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