Ch 7 Risk Monitoring and Control

Outputs

-Change requests: These must be processed through the perform integrated change control process. The change requests take the form of corrective actions or preventive actions, and that implementing a contingency plan or a workaround may bring about the need for a change request. A workaround is an unplanned response to a negative risk event. It attempts to deal with the risk in a productive, efficient manner. If no risk response plan exists or an unplanned risk occurs, workarounds are implemented to deal with the consequences of the risk. -Work performance information: It provides a mechanism to communicate and support project decision making. -Project management plan updates: These might need to be updated as a result of risk monitoring and controlling. For instance, change requests might change the risk management processes, which in turn will change the project management plan. -Project documents updates: Some of the project documents that may require updating include the results of a risk audit or risk assessment, the outcomes or results of the project risks and the risk responses, and updates to the risk register. The risk register is updated when a risk audit or risk reassessment concludes that some element of the original risk information has changed; for example, the impact or probability scores are updated to reflect new conditions, the priority of the risk has changed, the owner of the risk has changed, or the response plan has been updated. The risk register should also be updated when the risk is closed or when a risk event occurs. -Organizational process assets: They include the following updates to the organizational process assets: ~Templates for the risk management plan, ~Risk breakdown structure, ~Lessons learned from the project risk management activities

Inputs

-Project management plan: It includes the risk management plan that provides guidance for risk monitoring and controlling. -Risk register: It tracks and ranks individual risks, identifies the risk owner, describes risk triggers and residual risks, and lists the response plans and strategies you should implement if an actual risk event occurs. -Work performance data: It includes information that may help in determining that a new risk event is about to occur, or it may assist in monitoring previously identified risks. -Work performance report: This report is where you take the information and use variance analysis, forecasting, and earned value analysis to produce results (that are reported in the status report) that help in decision making, implementing the risk responses, and taking corrective actions. This information should also be examined from the perspective of risks or risk response plans that might need close monitoring or changes to the response plans to coincide with the data in the work performance reports.

Cost Performance Index (CPI)

If the CPI value is greater than 1, it indicates better than expected performance; if less than 1, it shows poor performance. A CPI value of 1 indicates that the project is right on target.

Status Meeting

In project status meeting, it is necessary to put risk management as an agenda item. The time spent on this item will depend on the number of identified risks, their priorities, and the complexity of the responses planned for them. Nevertheless, keeping risk on the agenda and discussing risks with the team on a regular basis helps make risk management smoother and more effective

Tools and Techniques of the Control Risks Process

Risk assessment Risk audit Variance and trend analysis Technical performance measurement Reserve analysis Status meeting

Schedule Variance (SV)

Schedule variance, another popular variance, tells whether the schedule is ahead or behind what was planned for this period. It's the difference between EV and PV. This formula is most helpful for the critical path methodology to build the project schedule. The schedule variance (SV) is calculated as follows: SV = EV - PV

Schedule Performance Index (SPI)

The schedule performance index (SPI) measures the efficiency of the project team to date in completing work tasks against the progress that was planned. This formula should be used in conjunction with an analysis of the critical path activities to determine if the project will finish ahead or behind schedule. If SPI is greater than 1, you are ahead of schedule and have completed more work than was planned. If SPI is less than 1, you are behind schedule and have not completed as much work as you planned to complete by the measurement date. The schedule performance index (SPI) is calculated this way: SPI = Earned value (EV) / Planned value (PV)

Forecasting Formulas

There are three other EAC forecasting formulas outlined in the PMBOK guide: The first EAC formula is called, "EAC forecast for ETC work performed at the budgeted rate." This formula calculates EAC based on the actual costs to date and the assumption that ETC work will be completed at the budgeted rate. The formula looks like this: EAC = AC + (BAC - EV) The next EAC formula is called, "EAC forecast for ETC work performed at the present CPI." This forecast assumes that future performance will be just like the past performance for the project. The formula looks like this: EAC = BAC / CPI The last formula is called, "EAC forecast for ETC work considering both SPI and CPI factors." This formula assumes two things: There is a negative cost performance to date and the project schedule dates must be met. The formula looks like this: EAC = AC + [(BAC - EV) / (CPI * SPI)]

Trend Analysis

Trend analysis helps in detecting new risks. Trends in project performance need to be reviewed on a regular basis as the project execution progresses. These trends can be determined by analyzing the performance data depending upon various performance control techniques, such as variance and earned value analysis. These involve observing trends as the project is performed and taking corrective action where needed or reassessing risk response strategies to take advantage of opportunities or lessen negative impacts

Forecasting

a cost performance technique. It refers to predicting some information about the project in the future based on the performance in the past. This technique is regularly updated as the project progresses and more data of the past performance becomes available. The forecasting formulas are used to determine an estimate at completion (EAC) and an estimate to complete (ETC). The EAC estimates (or forecasts) the expected total cost of a work component, a schedule activity, or the project at its completion by calculating the actual costs to date and then adding an estimate of what the remaining work will cost. The ETC is the anticipated cost estimate to finish the work of the project. EAC is most often calculated by using actual costs incurred to date plus a bottom-up ETC estimate. The bottom-up ETC estimate is usually provided by the members of the project team who are actually working on the project activities. They provide the project manager with an estimate of the amount of effort remaining (and, therefore, the cost of the effort) based on the activities they have completed to date and what they believe will occur in the future. Their estimates are summed to come up with a total ETC, also known as a bottom-up ETC.

Cost Variance (CV)

a measure of project cost performance. A variance is used to determine if costs are higher or lower than budgeted. Cost variance is calculated by the following formula: CV = Earned value (EV) - Actual cost (AC) A positive value means that spending is less than budgeted, whereas a negative value indicates that project costs are higher than originally planned.

Risk Audit

a method to test the overall risk management process and the planned risk responses. A risk audit is a review of the effectiveness of the risk responses in dealing with identified risks and their root causes, as well as the effectiveness of the risk management process. Risk audits are carried out during the entire life of the project by risk auditors. Risk auditors are not typically project team members and are expertly trained in audit techniques and risk assessment. Risk audits are specifically interested in examining the implementation of response plans

Technical Performance Measurement

compares actual versus planned parameters related to the overall technical progress of the project. The deviation determines the degree to which system requirements are met in terms of performance, cost, schedule, and progress in implementing risk handling. The parameters chosen to measure technical performance could be any parameters that represent something important related to the project objectives and requirements; software performance, human resource performance, and system test performance are some examples.

Earned Value Management (EVM)

continuously monitors the planned value, earned value, and actual costs expended to produce the work of the project. When variances that result in cost changes are discovered (including schedule variances and cost variances), those changes are managed using the project change control system. The primary function of this analysis technique is to determine and document the cause of the variance, to determine the impact of the variance, and to determine whether a corrective action should be implemented as a result.EVM is the most often used performance measurement method. EVM is performed on the work packages and the control accounts of the WBS. To perform the EVM calculations, first gather the three measurements mentioned earlier: planned value (PV), actual cost (AC), and earned value (EV)

Planned Value (PV)

the authorized budget assigned to scheduled work to be accomplished for a schedule activity or work breakdown structure (WBS) component. PV is also called budgeted cost of work scheduled (BCWS)

Risk Assessment

the initial step of risk management. It is used to analyze the value of assets to the business, identify threats to those assets, and evaluate how vulnerable each asset is to those threats. Risk assessment can be quantitative or qualitative. It includes: -Gathering information on assets (IT infrastructure components) -Threats from both internal and external sources (the likelihood of occurring) -Vulnerabilities (the extent of impact or effect on organization)

Control Risks

the process of implementing risk response plans, tracking identified risks, monitoring residual risks, identifying new risks, and evaluating risk process effectiveness throughout the project. It can involve choosing alternative strategies, executing a contingency or fallback plan, taking corrective action, and modifying the project management plan.

To-Complete Performance Index

the projected cost performance the remaining work of the project must achieve in order to meet the BAC or EAC. It's calculated by dividing the work that is remaining by the funds that are remaining. The formula for TCPI when using the BAC is as follows: TCPI = (BAC - EV) / (BAC - AC)

Budget at Completion (BAC)

the total amount of PV (approved budgeted costs) for all of the work of a work component or the project. It is the sum of all the budgets established for all the work in the work package, control account, schedule activity, or project.

Actual Cost (AC)

the total cost actually incurred and recorded in accomplishing work performed during a given period for a schedule activity. It's the cost of work and money spent to date, including direct and indirect costs. AC is sometimes called actual cost of work performed (ACWP).

Earned Value (EV)

the value of completed work. It's the budgeted amount for work actually completed on a schedule activity during a given time period, typically expressed as a percentage of work completed compared to a budget amount. EV is also called budgeted cost of work performed (BCWP)

Workarounds

unplanned responses to a negative risk that has occurred. It is realistic to expect some risks to go undetected, and then suddenly materialize. Workarounds are the risk management team's responses to the types of risks

Variance Analysis

used to gauge how closely a project adheres to the scope, time, and cost estimates made during the planning phase. It examines the dissimilarities between the planned and the actual budget or schedule in order to discover unacceptable risks to the budget, schedule, quality, or scope of the project. It includes reviewing actual results and comparing them to what was planned to determine if there is a difference between the two. Variance analysis involves using performance information and earned value analysis to review overall project performance. If variance is detected, there is a potential for risks and therefore, a potential for positive or negative consequences