CONTRUCTION PROJECT MANAGEMENT
CE - 371
Maj Haider Ali Shams
PROJECT RISK
MANAGEMENT
PROJECT RISK
MANAGEMENT
• Process of working on risk
management planning, identifying,
analyzing, response planning and
controlling of project risks
• Goal is to:
Increase the likelihood of positive
risks
Decrease the likelihood of negative
risks
• Project manager has to be proactive
here
• End of the day saves time and money
3
PROJECT RISK
KNOWLEDGE AREAS
4
PLAN RISK MANAGEMENT
• The main output of this process is a risk
management plan—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 sponsor’s
approaches to risk
• The level of detail will vary with the
needs of the project
MAIN POINTS IN RISK MANAGEMENT
PLAN
• Methodology
• Roles and responsibilities
• Budget and schedule
• Risk categories
• Risk probability and impact
• Revised stakeholders’ tolerances
• Tracking
• Risk documentation
PLAN RISK MANAGEMENT
• Identifying risks is the process of
understanding what potential events
might hurt or enhance a particular
project
• Another consideration is the likelihood of
advanced discovery
• Risk identification tools and techniques
include:
Brainstorming
The Delphi technique
Interviewing
SWOT analysis
RISK REGISTER
• An identification number for each risk event
• A rank for each risk event
• The name of each risk event
• A description of each risk event
• The category under which each risk event falls
• The root cause of each risk
• Triggers for each risk; triggers are indicators or
symptoms of actual risk events
• Potential responses to each risk
• The risk owner or person who will own or take
responsibility for each risk
• The probability and impact of each risk occurring.
• The status of each risk
7/14/20XX Pitch deck title 8
QUALITATIVE RISK ANALYSIS
• Assess the likelihood and
impact of identified risks to
determine their magnitude and
priority
• Risk quantification tools and
techniques include:
Expert judgment
Probability/impact matrixes
The top ten risk item
tracking
SAMPLE PROBABILITY/IMPACT MATRIX
EXAMPLE OF TOP TEN RISK ITEM
TRACKING
Monthly Ranking
Risk Item This Last Number Risk Resolution
of Months Progress
Month Month
Inadequate 1 2 4 Working on revising the
planning entire project plan
Poor definition 2 3 3 Holding meetings with
of scope project customer and
sponsor to clarify scope
Absence of 3 1 2 Just assigned a new
leadership project manager to lead
the project after old one
quit
Poor cost 4 4 3 Revising cost estimates
estimates
Poor time 5 5 3 Revising schedule
estimates estimates
QUANTITATIVE RISK ANALYSIS
• Often follows qualitative risk
analysis, but both can be done
together
• Large, complex projects involving
leading edge technologies often
require extensive quantitative risk
analysis
• Main techniques include:
Decision tree analysis
Simulation
Sensitivity analysis
DECISION TREES AND EXPECTED
MONETARY VALUE (EMV)
• A decision tree is a
diagramming analysis
technique used to help select
the best course of action in
situations in which future
outcomes are uncertain
• Estimated monetary value
(EMV) is the product of a risk
event probability and the risk
event’s monetary value
• You can draw a decision tree
to help find the EMV
SENSITIVITY ANALYSIS
• Sensitivity analysis is a
technique used to show the
effects of changing one or more
variables on an outcome
• For example, many people use it
to determine what the monthly
payments for a loan will be
given different interest rates or
periods of the loan, or for
determining break-even points
based on different assumptions
• Spreadsheet software, such as
Excel, is a common tool for
performing sensitivity analysis
SIMULATION
• Simulation uses a representation
or model of a system to analyze
the expected behavior or
performance of the system
• Monte Carlo analysis simulates
a model’s outcome many times to
provide a statistical distribution of
the calculated results
• To use a Monte Carlo simulation,
you must have three estimates
(most likely, pessimistic, and
optimistic) plus an estimate of the
likelihood of the estimate being
between the most likely and
optimistic values
PLANNING RISK RESPONSE
• After identifying and quantifying risks,
you must decide how to respond to them
• Four main response strategies for
negative risks:
Risk avoidance
Risk acceptance
Risk transference
Risk mitigation
• Four main response strategies for
positive risks:
Exploit
Enhance
Share
Accept
CONTROL RISKS
• Involves executing the risk management process to
respond to risk events and ensuring that risk
awareness is an ongoing activity performed by the
entire project team throughout the entire project
• Workarounds are unplanned responses to risk events
that must be done when there are no contingency
plans
• Main outputs of risk control are:
Work performance information
Change requests
Updates to the project management plan, other
project documents, and organizational process
assets
