Scribd
Upload
66 views29 pages

Production Organization Lecture 5: Project Risk and Change

This document discusses project risk and change management. It defines risk management as identifying potential unforeseen issues, minimizing their impacts, and having contingency plans. The key aspects of risk management are identifying risks early, assessing their probability and impact, developing responses like mitigating, avoiding, or transferring risks, and controlling risks through a risk register and change management process. Effective risk management gives better control over projects and improves chances of meeting objectives.

Uploaded by

Sujani Maarasinghe
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
66 views29 pages

Production Organization Lecture 5: Project Risk and Change

This document discusses project risk and change management. It defines risk management as identifying potential unforeseen issues, minimizing their impacts, and having contingency plans. The key aspects of risk management are identifying risks early, assessing their probability and impact, developing responses like mitigating, avoiding, or transferring risks, and controlling risks through a risk register and change management process. Effective risk management gives better control over projects and improves chances of meeting objectives.

Uploaded by

Sujani Maarasinghe
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 29

Production Organization Lecture 5: Project Risk and Change

Dr. Manjula Nanayakkara (BSc.Eng, PhD) Department of Production Engineering University of Peradeniya Sri Lanka

Risk in Projects: Overview


Risks are inherent in projects May have positive or negative effects on project objectives Some risks can be identified before the project starts, but not all Some risks can be with anticipated consequences Risks can be beyond imagination sometimes

Risk Management: Overview


To attempt to recognize potential unforeseen trouble spots Risk management defines as many risk events as possible and minimizes their impacts Manages responses to those events that do materialize Provide with contingency funds to cover the risk events

Risk Management
Chances for risk event occurring are greatest in concept, planning and start up phases Cost and the impact is lesser if it starts earlier than the later Identifying the project risk events and deciding a response before the project begins is more prudent

Risk Event Graph

Risk Management Approach


It is a preventive approach (rather than reactive) then surprises are reduced Negative consequences associated with undesirable events are minimized Successful risk management gives better control over the future and significantly improve the chances of meeting project objectives within time, budget and the performance

Sources for Risk


Unlimited!, internal and external External sources, known as threats External risks are generally considered at the start, before going ahead with the project External risks are important to address as their impact would be high

Risk Management Process


Risk identification Risk assessment Risk response development Risk response control

Risk Identification
Generate a possible list of risks Team effort: Risk management team Risk breakdown structure (RBS) in conjunction with WBS Later these risks are analyzed and filtered out Event that produce consequence is important, not just focusing the objectives

Risk Identification- Risk Profile


Risk profile- a list of questions Include strengths and weaknesses of the firm Addresses Technical and management risks of the firm Updated (to-date) Risk identification need the inputs from all stake holders

Risk Assessment
Some risks identified may not deserve attention, can be ignored- redundant Stratifying only once needed to be addressed Scenario analysis- technique to analyze risks Significance of the risk is assessed in terms of
Probability of the event Impact of the event

Risk Analysis Process- Impact Level


Different levels of risk probabilities and impact levels identified To be tailored for a specific project, not general -some adverse risks effect projects differently Rank order descriptors or numerical weightings are used Time the event occur also material

Risk Response Development: Response to Risk


Mitigating Avoiding Transferring Sharing Retaining

Mitigating Risk
Reduce the likelihood that the event will occur
Mostly used- successful Less costly

Reduce the impact that the adverse event would have on the project

Avoiding Risk
Changing the project plan to eliminate the risk or condition Not all, bust some elements of risks can be avoided Eg: Adopting to proven technology rather than experimenting

Transferring Risk
Passing the risk to another party Associated with a premium Insurance Performance bonds Warranties Guarantees

Retaining Risk
Acceptance the risk, effects of some risks are large, not feasible to transfer or mitigate Generally changes for such occurrence is slim Risk is retained by adopting to a contingency plan if risk arises

Contingency Plan
An alternative plan that will be used in risk appears This plan presents actions if risks foreseen Plan answers all possible questions related to a possible risks Conditions to activate the contingency plan has to be clearly documented Risk response matrix is a good tool to for managing risks

Types of Risks to be Handled


Technical Schedule Cost Funding And many more

Opportunity Management
What can be positive in a risk? Same process applies in managing Identified, assessed for the likelihood of the impact Responses are determined, contingency plans and funding is organized

Budget Reserves
Identified for specific work packages or segments These are found in WBS or Baseline curve Reserve amount is determined by costing out the accepted contingency recovery plan Communicated to the project team

Management Reserves
Funds are needed to cover major unforeseen risks and applied to the total project Established after budget reserves are identified and funds established Management reserved are independent of budget reserves Management reserves are often based on historical data and judgements

Time Buffers
Is a cushion against potential delays Amount and the time depends on the inherent uncertainty of the project More uncertain the project, more the time should be reserved To assign extra time to critical moments

Types of Time Buffers


Activities with severe risks Activities that are prone to delays due to a delay in precedence activity Noncritical activities that has the likelihood to create more critical paths Activities that need scarce resources

Risk Response Control


Risk register is the formal document to summarize the first three steps of risk management process Risk register details identifies risks, including descriptions, category and probability of occurrence, impact, responses, contingency plans, owners and current status It is backbone of the last step of risk management

Change Control Management


Major element in risk control management Coping with and controlling project changes Change come from many sources; customer, owner, project manager, team member and occurrence of risk events

Changes
Scope changes Changes in implementation and contingency plans Improvement changes

Change Management Systems


Identify proposed changes List expected effects of proposed changes on schedule and the budget Review, evaluate and approve or disprove changes Negotiate and resolve conflicts of change, conditions and cost Communicate changes to parties affected Assign responsibility for implementing change Adjust master schedule and budget Track all changes that are to be implemented

Benefits of Change Control Systems


Inconsequential changes are discouraged Costs of changes are maintained in a log Integrity of the WBS and performance measures are maintained Allocations and use of budget and manage reserve funds and tracked Responsibility of the implementation is clarified Effect of changes is visible to all parties involved Implementation of change monitored Scope changes will be quickly reflected in baseline and performance measures

You might also like