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BSBPMG407A Apply Risk Management Techniques 1 Apply Risk Management Techniques Project Risk Processes Part 2 Certificate IV in Project Management 17871 Qualification Code BSB41507 Unit Code BSBPMG407A

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Page 1: BSBPMG407A Apply Risk Management Techniques 1 Apply Risk Management Techniques Project Risk Processes Part 2 C ertificate IV in Project Management 17871

BSBPMG407A Apply Risk Management Techniques1

Apply RiskManagement Techniques

Project Risk Processes Part 2

Certificate IV in Project Management 17871Qualification Code BSB41507

Unit Code BSBPMG407A

Page 2: BSBPMG407A Apply Risk Management Techniques 1 Apply Risk Management Techniques Project Risk Processes Part 2 C ertificate IV in Project Management 17871

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Project Risk Management Processes

PMBOK Project Risk Management Processes -

11.1 Plan Risk Management

11.2 Identify Risks

11.3 Perform Qualitative Risk Analysis

11.4 Perform Quantitative Risk Analysis

11.5 Plan Risk Responses

11.6 Monitor and Control Risks

Related processes from Project Integration Management –

4.1 Develop Project Charter

4.2 Develop Project Management Plan

4.6 Close ProjectPMBOK 4th Edition

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11.4 Perform Quantitative Risk Analysis

Adapted from PMBOK 4th Edition

Initiation Planning Execution Close

Monitor

Control

• The process of numerically analysing the effect of identified risks on overall project objectives

• Typically only applied to risks with high priority due to potential to substantially impact the project’s objectives

• Enables a more rigorous approach to risk decision making in the presence of uncertainly

• Often omitted depending on the organisation’s risk appetite and maturity of the project and risk management processes

• Occurs during Planning

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11.4 Perform Quantitative Risk Analysis

• Inputs to Perform Quantitative Risk Analysis -Draft Risk Register

Risk Management Plan

Cost Management Plan

Schedule Management Plan

Organisational Process Assets -– Risk management standards

– Risk management policies and procedures

– Risk categories and definitions

– Standard templates

– Lessons learned from previous projects

– Risk databases and checklists

Adapted from PMBOK 4th EditionAdapted from PMBOK 4th Edition

Initiation Planning Execution Close

Monitor

Control

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11.4 Perform Quantitative Risk Analysis

• Tools and techniques for Quantitative Risk Analysis include -

Interviews

SensitivityAnalysis

ProbabilityDistributions

Modelling &SimulationExpert

Judgement

Expected MonetaryValue Analysis

Decision TreeDiagrams

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11.4 Perform Quantitative Risk Analysis

Interviews• Draw on experience of experts and historical data to quantify the probability

and impacts of risks on project objectives. Often Three-point data is gathered on pessimistic, likely and optimistic outcomes.

Probability Distributions – Advanced technique

• Discrete distributions represent uncertain events such as risks. Requires high degree of statistical skill and statistical software.

Sensitivity Analysis – Advanced technique

• Helps to determine which risks have the most potential impact on project objectives. Prioritisation undertaken in Qualitative Analysis is often sufficient.

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11.4 Perform Quantitative Risk Analysis

Modelling and Simulation – Advanced techniques

• Uses a model to simulate the outcomes of the project, including the impact of uncertain events such as risks. Requires extensive data on past and similar projects, a high degree of statistical expertise and statistical software.

Expected Monetary Value Analysis – Advanced technique

• Extremely advanced technique. Rarely used except for Defence and Scientific projects such as space exploration. Specifically examines the impacts on cost of uncertain events.

Decision Tree Diagrams• Can be use in conjunction with Modelling and Simulation and Expected

Monetary Value Analysis, or can be prepared in a more informal manner. Enables analysis of different choices and paths.

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11.4 Perform Quantitative Risk Analysis

• Outputs of this process include –

Risk Register Updates– Probabilistic analysis of the project

– Probability of achieving cost and time objectives

– Prioritised list of quantified risks

– Trends in risk analysis results

Adapted from PMBOK 4th Edition

Initiation Planning Execution Close

Monitor

Control

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11.5 Plan Risk Responses

Adapted from PMBOK 4th Edition

Initiation Planning Execution Close

Monitor

Control

• The process of developing options and actions to reduce the threat and impacts of risks

• It includes the identification and assignment of one person to be the Risk Owner, as well as the selection of the best management or mitigation actions

• Planned risk responses must be appropriate to the significance of the risk and cost effective

• Can also be applied to the maximisation of the benefits from any identified possible opportunities (less common)

• Occurs during Planning

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11.5 Plan Risk Responses

• Inputs to Plan Risk ResponsesRisk Register

Risk Management Plan

• Tools and techniques to Plan Risk Responses include -

Adapted from PMBOK 4th EditionAdapted from PMBOK 4th Edition

1. Avoid

2. Transfer

3. Mitigate

4. Accept

Negative Risks or Threats

1. Exploit

2. Share

3. Enhance

4. Accept

Positive Risks or Opportunities

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11.5 Plan Risk Responses

Avoid• Changing the Project Management Plan to eliminate the risk entirely

Transfer • Shifting some or all of the ownership of a threat to third party and thus also

transferring the negative impact.

Mitigate• Undertaking risk responses that in some way reduce either the likelihood or

impact of the risk.

Accept• Passive acceptance requires no specific risk response action apart from

standard risk monitoring and reporting procedures.

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11.5 Plan Risk Responses

Activity:

A. I know we have 3 different designs we can select from in order to satisfy the customer’s requirements. However I am very reluctant to consider the second option because, if we are wrong there exists the chance of imminent damage to the project.

B. I know the design we selected has the option of getting us in trouble, but I’m not going to worry about or even develop a contingency plan until I am convinced that the risk is about to occur.

C. I know we can manufacture the project ourselves but there are risks. I would rather award a fixed-price contract to Alpha company and have them do the manufacturing instead.

D. I have set up a management reserve just in case there are escalations in the cost of the raw materials we must purchase.

Kerzner and Saldaris, 2006.

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11.5 Plan Risk Responses

Activity:

A. I know we have 3 different designs we can select from in order to satisfy the customer’s requirements. However I am very reluctant to consider the second option because, if we are wrong there exists the chance of imminent damage to the project. AVOID

B. I know the design we selected has the option of getting us in trouble, but I’m not going to worry about or even develop a contingency plan until I am convinced that the risk is about to occur. ACCEPT

C. I know we can manufacture the project ourselves but there are risks. I would rather award a fixed-price contract to Alpha company and have them do the manufacturing instead. TRANSFER

D. I have set up a management reserve just in case there are escalations in the cost of the raw materials we must purchase. MITIGATE

Kerzner and Saldaris, 2006.

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11.5 Plan Risk Responses

• Outputs of this process include – Risk Register Updates

– Risk Owners Assigned

– Mitigation/Management Strategies defined and documented

– Residual Risk Ratings

Risk Action Plans - for specific high priority risks

Risk Related Contract Decisions Project Management Plan Updates

– Schedule management plan

– Cost management plan

– Quality management plan

– Procurement management plan

– Human resource management plan

– Work Breakdown Structure

– Schedule Baseline

– Cost Baseline

Assumptions Log UpdatesAdapted from PMBOK 4th Edition

Initiation Planning Execution Close

Monitor

Control

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11.6 Monitor and Control Risks

Adapted from PMBOK 4th Edition

Initiation Planning Execution Close

Monitor

Control

• The process of implementing risk response plans, tracking residual risks, identifying new risks, and evaluating risk management effectiveness

• Risk Action Plans are included in the project lifecycle and managed by this process

• Can include activities such as choosing alternative strategies, executing a contingency or fallback plan, and modifying the project management plan accordingly

• The Risk Owner reports periodically to the Project Manager on the effectiveness of the Risk Action Plans and responses

• Occurs throughout the project

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11.6 Monitor and Control Risks

• Inputs to Monitor and Control RiskRisk Register

Risk Action Plans

Project Management Plan

Work Performance Information– Deliverable status

– Schedule progress

– Costs incurred

Performance Reports

Adapted from PMBOK 4th EditionAdapted from PMBOK 4th Edition

Initiation Planning Execution Close

Monitor

Control

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11.6 Monitor and Control Risks

• Tools and techniques to Monitor and Control Risks include -

Risk Audits

Technical PerformanceMeasurementRisk

Re-assessmentVariance &

Trend Analysis

StatusMeetings

ReserveAnalysis

StatusReports

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11.6 Monitor and Control Risks

Risk Re-assessment• Risk monitoring and control activities often result in the identification of new

risks, re-assessment of current risks and the closing of risks that no longer apply. Re-assessment sessions need to be scheduled regularly and risk registers, status reports and risk action plans updated as a result.

Risk Audits • Examine and document the effectiveness of risk responses. Often combined

with Risk Re-assessment activities.

Variance and Trend Analysis• Compares the planned results of risk responses and action plans to the

actual outcomes. Often combined with Risk Re-assessment activities.

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11.6 Monitor and Control Risks

Technical Performance Measurement – Advanced technique

• Measures the performance of technical accomplishments or deliverables. Can only be performed if quantifiable measures of technical performance are defined in the Project Management and Risk Management Plans.

Reserve Analysis• Compares the amount of risk reserves or contingency that remain at any

point in time to determine if it is adequate or can be adjusted up or down based on the performance of risk management activities.

Status Meetings • Project Risk Management and a review of the Risk Register should be on

the agenda for all Project Status Meetings.

Status Reports• Risk ratings and trends should be included in Project Status Reports for the

high priority risks.

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11.6 Monitor and Control Risks

• Outputs of this process include –Risk Register Updates

– Risk Re-assessments

– Risk Audits

– Risk reviews

– Risk Action Plans

Risk Management Plan Updates– Revised templates– Risk Breakdown Structure– Lessons learned from risk management activities

Change Requests– Corrective and Preventative Actions

Project Management Plan UpdatesProject Document Updates

Adapted from PMBOK 4th Edition

Initiation Planning Execution Close

Monitor

Control

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Team Assignment Criteria

Team AssignmentComponents

Marks Basic Competency Higher Competency

Risk Rating Matrix 5 Basic scales for likelihood and consequences (3 possible ratings)

Combined impacts of likelihood and consequences

Detailed scales for likelihood and consequences (5 possible ratings)

Quantification of impacts for each rating

Risk Register 5 Risk register covering major categories of project risk

Risk ratings and priorities Summarised mitigation strategies

Concept of residual risk rating applied

More comprehensive coverage of risk categories

Risk Action Plans 5 Detailed risk action plans provided for 3 highest priority risks, including assignment of responsibility for plan execution

More comprehensive risk action planes including scope, cost and time impacts of the plan

Risk identificationRisk management tools &

techniques

5 Basic understanding of tools and techniques

At least two methods used

Advanced understanding of tools and techniques

More than two methods used and experts consulted

Total 20 13 to 16 17 to 20