risk management in projects

8/7/2019 Risk Management in Projects

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SUBMITTED BY

DEEPIKA JAGGI

BTB/07/2013th



Projects are risky undertakings, and modern approaches to managingprojects recognise the central need to manage the risk as an integral part of

the project management discipline.

All projects share a range of features which inevitably introduce uncertainty.

CHARACTERSTICS:

Factors found in all projects which make them inherently risky include:

` Uniqueness. Every project involves at least some elements that have notbeen done before, and naturally there is uncertainty associated with theseelements.

` Compl exity . Projects are complex in a variety of ways, and are more than

a simple list of tasks to be performed. There are various kinds of complexityin projects, including technical, commercial, interfaces or relational, each of which brings risk into the project.



` Assu mpti ons and c onstraints. Project scoping involves making a rangeof guesses about the future, which usually include both assumptions (thingswe think will or will not happen) and constraints (things we are told to do or not do). Assumptions and constraints may turn out to be wrong, and it isalso likely that some will remain hidden or undisclosed, so they are asource of uncertainty in most projects.

` P eopl e. All projects are performed by people, including project teammembers and management, clients and customers, suppliers andsubcontractors. All of these individuals and groups are unpredictable to

some extent, and introduce uncertainty into the projects on which theywork.

` S takehol ders. These are a particular group of people who imposerequirements, expectations and objectives on the project. Stakeholder requirements can be varying, overlapping and sometimes conflicting,leading to risks in project execution and acceptance.

` C hange. Every project is a change agent, moving from the known presentinto an unknown future, with all the uncertainty associated with suchmovement.



DELIBERATE DESIGN:

Each organisation wishes to move ahead as quickly as possible, andthat involves taking risk as the business exposes itself to a range of uncertainties that could affect whether or not it achieves its desiredaim. This can be achieved in two ways:

` One option might be to take small steps, making incrementalchanges to existing products and services, seeking continuousimprovement and evolutionary change. While this strategy mightappear to be less risky, it delivers smaller advantages at eachincrement, and relies on a constant supply of value-enhancingdevelopments.

` An alternative is to be revolutionary, looking for major innovationsand paradigm-breaking change, trying to leapfrog the competition

and get several steps ahead. This is a more risky strategy but thepotential gains are larger and might be achieved more quickly.



EXTERNAL ENVIRONMENT:

Projects are not conducted in a vacuum, but exist in an environment

external to the project itself which poses a range of challenges and

constraints. This includes both the wider organisation beyond the project

and the environment outside the organisation, and changes which are

outside the project¶s control can occur in both of these. Environmental

factors which introduce risk into projects include:

` Market volatility

` Competitor actions

` Emergent requirements

` Client organisational changes

` Internal organisational changes

` PESTLIED (political, economic, social,

technological, legal, international, environmental, demographic) factors.



Projects are risky as a result of their common

characteristics, by del iberate design, and because of

the external envir onment within which they are

undertaken.

It is impossible to imagine a project without risk. Of

course some projects will be high-risk, while others have

less risk, but all projects are by definition risky to some

extent. The µzero-risk project¶ is an oxymoron and a

logical impossibility ± it does not and cannot exist.



` Risk management is concerned with identifyingrisks and drawing up plans to minimise their effecton a project.

` A RISK is a probability that some adversecircumstance will occur Project risks affect schedule or resources;

Product risks affect the quality or performance of the

software being developed; Business risks affect the organisation developing or

procuring the software.



` Technology Risks

` People Risks

` Organisational Risks

` Requirement Risks` Estimation Risks



Risk Management involves how managementresponds to risks. It includes:

` recognising preventive measures to minimise risk.

` implementing contingency plans to counter risk.

` reduce doubts via investigation through usefulinformation.

` transfer of risk to another asset.

` risk allocations in contractual agreements.` setting contingencies to budget allocations.



Risk Identification involves in pinpointing the risks that may affecta project.

It has to be conducted at regular intervals throughout the lifespan of the project.

Risk Identification has to take into consideration internal and

external factors.Internal factors involve risks that the group which is handling theproject can manage. Some examples of internal factors are thedelegation of work, freezing of vacation leaves and budgetallocation.

External factors involve risks that the project personnel are not incommand of. Some examples of external factors are economicfluctuations, policy restructuring or natural disasters.



Risk Quantification is the assessmentof risks and how different risks arelinked and communicated with eachother, in order to determine the

activity required for different riskoccurrence.

Risk Quantification includes several different aspects:` Complex calculations may result to incorrect accuracy and

consistency. Good prospects for one stakeholder may be adownfall for another.

` A risk occurrence can have a snowball effect.` Chance and ways to exploit this chance communicate in

unexpected ways.



Risk Response Development includes preventivemeasures against threats. These measures fallinto one of the below-mentioned categories:

` Avoidance and abolishing a particular danger. Thisis by abolishing the root of the problem.

` Mitigation and lessening the cost of a riskoccurrence by lessening the likelihood of this

occurrence.` Acceptance and to absorb the consequences



` Once risks have been identified and adequate control measure

assessed, decisions need to be taken on how to respond to

specific risks by taking action to improve the outcome.

Risk Response will help this process. Possible responses to risk

should include one of the four T's as follows:

` Transfer - Transferring some aspects of risk is a recognised method

either by paying a third party to take it on or if available, an insurance

policy.

` Tolerate - Perhaps nothing can be done at a reasonable cost to stop

the risk, although, ideally, the risk should be monitored by using therelevant Risk Register/Tracker template to ensure it remains

acceptable.



` Treat - Treating the risk ± take action to control it in some way by applying

containment of contingent actions. Within this categorisation:

Containment actions are those which lessen the likelihood of the risk or the

consequences, and are applied before the risk materialises.

Contingent actions are those which are put into place after the outcome from

the risk has happened (therefore becoming an issue needing quickdecisions). Here the focus is on reducing the impact of the risk. These

actions can be pre-planned so that people know what to do in advance.

` Terminate - By doing things differently and thus removing the risk, where it

is either feasible or practical to do so.



Consider each risk individually and develop astrategy to manage that risk.

` Avoidance strategies The probability that the risk will arise is reduced;

` Minimisation strategies The impact of the risk on the project or product will be

reduced;

` Contingency plans

If the risk arises, contingency plans are used to deal withthat risk;



Risk may be managed in a number of ways:

` By using existing assets:Here existing resources can be used to counter risk. This may involveimprovements to existing methods and systems, changes in responsibilities,improvements to accountability and internal controls, etc.

` By contingenc y planning:

You may decide to accept a risk, but choose to develop a plan to minimizeits effects if it happens. A good contingency plan will allow you to take actionimmediately, with the minimum of project control if you find yourself in acrisis management situation. Contingency plans also form a key part of Business Continuity Planning (BCP) or Business Continuity management(BCM).



` By investing in new resources:

Your risk analysis should give you the basis for deciding whether to bring in

additional resources to counter the risk. This can also include insuring the

risk: Here you pay someone else to carry part of the risk ± this is particularly

important where the risk is so great as to threaten your or your

organization's solvency.



Risk Strategy

Organisational

financial problems

Prepare a briefing document for senior management

showing how the project is making a very important

contribution to the goals of the business.

Recruitmentproblems

Alert customer of potential difficulties and thepossibility of delays, investigate buying-in

components.

Staff illness Reorganise team so that there is more overlap of work

and people therefore understand each other¶s jobs.

Defectivecomponents

Replace potentially defective components with bought-in components of known reliability.



Risk Strategy

Requirements

changes

Derive traceability information to assess requirements

change impact, maximise information hiding in thedesign.

Organisational

restructuring

Prepare a briefing document for senior management

showing how the project is making a very important

contribution to the goals of the business.

Databaseperformance

Investigate the possibility of buying a higher-performance database.

Underestimated

development time

Investigate buying in components, investigate use of a

program generator



` Assess each identified risks regularly to decide

whether or not it is becoming less or more

probable.

` Also assess whether the effects of the risk havechanged.

` Each key risk should be discussed at

management progress meetings.



` Rule 1: Make Risk Management Part of

Your Project

` Rule 2: Identify Risks Early in Your Project

` Rule 3: Communicate About Risks

` Rule 4: Consider Both Threats and Opportunities

` Rule 5: Clarify Ownership Issues

` Rule 6: Prioritise Risks

` Rule 7: Analyse Risks

` Rule 8: Plan and Implement Risk Responses` Rule 9: Register Project Risks

` Rule 10: Track Risks and Associated Tasks

risk management in projects

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