Pm session10
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This document discusses risk management in project management. It defines project risk as an uncertain event that can positively or negatively impact project objectives. It identifies different types of risks and explains the risk continuum from unknown unknowns to known knowns. The document also outlines the five main components of risk management according to PMBOK: 1) define objectives, 2) identify risks, 3) qualify and quantify risks, 4) develop responses, and 5) control risks. It provides examples of identifying, analyzing, and responding to different types of risks in projects.
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Pm session10
- 1. 1 Risk Management Project Management Session 10 Dr. M. Sepehri FAll 1390
- 2. 2 Project Risk An uncertain event or condition that, if it occurs, has a positive or negative impact on a project objective External: unpredictable External: predictable Internal: non-technical Internal: technical Legal Business risks Insurable risk – Direct property damage – Indirect consequential loss – Legal liability – Personnel
- 3. 3 Risk Continuun Unknown Unknowns Known Unknowns Knowns No Information Partial Information Complete Information Total Risk Uncertainty No Risk Scope of Risk Management Feasibility Studies Closeout Reports Enter New Markets
- 4. 4 Definition of Risk Risk = f(Likelihood, Impact) event • Likelihood is the probability of occurrence • Impact is the amount at stake
- 5. 5 Components of Risk Impact Probability • Risk Event • Risk Probability • Impact • Timing • Tolerance
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- 7. 7 Rating Impacts for a Risk
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- 9. 9
- 10. 10 Variation through the Project Life Cycle? Time along project life cycle Familiarity Mitigation? Risk Event Probability? Amount to complete? Amount at Stake? Cost to make Changes?
- 11. 11 RISK MANAGEMENT Why bother with Risk Management? Arguments AGAINST Arguments FOR
- 12. 12 Risk Management Risk management focuses on the future Risk and information are inversely related Historically, we focused our attentions on schedule & cost risk management. Today, our primary emphasis is on technological risk management: – Can we design it and build it? – What is the risk of obsolescence?
- 13. 13 Basic Concept Risk management focuses on: – Known unknowns – Proactive management The alternative to proactive management is reactive management, also called crisis management. This requires significantly more resources and takes longer for problems to surface.
- 14. 14 Preparing for Possibilities
- 15. 15 Risk Management The systematic processes of identifying, analyzing & responding to project risks A formal approach to the process as opposed to an intuitive one. – Define objectives – Identify Risk – Qualify/Quantify Risk – Develop Response – Risk Control
- 16. رابطه بين مراحل مديريت پروژه با مديريت ريسك 16 پروژه
- 17. 17 Risk Management (PMBOK) The systematic processes of identifying, analyzing & responding to project risks A formal approach to the process as opposed to an intuitive one. 1. Divide/define objectives 2. Identify Risk (to objectives) 3. Qualify/Quantify Risk 4. Develop Response 5. Risk Control
- 18. 18 1- Define Objectives Divide and then define – Subdivide by stakeholders – Subdivide by PM knowledge area – Subdivide by OBS (departments) – Subdivide by WBS (work package) – Subdivide by constraints
- 19. Define Objectives, Sub-divide Objectives 19
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- 21. 21 Risk Types at Boeing Financial risks Market risks Technical risks Production risks Risk >>> Mitigation strategies
- 22. 22 Financial Risks Up-front funding and payback period based upon number of planes sold – Mitigation strategies Funding by life cycle phase Continuous financial risk management Sharing risks with subcontractors Risk reevaluation based upon sales commitments
- 23. 23 Market Risks Forecasting customers’ expectations on cost, configuration, and amenities based upon a 30-40 year life of a plane – Mitigation strategies Close customer contact and input Willingness to custom-design per customer Development of a baseline design that allows for customization
- 24. 24 Technical Risks Because of the long lifetime for a plane, we must forecast technology and its impact on cost, safety, reliability and maintainability – Mitigation strategies structured change management process Use of proven technology rather than high risk technology Parallel product improvement and new product development processes
- 25. 25 Production Risks Coordination of manufacturing and assembly of a large number of subcontractors without impacting cost, schedule, quality or safety – Mitigation strategies Close working relationships with subcontractors A structured change management process Lessons learned from other new projects Use of learning curves
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- 27. 27 2- Risk Identification Start with each objective •Cause to effect •Effect caused by
- 28. 28 Risk Identification Historical data/closeout reports Structured questionnaires Structured interviews Brainstorming Structured checklist (WBS) Flow charts (build methods) Judgment based on experience System Analysis Scenario Analysis
- 29. 29 Why Projects Fail Innovation Concurrency Stakeholders Communication Scope of work Poor estimating Poor planning Insufficient reviews Insufficient control Lack of commitment Incomplete and/or in-accurate information Lack of support from team members . . . .
- 30. 30 3- Risk Qualification For each risk, identify the risk degree, qualify by experts, and quantify! – Subjective – Objective • Probability • Expected Value • Variance
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- 33. 33 4- Risk Response • Eliminate Risk Remove early • Mitigate Risk Reduce probability/impact • Deflect Risk Transfer to another party • Accept Risk Avoidance Control (mitigation) Transfer Assumption (retention)
- 34. How Much Risk is Acceptable? 34 High tolerance for risk Medium tolerance for risk Low tolerance for risk
- 35. 35 Which Method to Use? Project Procedural Documentation Guidelines Reduction Avoidance High Low Tolerance for Risk Rigid Policies/ Procedures Assumption Transfer
- 36. Developing Contingency Plans 36
- 37. 37 Problem-Solving Idea Generation: Brainstorming
- 38. 38 5- Risk Control Implements Risk Management plan to make it happen. Most neglected, but most important. Includes communication, training, practice runs. Develop company culture & attitude. Risk Management plan is monitored/updated on a regular basis to include any changes: – Changes in the scope of work – Changes in the build method – Changes in the team members – Changes in the suppliers
- 39. 39 Decision-Making Categories Complete uncertainty Relative uncertainty (partial information) Complete certainty Tolerance For Risk Risk avoider Risk neutral Risk lover
- 40. 40 FIVE STEPS TO DEVELOP PAYOFF TABLE List all the alternatives. List the future consequences of each alternative. Identify the payoffs associated with each combination. Assess the degree of certainty that these combinations will materialize Decide on a decision criterion.
- 41. 41 Developing and Using Payoff Tables Establishing the procedure to follow Construct the Payoff table Decision-making under certainty Decision-making under complete uncertainty Maximin Approach Maximax Approach Minimax regret Approach Insufficient Reason Approach Decision-making under risk Expected Monetary Value (EMV) Approach Expected Opportunity Loss (EOL) Approach Expected Value of Perfect Information (EVPI) Approach
- 42. LEGEND 42 Risk Quantification STAGE I STAGE II GUID-ANCE WARHEAD DESIGN TEST MANU. COST HIGH MEDIUM LOW PROGRAM SUMMARY
- 43. 43 Future Risks Inexperienced Customer’s Knowledge Experienced Simple Complex Contract Type
- 44. Degrees of Downstream Risk 44 R&D Low Risk Manufacturing Marketing Time
- 45. Degrees of Downstream Risk 45 R&D High Risk Manufacturing Marketing Time
- 46. 46 Prioritization of Risks Schedule Cost Technical Performance or Quality First (Highest) Priority Second Priority Third Priority
- 47. 47 Risk Intensity Radical Breakthrough Product Changes Next Generation Add-ons & Enhancements Addition to Family New Process Process Changes Next Generation Fine-Tuning & Incidentals Changes and Upgrades Risk Type Market Technical Timing Cost Price Quality High High High Low Medium Medium High High High Medium Medium Medium Medium Medium Medium Medium Low Medium Medium Medium Low Low Low Low
- 48. 48 Risk Control Measures Extreme Intensity of Controls Risk Intensity Standard Controls High Range of Controls Low Low
- 49. 49 The Risk-Reward Matrix Low High Medium Reward Risk High Medium Low
- 50. 50 Interacting Risks Specification Limit On Characteristic B Product Feature A Product Feature B Desirable Undesirable Undesirable Desirable
- 51. 51 Poor Risk Management Risk Planning Technical Inability Performance Time
- 52. 52 You never know