Risk Management

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.

Risk

Possibility of loss or injury

Risk

Uncertainty of positive or negative effect
in meeting project objectives

Negative Risk

Might impede project success threat

Positive Risk

opportunities that might produce good things

Negative Risk

involves understanding potential problems
that might occur in the project and how they might
impede project success.

Integration

Risk Condition: Inadequate planning, poor resource allocation, lack of post-project review.

Scope

Risk Condition: poor definition of ******** and work package, incomplete definition of quality requirements, inadequate ***** control

Time

Risk Condition: Errors in estimating ****** and resource availability, poor allocation and management of float, early competition release.

Cost

Risk Condition: Estimating error, inadequate productivity, cost, change, or contingency control; poor maintenance, security, purchasing, etc.

Quality

Risk Condition: Poor attitude toward quality; substandard

design/materials/workmanship; inadequate quality assurance

program

Human Resources

Risk Condition: Poor conflict management; poor project organization and definition of responsibilities; absence of leadership

Communications

Risk Condition: Carelessness in planning or *******; lack of consultation with key stakeholders

Risk

Risk Condition: Ignoring risk; unclear assignment of risk; poor insurance management

Procurement

Risk Condition: Unenforceable conditions or contract clauses; adversarial relations

Positive Risk

risks that result in good things happening;
sometimes called opportunities.

Project Risk

uncertainty that can
have a negative or positive effect on meeting project
objectives.

Project Risk Management

to minimize potential
negative risks while maximizing potential positive risks.

Risk Utility/ Risk Tolerance

is the amount of satisfaction or pleasure
received from a potential payoff

Risk management planning

Deciding how to approach and
plan the risk management activities for the project.

Risk identification

Determining which risks are likely to
affect a project and documenting the characteristics of
each.

Qualitative risk analysis

Prioritizing risks based on their
probability and impact of occurrence

Quantitative risk analysis

Numerically estimating the
effects of risks on project objectives

Risk response planning

Taking steps to enhance
opportunities and reduce threats to meeting project
objectives

Risk monitoring and control

Monitoring identified and
residual risks, identifying new risks, carrying out risk
response plans, and evaluating the effectiveness of risk
strategies throughout the life of the project

risk management plan

The main output of risk management planning, a plan that documents the procedures for
managing risk throughout a project

Contingency plan

are predefined actions that the project team will take if an
identified risk event occurs

Fallback plans

are developed for risks that have a high impact on meeting
project objectives and are put into effect if attempts to reduce the risk are
not effective

Contingency Reserves/ allowance

are provisions held by the project
sponsor or organization to reduce the risk of cost or schedule overruns to an
acceptable level.

Avoid, Transfer, Mitigate, Accept

Strategies in Dealing NEGATIVE Risks

Exploit, Enhance, Share, Accept

Strategies in Dealing POSTIVE Risks

Avoid

try to eliminate the threat and protect the project from its impact.

Transfer

the impact of the thread to a 3rd party and own the response together.

Mitigate

the likelihood of occurrence or impact.

Accept

the risk and take no action until and unless it occurs.

Exploit

the opportunity and make sure its value is realized.

Enhance

the risk by increasing the likelihood of its impact.

Share

by allocating the responsibility to a 3rd party who can
increase likelihood of capturing the opportunity.

Accept

opportunity if it arises, but don’t take proactive approach
to make it happen.

Risk Breakdown Structure

a hierarchy of potential risk categories
for a project. Similar to a work breakdown structure but used to identify and
categorize risks.

Risk Identification

the process of understanding what potential
events might hurt or enhance a particular project

Brainstorming

a technique by which a group attempts to generate
ideas or find a solution for a specific problem by amassing ideas
spontaneously and without judgment

Delphi Technique

used to derive a consensus among a
panel of experts who make predictions about future
developments

Interviewing

is a fact-finding technique for collecting information in
face-to-face, phone, e-mail, or instant-messaging discussions.

strengths, weaknesses, opportunities, and threats

SWOT acronym

SWOT analysis

Can be used during risk identification. Helps identify the broad negative and positive risks that apply to a
project

Risk Register

The main output of the risk identification process is a list of identified risks and
other information needed to begin creating a risk register.

Risk Register

A document that contains the results of various risk management processes and
that is often displayed in a table or spreadsheet format.

Risk Register

A tool for documenting potential risk events and related information

Risk Events

refer to specific, uncertain events that may occur to the detriment
or enhancement of the project

Qualitative Risk Analysis

Assess the likelihood and impact of identified risks to determine
their magnitude and priority.

Probability/Impact Matrix

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

probability/impact matrix

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.

Risk Factor

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.

Top Ten Risk Item Tracking

is a qualitative risk analysis tool that
helps to identify risks and maintain an awareness of risks
throughout the life of a project

Watch List

a list of risks
that are low priority, but are still identified as potential risks.

Quantitative Risk Analysis

Often follows qualitative risk analysis, but both can be done
together.

decision tree

diagramming analysis technique used to help
select the best course of action in situations in which future
outcomes are uncertain.

Estimated Monetary Value

is the product of a risk event
probability and the risk event’s monetary value.

Estimated Monetary Value

(EMV) acronym

Monte Carlo analysis

simulates a model’s outcome many times to
provide a statistical distribution of the calculated results.

Simulation

uses a representation or model of a system to analyze
the expected behavior or performance of the system.

most likely, pessimistic, and optimistic

To use a Monte Carlo simulation, you must have three estimates

Sensitivity Analysis

is a technique used to show the effects of
changing one or more variables on an outcome.

Risk Response Planning

After identifying and quantifying risks, you must decide how to respond to
them

Residual Risk

are risks that remain after all of the response
strategies have been implemented.

Secondary Risk

are a direct result of implementing a risk response.

Workarounds

are unplanned responses to risk events that must be done when
there are no contingency plans

Risk Monitoring and Control

Involves executing the risk management process to respond to risk events

Activity definition

Identifying the specific activities that the project team

members and stakeholders must perform to produce the project

deliverables.

Activity sequencing

Identifying and documenting the relationships between

project activities.

Activity resource estimating

Estimating how many resources a project team

should use to perform project activities.

Activity duration estimating

Estimating the number of work periods that are

needed to complete individual activities.

Schedule development

Analyzing activity sequences, activity resource

estimates, and activity duration estimates to create the project schedule

Schedule control

Controlling and managing changes to the project schedule

activity or task

is an element of work normally found on the

WBS that has an expected duration, a cost, and resource

requirements

activity list

is a tabulation of activities to be included on a

project schedule

activity attributes

provide more information about each

activity, such as predecessors, successors, logical relationships,

leads and lags, resource requirements, constraints, imposed

dates, and assumptions related to the activity.

milestone

is a significant event that normally has no duration.

milestone

often takes several activities and a lot of work to complete

milestone

useful tools for setting schedule goals and

monitoring progress

activity sequencing

Involves reviewing activities and determining dependencies.

dependency

relates to the sequencing of project

activities or tasks

mandatory dependencies

Inherent in the nature of the work

being performed on a project; sometimes referred to as hard

logic.

Discretionary dependencies

Defined by the project team;

sometimes referred to as soft logic and should be used with

care because they may limit later scheduling options.

External dependencies

Involve relationships between project

and non-project activities.

Network Diagrams

are the preferred technique for showing

activity sequencing.

Arrow Diagramming Method

Nodes or circles are the starting and ending points of activities Can only show finish-to-start dependencies.

Precedence Diagramming Method

Activities are represented by boxes.

Arrows show relationships between activities.

Activity Resource Estimating

Before estimating activity durations, you must have a good idea

of the quantity and type of resources that will be assigned to

each activity.

Duration

includes the actual amount of time worked on an

activity plus the elapsed time.

effort

is the number of workdays or work hours required to

complete a task.

Three-Point Estimates

An estimate that includes an optimistic, most likely, and

pessimistic estimate, such as three weeks for the optimistic,

four weeks for the most likely, and five weeks for the

pessimistic estimate

Schedule Development

Uses results of the other time management processes to

determine the start and end dates of the project.

Gantt charts

provide a standard format for displaying project

schedule information by listing project activities and their

corresponding start and finish dates in a calendar format

Specific measurable assignable realistic time-framed

SMART

Critical Path Method

is a network diagramming technique used to predict total

project duration

critical path

for a project is the series of activities that

determines the earliest time by which the project can be

completed.

critical path

the longest path through the network

diagram and has the least amount of slack or float

float or slack

is the amount of time an activity can be delayed

without delaying a succeeding activity or the project finish

date.