysis 3. Project documents updates
•Stakeholder register •Cost-benefits analysis •Assumption log
3. EEF 9. Decision making •Cost forecasts
4. OPA •Multi-criteria decision analysis •Lessons learned register
•Project schedule
•Project team assignments
•Risk register
•Risk report
 Response strategies for threats

• ESCALATE

• AVOID

• TRANSFER

• MITIGATE

• ACCEPT
 RESPONSE STRATEGIES FOR OPPORTUNITIES

Escalate

Exploit

Share

Enhance

Accept
Summary identification Analysis Response
ID O/T Description of Risk Category Potential Owner Prob. Schedule Cost Quality score Strategy Tactic Fallback
response
R1 T the probability of tech. call Site M VL H L MH Mitigate Safety Take him
worker xxxxx falls ambulance Engineer procedures to
and injured hospital

Watch list 42
SECONDARY RISK:
RISKS THAT ARISE AS A DIRECT
RESULT OF IMPLEMENTING A RISK
RESPONSE.

RESIDUAL RISK:
RISKS THAT REMAIN AFTER
AVOIDANCE, TRANSFER OR
MITIGATION RESPONSES HAVE BEEN
TAKEN. THIS ALSO INCLUDES MINOR
RISKS THAT HAVE BEEN ACCEPTED.
 Implement Risk Responses
Inputs Tools & Techniques Outputs
1. Project manage. Plan 1. Expert judgment 1. Change request
•Risk management Plan
2. Interpersonal & teams skills 2. Project documents
2. Project documents •Influencing updates
•Lessons learned register • Issue log
•Risk register 3. Project management • Lessons learned
•Risk report information system register
• Project team
3. (OPA) assignments
• Risk register
• Risk report
 MONITOR RISKS

The process of monitoring the

implementation of agreed-upon risk

response plans, tracking identified

risks, identifying and analyzing new

risks, & evaluating risk process

effectiveness throughout the project

 MONITOR RISKS
Inputs Tools & Techniques Outputs
1. Project manage. Plan 1.Data analysis 1. Work performance info.
•Risk manage. Plan •Technical performance 2. Change requests
2. Project documents analysis 3. Project management plan
• Issue log •Reserve analysis updates
• Lessons learned register •Any component
• Risk register 2. Audits 4. Project documents updates
• Risk report • Assumption log
3. Work performance data 3. Meetings • Issue log
4. Work performance • Lessons learned register
reports • Risk register
• Risk report
5. OPA updates
 PROJECT RISK RESPONSE AUDIT

 AN EXAMINATION OF THE EFFECTIVENESS OF RISK RESPONSE PLANS AND THE PERFORMANCE OF THE RISK
OWNER.

PROJECT RISK RESPONSE AUDIT PROCESS

 GATHER RELEVANT PROJECT DATA REGARDING WORK RESULTS INCLUDING RISK DATABASE.
 REVIEW THE RISK RESPONSE PLANS AND IMPLEMENTATION OF THE PLANS.
 PREPARE A REPORT OF THE FINDINGS AND DISTRIBUTE TO THE PROJECT TEAM AND KEY STAKEHOLDERS.

WORKAROUND PLANS
UNPLANNED RESPONSES TO EMERGING RISKS THAT WERE PREVIOUSLY UNIDENTIFIED OR UNEXPECTED.
QUESTIONS

48
1- ALL OF THE FOLLOWING ARE FACTORS IN THE ASSESSMENT OF PROJECT
RISK EXCEPT:

A. RISK EVENT

B. RISK PROBABILITY

C. AMOUNT AT STAKE

D. INSURANCE PREMIUMS
2- RISK TOLERANCES ARE DETERMINED IN ORDER TO HELP:

A. THE TEAM RANK THE PROJECT RISKS

B. THE PROJECT MANAGER ESTIMATE THE PROJECT

C. THE TEAM SCHEDULE THE PROJECT

D. MANAGEMENT KNOW HOW OTHER MANAGERS WILL ACT ON THE PROJECT

3- A PROJECT MANAGER IS QUANTIFYING RISK FOR HER PROJECT. SEVERAL OF
HER EXPERTS ARE OFFSITE, BUT WISH TO BE INCLUDED. HOW CAN THIS BE
DONE?

A. USE MONTE CARLO ANALYSIS USING THE INTERNET AS A TOOL.

B. APPLY THE CRITICAL PATH METHOD.
C. DETERMINE OPTIONS FOR RECOMMENDED CORRECTIVE ACTION.
D. APPLY THE DELPHI TECHNIQUE
4- WORKAROUNDS ARE DETERMINED DURING WHICH RISK MANAGEMENT PROCESS:

A )IDENTIFY RISKS.

B )PERFORM QUANTITATIVE RISK ANALYSIS.

C )PLAN RISK RESPONSES.

D ) CONTROL RISKS.

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5- WHAT SHOULD BE DONE WITH RISKS ON THE WATCH LIST?

A. DOCUMENT THEM FOR HISTORICAL USE ON OTHER PROJECTS

B. DOCUMENT THEM AND REVISIT DURING PROJECT EXECUTING

C. DOCUMENT THEM AND SET THEM ASIDE BECAUSE THEY ARE ALREADY COVERED IN
YOUR CONTINGENCY PLANS

D. DOCUMENT THEM AND GIVE THEM TO THE CUSTOMER

 6- MONTE CARLO ANALYSIS IS USED TO:
A )GET AN INDICATION OF THE RISK INVOLVED IN THE PROJECT.

B )ESTIMATE AN ACTIVITY’S LENGTH.

C )SIMULATE THE ORDER IN WHICH ACTIVITIES OCCUR.

D )PROVE TO MANAGEMENT THAT EXTRA STAFF IS NEEDED.

54
7- IF A PROJECT HAS A 60% CHANCE OF A U.S. $100,000 PROFIT AND A 40% CHANCE OF A
U.S. $100,000 LOSS, THE EXPECTED MONETARY VALUE FOR THE PROJECT IS:

A. $ 100,000 PROFIT

B. $ 60,000 LOSS

C. $ 20,000 PROFIT

D. $ 40,000 LOSS
8- IF A RISK EVENT HAS A 90% CHANCE OF OCCURRING, AND THE CONSEQUENCES WILL BE
U.S. $100,000, WHAT DOES U.S. $90,000 REPRESENT?

A. RISK VALUE

B. PRESENT VALUE

C. EXPECTED MONETARY VALUE

D. CONTINGENCY BUDGET
9- A PROJECT MANAGER HAS JUST FINISHED THE RISK RESPONSE PLAN FOR A U.S. $387,000
ENGINEERING PROJECT. WHICH OF THE FOLLOWING SHOULD BE PROBABLY DONE NEXT?

A. DETERMINE THE OVERALL RISK RATING OF THE PROJECT

B. BEGIN TO ANALYZE THE RISKS THAT SHOW UP IN THE PROJECT DRAWINGS

C. ADD WORK PACKAGES TO THE PROJECT WORK BREAKDOWN STRUCTURE

D. HOLD A PROJECT RISK REASSESSMENT

10- PURCHASING INSURANCE IS BEST CONSIDERED AN EXAMPLE OF RISK:

A. MITIGATION

B. TRANSFER

C. ACCEPTANCE

D. AVOIDANCE