Project Management Test 3

Risk Management Focuses on…

Known unknowns, proactive management, risk and information are inversely related

Risk Clusters

Financial, technical, contractual, commercial, execution

Risk types

Absenteeism, Resignation, staff pulled away, time overruns, skills unavailable, ineffective timing, specs incomplete

Four stages of risk management

Risk identification, evaluate, plan, track and control

Risk identification

Approaches

Evaluate

Conduct and analysis of probability and consequences

Plan

Risk mitigation strategies

Track and control

through documentation

Likelihood

probability of an occurrence

Consequence

Amount at stake

Developing a payoff table

List alternatives, List future consequences, identify payoffs, assess the degree of certainty, decide on a decision criterion

Risk =

Likelihood X Consequences

Accepting Risk

Funds held in separate account for future use, can be identified as overall percentage of a project budget or specific to an identified risk event

Reducing Risk

Achieved in the planning stage, targeted to eliminate or reduce risk

Mitigating risk

Warning signs, protective barriers, training

Contract types

Lump sum, T and M, Cost plus, Hybrids

Transferring risk to 3rd parties

Insurance companies

Commercial insurance available

Errors and omissions, liability, workman’s comp

Avoid risk inherent in a project

Change project to eliminate exposure to the risk

Tracking

Associated with collecting and monitoring information about the project risks

Risk management Plan

Describes the process to be followed during the project

Risk management plan identifies

Responsibilities, process details, methodology/strategy

European Association for Project Management

Define, Focus, Identify, Structure, Clarify, Estimate, Evaluate, Plan, Manage

Control and documentation

Help managers classify and codify risks, responses, and outcomes

Tracking risk

Previously identified as risk status information, risk event handling assignments, impact or success of risk handling plans

Risk triggers

Are proactive

Controlling risks

Is the process of making management decisions based on present information concerning risks

Key features of PRAM

Risk management follows a life cycle, Risk management strategy changes over the project life cycle, synthesized coherent approach

Estimating

An assessment of the likely result; usually applied to the project cost, duration and or work effort

Budget

The approved estimate, against which project progress is measured

Baseline

The approved plan plus or minus approved change requests

Pricing and estimating

Specific pricing strategies must be developed for each project

Common sources of project cost

Labor, materials, subcontractors, equipment and facilities, travel

Types of cost

Direct vs. Indirect, Recurring vs. Nonrecurring, Fixed Vs. Variable, Normal Vs. Expedited

Tasks

type of work to be done

Effort

Labor hours, internal resources, contractors

Schedule

Level of effort over time

Cost

labor cost, products/materials, travel, risk pool

Ballpark

+- 30% Early in the sales cycle

Comparative

+- 15% Later in the sales cycle

Feasibility

+- 10% Just before the contract

Definitive

+- 5% After the contract has been signed

Rough order of magnitude

Top managers / sales executives use a top down approach with limited information to come to a rough number

Comparative estimates

Top managers / sales executives use a top down approach using roughly similar projects in the past that have already been completed

Parametric Estimating

Use mathematical models to predict project costs based on last projects. Regression analysis, learning curve theory

Feasibility Estimating

Project managers use data once the preliminary design work for the project has been done

Bottom up estimating

The people doing the work create the cost and schedule estimates from the detailed project

Labor

If the resource is inside the organization you can get the burdened labor rate from the finance/human resource department

Pricing methods A

Work is priced out at the department average

Pricing methods B

Work is priced out at the person’s salary

Fixed costs

Equipment can be calculated as a fixed cost or a calculated cost such as equipment rental

Material costs

Resources that make up a product

Budget Trade-offs

In the process of finalizing the cost estimate on a project, you may find the project is going to cost more than you estimated