Project Management CH 11

Negative Risk

•A dictionary definition of risk is "the possibility of loss or injury" •Negative risk involves understanding potential problems that might occur in the project and how they might impede project success •Negative risk management is like a form of insurance; it is an investment

Probability/Impact Matrix

•A 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 •List the risks and then label each one as high, medium, or low in terms of its probability of occurrence and its impact if it did occur •Can also calculate risk factors: -Numbers that represent the overall risk of specific events based on their probability of occurring and the consequences to the project if they do occur

Planning Risk Responses

•After identifying and quantifying risks, you must decide how to respond to them •Four main response strategies for negative risks: -Risk avoidance -Risk acceptance -Risk transference -Risk mitigation

Identifying Risks

•Identifying risks is the process of understanding what potential events might hurt or enhance a particular project •Another consideration is the likelihood of advanced discovery •Risk identification tools and techniques include: -Brainstorming -The Delphi Technique -Interviewing SWOT analysis

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 •Workarounds are unplanned responses to risk events that must be done when there are no contingency plans •Main outputs of risk control are: -Work performance information -change requests -updates to the project management plan, other project documents, and organizational process assets

Broad Categories of Risk

•Market risk •Financial risk •Technology risk •People risk •Structure/process risk

Topics Addressed in a Risk Management Plan

•Methodology •Roles and responsibilities •Budget and schedule •Risk categories •Risk probability and impact •Revised stakeholders' tolerances •Tracking •Risk documentation

Risk Can Be Positive

•Positive risks are risks that result in good things happening; sometimes called opportunities •A general definition of project risk is an uncertainty that can have a negative or positive effect on meeting project objectives •The goal of project risk management is to minimize potential negative risks while maximizing potential positive risks

Chapter 11 Summary

•Project risk management is the art and science of identifying, analyzing, and responding to risk throughout the life of a project and in the best interests of meeting project objectives •Main processes include: -Plan risk management -Identify risks -Perform qualitative risk analysis -Perform quantitative risk analysis -Plan risk responses -Control risks

Risk Utility

•Risk utility or risk tolerance is the amount of satisfaction or pleasure received from a potential payoff -Utility rises at a decreasing rate for people who are risk-averse -Those who are risk-seeking have a higher tolerance for risk and their satisfaction increases when more payoff is at stake -The risk-neutral approach achieves a balance between risk and payoff

Best Practice

•Some organizations make the mistake of only addressing tactical and negative risks when performing project risk management •David Hillson, (www.risk-doctor.com) suggests overcoming this problem by widening the scope of risk management to encompass both strategic risks and upside opportunities, which he refers to as integrated risk management

Results of Good Project Risk Management

•Unlike crisis management, good project risk management often goes unnoticed •Well-run projects appear to be almost effortless, but a lot of work goes into running a project well •Project managers should strive to make their jobs look easy to reflect the results of well-run projects