IT 464 Chapter 11
Controlling risks
Monitoring identified and residual risks, identifying new risks, carrying out risk response plans, and evaluating the effectiveness of risk strategies throughout the life of the project
Performing quantitative risk analysis
Numerically estimating the effects of risks on project objectives
Performing qualitative risk analysis
Prioritizing risks based on their probability and impact of occurrence
decision tree
is a diagramming analysis technique used to help select the best course of action in situations in which future outcomes are uncertain
interviewing
is a fact-finding technique for collecting information in face-to-face, phone, e-mail, or instant-messaging discussions
Brainstorming
is a technique by which a group attempts to generate ideas or find a solution for a specific problem
Sensitivity Analysis
is a technique used to show the effects of changing one or more variables on an outcome
project risk
is an uncertainty that can have a negative or positive effect on meeting project objectives
the main goal of project risk management is to
minimize potential negative risks while maximizing potential positive risks
risk identification tools and techniques include
Brainstorming The Delphi Technique Interviewing SWOT analysis
Planning risk management
Deciding how to approach and plan the risk management activities for the project
Identifying Risks
Determining which risks are likely to affect a project and documenting the characteristics of each
controlling risks
Involves executing the risk management process to respond to risk events and ensuring that risk awareness is an ongoing activity performed by the entire project team throughout the entire project
response strategies for positive risks
Risk exploitation Risk sharing Risk enhancement Risk acceptance
Planning risk responses
Taking steps to enhance opportunities and reduce threats to meeting project objectives
Estimated monetary value (EMV)
The product of a risk event probability and the risk event's monetary value
main outputs of risk control
Work performance information Change requests Updates to the project management plan, other project documents, and organizational process assets
Top Ten Risk Item Tracking
a qualitative risk analysis tool that helps to identify risks and maintain an awareness of risks throughout the life of a project
the risk neutral approach
achieves a balance between risk and payoff
negative risk management is
an investment, a form of insurance
secondary risks
are a direct result of implementing a risk response
Fallback Plans
are developed for risks that have a high impact on meeting project objectives, and are put into effect if attempts to reduce the risk are not effective
Management Reserves
are funds held for unknown risks that are NOT part of the cost baseline but ARE part of the budget and funding requirements
Contingency reserves or allowances
are provisions held by the project sponsor or organization to reduce the risk of cost or schedule overruns to an acceptable level
Residual Risk
are risks that remain after all of the response strategies have been implemented
risk management
can help improve project success by helping determine project scope
Main Techniques include
decision tree analysis simulation sensitivity analysis
risk
defined as the possibility of loss or injury
provides independent and anonymous input regarding future events
delphi technique
Project Risk Management
is in the best interest of meeting project objectives, it is the art and science of identifying, analyzing, and responding to risk
Risk utility
is the amount of satisfaction or pleasure received from a potential payoff
risk management plan
is the main output of this process, a plan that documents the procedures managing risks throughout a project
Identifying risks
is the process of understanding what potential events might hurt or enhance a particular project
Delphi Technique
is used to derive a consensus among a panel of experts who make predictions about future developments
probability/impact matrix or chart
lists the relative probability of a risk occurring on one side of a matrix or axis on a chart and the relative impact of the risk occurring on the other
contingency plans
predefined actions that the project team will take if an identified risk event occurs
risk events
refer to specific, uncertain events that may occur to the detriment or enhancement of the project
Utility rises at a decreasing rate for a ____ person. a.risk-seeking b.risk-averse c.risk-neutral d.risk-indifferent
risk averse
The Monte Carlo analysis
simulates a model's outcome many times to provide a statistical distribution of the calculated results
To use a Monte Carlo simulation, you must have _______.
three estimates, plus an estimate of the likelihood of the estimate being between the most likely and optimistic values
Four main response strategies for negative risks
1. risk avoidance- elimination of hazards, activities and exposures that can negatively affect an organization 2. risk acceptance- accepting an identified risk and taking no further action to reduce because its impact is manageable 3. risk transference- to shifting the consequence of risk and responsibility for its management to a third party 4. risk mitigation- process of developing actions to enhance opportunities and reduce threats to project objectives
risk register
A document that contains results of various risk management processes, often displayed in a table or spreadsheet format
A risk breakdown structure
A hierarchy of potential risk categories for a project
watch list
A list of risks that have low priority but are still identified as potential risks
Planning risk responses
After identifying and quantifying risks, you must decide how to respond to them
Risk Register Contents
An identification number for each risk event A rank for each risk event The name of each risk event A description of each risk event The category under which each risk event falls The root cause of each risk
performing quantitative risk analysis
often follows qualitative risk analysis, but both can be done together. large complex projects involving leading edge technologies often require extensive quantitative risk analysis
positive risk are called
opportunities
a risk owner
or person who will own or take responsibility for each risk
More sophisticated risk management software, such as Monte Carlo simulation tools, help in analyzing project risks
true
Risk registers can be created in a simple Word or Excel file or as part of a database
true
those who are rise seeking have a higher tolerance for risk and their satisfaction increases when more payoff is at stake
true
negative risk involves
understanding potential problems that might occur in the project
Workarounds are:
unplanned responses to risk events that must be done when there are no contingency plans