Risk Management Primer

David Lipien

12.19.2012

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Objectives1. Understand benefits of risk management in making projects successful.

2. Walk through the risk planning process.

3. Demonstrate a qualitative process and tools for using project team resources in successful risk planning.

Risks and UnknownsFormer United States Secretary of Defense Donald Rumsfeld 2003

“… because as we know, there are known knowns; there are things we know we know," "We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns -- the ones we don't know we don't know…”

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Risk PlanningMost decisions are made without complete information.

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RiskOpportunity

Risk PlanningWhat is a Risk and how does it differ from an Issue?

Risk (Proactive) – An uncertain event or condition that, if it occurs, has a positive or negative effect on a project’s objective. Risk identification is an ongoing proactive process that starts early in the program and continues throughout the lifecycle. For each risk identified, there should be a mitigation strategy.

Issue (Reactive) – A question or dispute regarding a task or activity that must be resolved in order for the project/program to proceed as planned. Teams regularly document and track each issue by assigning responsibility and a timeframe for resolution to a team member.

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Risk Planning DefinitionsWhat is Risk Management?

Definition: Risk Management is the act or practice of anticipating and addressing risks before they occur.

It is the process used to identify, evaluate, respond and control risks throughout the life of a project. This process is iterative and proactive for the life of the project.

What is Project Risk?

Definition: Measure of potential inability to achieve project objectives and their probable consequences within the project constraints.

Components:

Risk Events: Specific, analyzable, quantifiable risk occurrences that might happen to the detriment of a project. 6

Risk PlanningWhy and When

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To avoid landmines, make good decisions, and be successful…

Early and often…

Risk PlanningMicro level Risk Management

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Identify

Evaluate

Develop Response

Control Communicate

Risk Planning - Identify

peoplepeoplepeoplepeople

pppprocessrocessrocessrocess

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technologytechnologytechnologytechnology

Customers, Team Members, Organizations, Availability and Talent Experience

Requirements, Time/Schedule, Cost- Estimation/ Control, Revenues/Expenses, Budget, Legal / Regulatory, Management Project size/scope and Procurement

Change, Newness, Adoption / Use, Integration / Interfaces, Security, Architecture and Scalability

Risk Planning - Evaluate1. Analysis to determine risk event likelihood, impacts,

sensitivity and relationships.

2. Visibility to priority of potential risk events.

3. Apply appropriate resources at the right time.

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Risk Planning - Evaluate

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Little Big

HPHIHPLI

LPLI LPHI

MED HIGH

MEDLOW

Ve

ry Lik

ely

No

t Like

ly

PROBABILITY

OF

OCCURRENCE

(uncertainty)

IMPACT

(severity of consequence)

Risk Planning – Response1. Eliminate.

2. Reduce likelihood.

3. Reduce impact.

4. Accept.

5. Transfer.

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Risk Planning – Control1. Important to document risk tracking in the risk log.

2. Risk is clearly defined.

3. Risk is correctly categorized.

4. Risk has the appropriate mitigation and priority.

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Risk Planning – Conclusions1. Continuous part of delivery management.

2. Project uncertainties should be reduced.

3. Risks are identified and evaluated; risk responses are developed; and risks are controlled.

4. Risks are classified based on the probability of occurrence and impact to the project.

5. Risks are mitigated appropriately.

6. Risk mitigation strategies must be integrated into plans, schedules, budget, etc.

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