BUSI 313 EXAM 2
consequences
"how to minimize the risk event's impact
risk events
"what could go wrong?"
direct project overhead costs
direct project overhead costs can be tied to project deliverables or work packages
total slack
the amount of time an activity can be delayed and not delay the project - how long an activity can exceed its early finish date without affecting the project end date or an imposed completion date
two approaches to a burst activity
- activity-on-node (AON) uses a node to depict an activity - activity-on-arrow (AOA) uses an arrow to depict an activity
Risk Defined
- an uncertain event or condition that if it occurs, has a positive or negative effect on project objectives
technical risks
- backup strategies if chosen technology fails - assess whether technical uncertainties can be resolved
top-down approach
- consensus method - ratio method -apportion method - function point methods for software and system projects - learning curves
explain excessive detail
- emphasizes departmental outcomes rather than deliverable outcomes - creates more unproductive paperwork
schedule risks
- expediate or "crash" the project to get it back on tract - schedule activities in parallel or use start-to-start lag relationships - use the best people for high risk tasks
reasons for adjusting estimates
- integration costs are hidden in estimates -normal conditions do not apply - things go wrong on projects - the project slope are plans change - people are overly optimistic - people engage in strategic misrepresentation
contingency plan
- is an alternative plan that will be used if a possible foreseen risk event becomes a reality - is a plan of action that will reduce or mitigate the negative impact of the risk event - is not a part of the initial implementation plan and only goes into effect after the risk is recognized
Definition of Estimating
- is the process of forecasting or approximating the time and cost of completing project deliverables - is a traded, balancing the benefits of better accuracy against the costs of secured increased accuracy against the costs of secured increased accuracy
mitigating risk
- reducing the likelihood that the event will occur - reducing the impact that the adverse event would have on the project
Hammock Activity
- spans over a segment of a project - has a duration that is determined after the network plan is drawn
bottom-up approach
- template method - parametric procedures applied to specific tasks - range estimating
the level of detail in the work breakdown structure varies with:
- the complexity of the project - the need for control - the project size, cost, and duration - other factors
critical path
- the longest path through the activity network that allows for the completion of all project related activities - the shortest expected time in which the entire project can be completed - delays on the critical path will delay completion of the entire project
Types of Estimates
- top down (macro) estimates - bottom up (micro) estimates
Step 1: Risk Identification
-generate a list of all possible risk that could affect the project through brainstorming and other problem identifying techniques - focus on the events that could produce consequences, not on project objectives - use risk breakdown structure(RBS) in conjunction with WBS to identify and analyze risks - identify the macro risks first than specific areas can be checked - use risk profile (a list of questions) to address traditional areas of uncertainty of a project
the preferred approach in defining the project
-make a rough top down estimates -develop the WBS/OBS -make bottom up estimates -reconcile differences between top down and bottom up estimates
7 factors influencing the quality of estimates
1. planning horizon 2. project complexity 3. people 4. project structure and organization 5. padding estimates 6. organizational culture 7. other factors
7 estimating guidline for times, cost, resources
1. responsibility 2. the use of several people to estimate 3. normal conditions 4.time units 5. independence 6. contingencies 7/ risk assessment added to the estimate to avoid suprises to stakeholders
three major steps in the RCF?
1. select a reference class of projects similar to the potential project 2. collect and orange outcome data as a distribution, create a distribution of cost overruns as a percentage of the original project estimates (low to high) 3. use the distribution data to arrive at a realistic forecast. compare the original cost estimates for the project with the reference class project
Avoiding Risk
Changing the project plan to eliminate the risk or condition
contingency funds
Funds to cover project risks—identified and unknown
escalating risk
Notifying the appropriate people within the organization of the threat
Retaining Risk
making a conscious decision to accept the risk of event occurring
why are hammock activities useful
assigning and controlling indirect project costs - aggregate sections of the project to facilitate getting the right level of detail for specific sections of a project
path
a sequence of connected, dependent activities
Laddering
activities are broken into segments is the following activity can begin sooner and not delay work
parallel activities
activities that can occur independently and if desired, not at the same time
share risk
allocate some or all of the ownership of an opportunity to another party who is best able to capture the opportunity for the benefit of the project
Burst Activity
an activity that has more than one activity immediately following it (more than one dependency arrow flowing from it)
merge activity
an activity that has two or more preceding activities on which it depends (more than one dependency arrow flowing into it)
Risk Management
an attempt to recognize and manage potential and unforeseen trouble spots that may occur when the project is implemented
activity
an element of the project that requires time but may not require resources
what is a top down estimate?
analogy, group, consensus, or mathematical relationship
Direct Costs
are clearly changeable to specific work package
general and administrative (G&A) overhead costs
are not directly linked to a specific project
Scenario Analysis
assesses the significance of each risk event in terms of probability and impact
what is a bottom up estimate?
based on estimates of elements found in the work breakdown structure
accept risk
be willing to take advantage of the opportunity if it occurs, but not taking action to pursue it
what are lags used for?
can be used to constrain to finish-to-start, start-to-start, finish-to-finish, or combination relationships
how can bottom up estimates serve as a check?
can serve as a check on cost elements in the WBS by rolling up the work packages and associated cost accounts to major deliverables
risk of the abuse of a contingency plan
cause a manager to delay or postpone the decision to implement a remedy - lead to panic and acceptance of the first remedy suggested - make the decision making under pressure which can be dangerous and costly
contingency funds are divided into two reserves - what are they?
contingency reserves and management reserves
contingency reserve
cover identified risks and are allotted to risks associated to specific segments or deliverables of the project
funding risks
evaluate the risk of reductions in funding - a cut in the project
risk assessment form
evaluates the severity, probability of risk events and its detection difficulty
Failure Mode and Effects Analysis (FMEA)
extends the risk severity matrix by including ease of detection in the equation risk value = impact x probability x detection
inadequate detail
falls short of meeting the structure needs
Project Network
is a graphic flow chart depicting the project activities that must be completed the logical sequences, the interdependencies of the activities to be completed, and the times for the activities to start and finish along with the longest path through the network - the critical path
what is an opportunity?
is an event that can have positive impact on project objectives
Network Sensitivity
is the likelihood the original critical path will change once the project is initiated
what is a mega project?
large scale, complex ventures that typically cost 1 billion or more, take years to complete, and involve multiple private and public stakeholders
Escalate Risk
notify the appropriate people within the organization of the opportunity
transferring risk
passing risk to another party
no amount of ___________ can overcome or control risk
planning
Risk Severity Matrix
prioritized which risk to address
risk management is a ____________ approach instead of a ____________ approach
proactive, reactive
what is the "white elephant"?
projects are over budget, under value and the costs of maintaining the project exceed the benefits received
what is the double whammy in mega projects?
projects cost much more than expected and under deliver on benefits the projects were to provide
What is RCF?
reference class forecasting
cost risks
review price and avoid the trap of using one lump sum to cover price risks
Exploit Risk
seeks to eliminates the uncertainty associated with an opportunity to ensure that it definitely happens
the critical path is the _______________ expected time in which __________________
shortest, the entire project can be completed
a network schedule that has only one critical path and noncritical activities enjoy what?
significant slack would be labeled "insensitive"
enhance risk
take action to increase the probability and/or the positive impact of an opportunity
free slack
the amount of time an activity can be delayed without delaying any immediately following (successor) activity - occurs only at the end of a chain of activities, where you have a merge activity - a task with free slack doesn't need to worry about affecting the next task, thus it is "free" to use if available
what is the longest path through the activity network?
the critical path
what is a lag?
the minimum time a dependent activity must be delayed in the start of successor activities
bottom up estimates provide the customer with what opportunity?
the opportunity to compare the low cost efficient method approach with any imposed restrictions
bottom up estimates can take place after when?
the project has been defined in detail
top down estimates are sometimes made up by ______________ who have very ______________ knowledge of the component activities used to ______________
top managers, little, complete the project
top down estimates are usually derived from someone who ___________________________________?
uses experience and/or information to determine the project duration and total cost
Probability Analysis
uses statistical techniques in assessing project risk ex. - decision trees, NPV, program evaluations and review technique, PERT simulation
anticipation
what can be done before an event occurs
contingency plans
what to do when an event occurs