Lecture 06: Risk Management

A set of vocabulary practice flashcards based on Lecture 06, covering key risk management terminology, processes, tools and techniques, response strategies, and analytical methods.

Project Risk

An uncertain event or condition in the future that, if it occurs, has a positive or negative impact on one or more project objectives such as scope, schedule, cost, or quality.

Positive Risks (Opportunities)

Risks that bring positive effects or favorable situations in the organizational environment, such as the arrival of new technology or the removal of an international trade barrier.

Negative Risks (Threats)

External elements in the environment arising from political, economic, social, and technological forces that can cause problems for the business, such as new regulations, increased trade barriers, or product obsolescence.

Internal Risks

Risks originating from within one's own company or organization, including inaccurate cost estimates, scope creep, schedule delays, quality failures, personnel issues, and outdated infrastructure.

External Risks

Risks outside the project team's control that are difficult to predict, such as changes in business governance, market shifts, currency fluctuations, regulatory changes, and environmental disasters.

Project Risk Management

The art and science of identifying, analyzing, and responding to risk throughout the project lifecycle to meet project objectives.

Plan Risk Management

The process of defining how to conduct risk management activities for a project, as defined in the PMBOK Guide.

Risk Management Plan (RMP)

The formal output of the risk management planning process that details how risk identification, assessment, response development, and control will be structured and executed.

Identify Risks

The process of determining which risks might affect the project and documenting their characteristics.

Root Cause Analysis

An analytical technique used to determine the basic underlying reason that causes a variance, defect, or risk, which may underlie more than one variance, defect, or risk.

Risk Trigger

An indicator that a risk is about to occur or has occurred.

Trigger Condition

An event or a situation that indicates a risk is about to occur.

Cause and Effect Diagram

A diagramming technique that lists the risk as the effect in a box at the head of a fish and identifies potential causes across categories such as people, machines, methods, and materials on the connecting bones.

Process Flow Chart

A diagramming technique showing the logical sequence of steps in a system or process from start to finish, used during risk identification to recognize current risks and discover new ones.

Risk Categories

A group of potential causes for risk that can be classified into categories such as technical, project management, organizational, and external risks.

Risk Register

A living document and tracking tool in which the results of risk analysis and risk response planning are recorded, including identified risks, descriptions, categories, probability, impact, owners, and potential responses.

Plan Risk Responses

The process of developing options and actions to enhance opportunities and reduce threats to project objectives.

Risk Acceptance

A risk strategy that involves adopting a wait-and-see attitude to take action only when triggers are met, or doing nothing because the cure is more expensive than the consequences.

Risk Mitigation (Control)

A risk strategy aimed at reducing the probability or impact of a threat through proactive measures and active approaches, such as training or buy-versus-build evaluations.

Risk Transfer

A risk strategy that reduces probability or impact by shifting ownership, responsibility, or liability to a third party through actions such as outsourcing or purchasing insurance.

Risk Avoidance

A risk strategy that eliminates a risk by choosing an alternative path, such as changing the design or electing not to execute the part of the project associated with the risk.

Perform Qualitative Risk Analysis

The process of prioritizing risks for further action by assessing and combining their probability of occurrence (ranging from $0\%$ to $100\%$) and impact on project objectives.

Expected Monetary Value (EMV) Analysis

A quantitative risk analysis tool that evaluates the potential financial cost of risks by multiplying probability ($P$) by impact ($I$) ($EMV = P \times I$).

Positive EMV

An Expected Monetary Value denoted by a plus sign ($+$), indicating that an opportunity risk will yield a positive financial impact or benefit if it occurs.

Negative EMV

An Expected Monetary Value denoted by a minus sign ($-$), indicating that a threat risk will result in a negative financial impact or cost if it occurs.