Project Management Exam 3

Project Risk

An uncertain event or condition that if it occurs positively or negatively impacts project objectives such as scope schedule cost and quality

Positive Risk (Opportunity)

A favorable event such as new technology or removal of trade barriers

Negative Risk (Threat)

An unfavorable event such as new regulations competition changes or technological obsolescence

Internal Risks

Risks arising within the organization such as inaccurate estimates scope creep schedule delays quality failures personnel issues or outdated technology

External Risks

Risks outside organizational control such as governance changes market shifts legal changes environmental events or supplier failures

Project Risk Management

The process of identifying analyzing and responding to risks throughout the project life cycle

Objectives of Risk Management

Increase probability and impact of positive events and reduce probability and impact of negative events

Risk Identification

Process of determining which risks may affect the project and documenting characteristics

Risk Identification Techniques

Brainstorming expert interviews lessons learned SWOT analysis and diagramming

Root Cause Analysis

Technique to identify underlying causes of risks and may reveal triggers

Risk Trigger

Indicator that a risk is about to occur and signals activation

Cause and Effect Diagram

Fishbone or Ishikawa diagram listing causes under categories such as people machine and methods

Risk Categories

Technical project management organizational and external

Risk Register

A living document listing identified risks causes categories probability impact and responses

Risk Response Planning

Process of selecting strategies and actions to address risks and assigning owners

Risk Strategy Acceptance

Take no action unless a trigger occurs used when mitigation is too costly

Risk Strategy Mitigation

Reduce probability or impact proactively through training design improvement or prototyping

Risk Strategy Transfer

Shift ownership through insurance or outsourcing

Risk Strategy Avoidance

Eliminate risk by changing approach or scope

Qualitative Risk Analysis

Prioritizing risks based on probability and impact

Risk Probability

Likelihood of a risk occurring measured from zero to one hundred percent

Risk Impact

Severity of consequences to cost schedule or performance

Quantitative Risk Analysis

Numerical evaluation of risk impact using tools such as EMV

Risk Formula

Risk is equal to probability times impact

Expected Monetary Value (EMV)

Calculation used to quantify cost impacts of risks

EMV Formula

EMV equals probability multiplied by impact

Positive EMV

Indicates potential benefit or opportunity

Negative EMV

Indicates potential cost or threat

Project Schedule

A timetable showing activities start and end dates resources and due date

Schedule Baseline

Approved version of the project schedule changed only through formal change control

Activity

A distinct scheduled portion of project work that starts with an action verb

Duration

Total work periods required to complete an activity

Activity Sequencing

Ordering project activities logically to form a network diagram

Project Network

Diagram of nodes representing activities and arrows representing dependencies

AON Network

Activity on Node method using boxes to represent activities

AOA Network

Activity on Arrow method where arrows represent activities

Milestone

A significant event with zero duration marking major deliverables or checkpoints

Path

A sequence of connected project activities

Critical Path

Longest path with zero slack determining overall project duration

Successor Activity

Activity that logically comes after another

Predecessor Activity

Activity that must be completed or started before the successor

Precedence Diagramming Method (PDM)

Shows activities as nodes connected by logical dependencies

Finish to Start (FS)

Successor starts after predecessor finishes

Finish to Finish (FF)

Successor cannot finish until predecessor finishes

Start to Start (SS)

Successor starts only after predecessor begins

Start to Finish (SF)

Successor finishes only after predecessor starts

Lead

Amount successor activity can be advanced relative to predecessor

Lag

Delay between predecessor finish and successor start

Activity Duration Estimating

Process of determining the amount of time each activity requires

Analogous Estimating (Duration)

Uses duration of similar past projects and is the least accurate but quickest

Parametric Estimating (Duration)

Uses a mathematical model such as quantity multiplied by rate

One Point Estimating

Expert judgment produces a single estimate

3 Point (PERT) Estimating

Uses optimistic most likely and pessimistic values formula equals O plus four M plus P divided by six

PERT Network

Probabilistic method visualizing sequences dependencies and expected time

CPM (Critical Path Method)

Uses deterministic single time estimates to compute project duration

Forward Pass

Calculates early start and early finish

Backward Pass

Calculates late start and late finish

Slack or Float

Amount of delay allowed without delaying the project equals LS minus ES or LF minus EF

Zero Slack

Indicates an activity lies on the critical path

Standard Deviation (PERT)

Standard deviation equals pessimistic minus optimistic divided by six

Variance (PERT)

Variance equals standard deviation squared

Expected Path Duration

Sum of expected durations of activities on a path

Project Cost

Resources measured in monetary terms needed to achieve project objectives

Cost Management

Planning estimating budgeting financing managing and controlling costs

Importance of Cost Management

Sets cost baseline supports control decisions and prevents overruns

Cost Management Challenges

Poor estimation lack of resources scope variation inefficient processes and inaccurate reporting

Requirements for Accurate Cost Estimates

Well defined scope detailed WBS complete schedule expert judgment and adequate planning time

Considerations for Cost Estimation

Life cycle cost alternatives historical data realistic assumptions and required change approvals

Fixed Cost

Cost that does not change with production such as rent licenses or setup

Variable Cost

Cost that changes with amount of work such as materials or usage based labor

Direct Cost

Cost directly attributable to project work such as labor travel or materials

Indirect Cost

Shared overhead not tied to a single project such as taxes benefits or utilities

Plan Cost Management

Defines how to estimate budget manage monitor and control costs

Estimate Costs

Process of approximating cost of all resources needed

Determine Budget

Aggregating all estimated activity costs to set the cost baseline

Control Costs

Monitoring spending and managing changes to the cost baseline

Cost Management Plan Units of Measure

Standard units such as hours weeks meters liters or dollars

Cost Management Plan Level of Precision

Rounding guidelines for cost estimates

Cost Management Plan Level of Accuracy

Acceptable range of estimate variance such as plus or minus ten percent

Activity Based Estimating

Cost based on labor and materials per activity

Analogous Cost Estimating

Uses past similar projects to estimate current costs

Parametric Estimating (Cost)

Uses mathematical models such as cost per unit

3 Point Cost Estimating

Weighted average using optimistic most likely and pessimistic values equals O plus four M plus P divided by six

Bottom Up Cost Estimating

Most detailed and accurate sums costs from lowest WBS levels

Contingency Reserve

Budget for known unknowns likely to be spent part of cost baseline

Management Reserve

Budget for unknown unknowns controlled by senior management and not part of baseline

Reserve

Extra money used for risk responses or unforeseen cost events

Quality (PMBOK definition)

The degree to which a set of inherent characteristics fulfills requirements

Importance of Quality

Defines stakeholder expectations and stresses that prevention is cheaper than fixing errors or rework

Project Quality Management (definition)

Processes and activities ensuring a project meets defined needs from the customer perspective with no deviations from requirements

Why Project Quality Management is Important

Helps manage projects control costs set standards reduce failure risk and ensure customer satisfaction

Plan Quality Management

Defines quality for the project and product and how it will be achieved

Manage Quality

Ensures the team follows organizational standards and identifies areas for process improvement

Control Quality

Monitors deliverables ensures correctness and finds sources of problems

Project Manager’s Role in Quality

Understand expectations determine metrics identify standards ensure adherence improve quality emphasize equal priority with scope time and cost and perform QA and QC

Impact of Poor Quality

Increased costs decreased profits low morale low satisfaction increased risk rework and delays

Philip Crosbys Four Absolutes of Quality

Quality equals conformance to requirements prevention over inspection zero defects and measurement in monetary terms

Main Goal of Project Quality Management

Ensure the project meets customer needs and expectations

Key Quality Management Concepts

ISO 9000 TQM Six Sigma JIT PDCA customer satisfaction and continuous improvement

ISO 9000 (definition)

Internationally accepted standards for quality management