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