© Jerzy Nawrocki, Project Management

Risk 1

Project Management

Risk

Jerzy Nawrocki

Faculty of Computing

Poznan University of Technology

© Jerzy Nawrocki, 2013 Risk (2)

Project Management

Which of the principles is about uncertainty?

B

E

S

T

R

A

P

usiness justification

xperience

tages

olerances

oles & responsibilities

daptation

roduct-orientation

Risk (3)

Project Management

Aim of the lecture

How to deal with

project’s uncertainties?

Risk (4)

Project Management

Objectives

Risk

Project

BENEFIT

Scope

Quality

Uncertain

event(s)

Risk (5)

Project Management

Risk: What kind of effect?

Positive (opportunity)?

Negative (thread)?

Risk (6)

Project Management

Agenda

• Risk management

procedure

• Risk budget

• Risk register

• Risk Management

Strategy

© Jerzy Nawrocki, Project Management

Risk 2

Risk (7)

Project Management

The PRINCE2 risk management procedure

Identify

Assess

Plan

Implement Communicate

Risk (8)

Project Management

Risk identification techniques

• Review lessons

• Risk checklist

• Risk prompt list

• Brainstorming

• Risk breakdown structure

Risk (9)

Project Management

Roger Pressman, Software Engineering, McGraw Hill

• Product size risks (confidence in

size estimate, ...)

• Business impact risks

(govermental constraints, ...)

• Customer related risks (Are the

customers contradictory? ...)

• Process risks (Is the software

process used by other projects? ...)

Risk (10)

Project Management

Roger Pressman, Software Engineering, McGraw Hill

• Technology risk (Do you have to

interface with unknown components? ...)

• Development environment

risks (Are testing tools appropriate? ...)

• Staff risks (Have staff received

necessary training? ...)

Risk (11)

Project Management

Risk identification techniques

• Review lessons

• Risk checklist

• Risk prompt list

• Brainstorming

• Risk breakdown structure

Risk (12)

Project Management

Risk breakdown structure (example)

© Jerzy Nawrocki, Project Management

Risk 3

Risk (13)

Project Management

Results of risk identification

Risk (14)

Project Management

Cause – Event – Effect

Because it has been raining heavily

(risk cause),

there is a threat that the river flowing

through the farmer’s field might

overflow (risk event),

which would severely damage the

farmer’s crop (risk effect).

Risk (15)

Project Management

Cause – Event – Effect

Because the weather has been

particularly mild this winter (risk

cause),

there is an opportunity that fewer

people will be hospitalized with influenza (risk event),

which will mean that there will be less

disruption to planned routine

operations (risk effect).

Risk (16)

Project Management

The PRINCE2 risk management procedure

Identify

Assess

Plan

Implement Communicate

Risk (17)

Project Management

Risk assessment

• Estimation

• Probability

• Impact

• Proximity

• Evaluation

Risk (18)

Project Management

Risk estimation techniques

Expected value

cost_of_the_risk_impact •

probability

Risk Value

Breaking ... 100

Late ... 80

Defective ... 66

© Jerzy Nawrocki, Project Management

Risk 4

Risk (19)

Project Management

Risk estimation techniques

Probability-impact grid

Impact • Probability

Risk Value

Breaking ... 0,56

Late ... 0,20

Defective ... 0,03

Risk (20)

Project Management

Risk summary grid

Risk (21)

Project Management

Risk assessment

• Estimation

• Probability

• Impact

• Proximity

• Evaluation

Risk (22)

Project Management

Expected monetary value

Representing total risk with one number

Risk (23)

Project Management

The PRINCE2 risk management procedure

Identify

Assess

Plan

Implement Communicate

Risk (24)

Project Management

Threat and opportunity responses

© Jerzy Nawrocki, Project Management

Risk 5

Risk (25)

Project Management

Examples of risk responses

Risk Response Description

A prototype can be

damaged in transit

what will make the

project late.

Avoid Build the prototype on the destination

place.

Reduce Produce two prototypes.

Fallback After producing a prototype keep all the

producers ready till the end of transit.

Transfer Buy insurance.

Accept Do nothing.

Share

The money saved on building the

second prototype are shared between

the supplier and the customer and the

risk of late delivery as well.

Risk (26)

Project Management

Risk planning question

Avoid, reduce,

transfer or accept?

Cost

Profit

Risk (27)

Project Management

The PRINCE2 risk management procedure

Identify

Assess

Plan

Implement Communicate

Risk (28)

Project Management

Implementing the planned responses

Risk owner

(monitoring, control,

giving directions)

Risk actionee

(to carry out a risk

response action)

Risk (29)

Project Management

Implementing the planned responses

Risk owner =? Risk actionee

(can be the same person)

Risk (30)

Project Management

Example

A key supplier may go bankrupt.

Response:

To identify possible alternative suppliers

who have the capacity to undertake the

affected Work Packages at short notice

(fallback).

Owner: The commercial director.

Actionee: The Procurement Manager.

© Jerzy Nawrocki, Project Management

Risk 6

Risk (31)

Project Management

The PRINCE2 risk management procedure

Identify

Assess

Plan

Implement Communicate

Risk (32)

Project Management

Typical risk communication channels

• Checkpoint Reports

• Highlight Reports

• End Stage Reports

• End Project Reports

• Lessons Reports

Risk (33)

Project Management

Agenda

• Risk management

procedure

• Risk budget

• Risk register

• Risk Management

Strategy

Risk (34)

Project Management

Risk budget

To fund responses to the

project’s threats and

opportunities (e.g. to pay

implementation of a fallback

plan).

The expected monetary

value can be used to determine

a risk budget.

Risk (35)

Project Management

Agenda

• Risk management

procedure

• Risk budget

• Risk register

• Risk Management

Strategy

Risk (36)

Project Management

Purpose of Risk Register

To capture and

maintain information

on all of the identified threats

and opportunities relating to

the project.

© Jerzy Nawrocki, Project Management

Risk 7

Risk (37)

Project Management

Composition

Risk identifier

Risk author

Date registered

Risk category (e.g. schedule, quality)

Description (cause, risk event, effect)

Probability, impact and expected value

Proximity

Risk response category (avoid, ...)

Risk response actions

Risk status

Risk owner

Risk actionee.

Risk (38)

Project Management

Agenda

• Risk management

procedure

• Risk budget

• Risk register

• Risk Management

Strategy

Risk (39)

Project Management

Purpose

To describe the specific risk

management

• techniques,

• standards, and

• the responsibilities

for achieving an effective risk

management procedure.

Risk (40)

Project Management

Composition

Introduction (purpose, scope, ...)

Risk management procedure

(I,A,P,I,C)

Tools and techniques

Records (Risk Register)

Reporting

Timing (when formal risk mang.

activities?)

Roles and responsibilities

Risk (41)

Project Management

Composition

Scales (for probability and impact)

Proximity (imminent, within the stage,

...)

Risk categories (schedule, quality, ...)

Risk response categories (A, R, F, T,

...)

Early-warning indicators

Risk tolerance (threshold levels)

Risk budget

Risk (42)

Project Management

Literature

Chapter:

8

Appendix:

A24, A25