11
Introducing ProjectRisk Management
CERTIFICATION OBJECTIVES
11.01 Planning for Risk Management11.02 Creating the Risk Management Plan11.03 Identifying Risks11.04 Preparing for Risk Identification11.05 Identifying the Project Risks11.06 Creating a Risk Register11.07 Using Qualitative Risk Analysis11.08 Completing Qualitative Analysis11.09 Examining the Results of QualitativeRisk Analysis11.10 Preparing for Quantitative Risk Analysis11.11 Examining the Results of QuantitativeRisk Analysis11.12 Planning for Risk Response11.13 Creating Risk Responses11.14 Examining the Results of Risk Response Planning11.15 Implementing Risk Monitoringand Control11.16 Preparing for Risk Monitoringand Control11.17 Completing Risk Monitoring and Control11.18 Examining the Results of Risk Monitoringand Control
✓
Two-Minute Drill
Q&A
Self Test
416
Chapter 11: Introducing Project Risk Management
R
isk is everywhere. From driving a car to parachuting, it’s inherent in the activities we choose.Within a project, risks are unplanned events or conditions that can have a positive ornegative effect on its success. Not all risks are bad, but almost all are seen as a threat.
The risks that activities bring are an exchange for the benefits we get fromaccepting that risk. If a person chooses to jump out of a perfectly good airplanefor the thrill of the fall, the exhilaration of the parachute opening, and the viewof earth rushing up, there is a risk that the chute may not open—a risk that thrillseekers are willing to accept.Project managers, to some extent, are like these thrill seekers. Parachutists completetraining, pack their chutes, check and double-check their equipment, and make certainthere’s an emergency chute for those “just-in-case” scenarios. Project managers—goodproject managers—take a similar approach.Risks in a project, should they come to fruition, can mean total project failure,increased costs, and extended project duration among other things. Risk often hasa negative connotation, but like the parachutist,the acceptance of the risk can also offer a reward.For the parachutist, the risk is certain death—butthe reward is the thrill of the activity. For projectmanagers, risk can mean failure, but the rewardcan mean a time or cost savings, as well as otherbenefits.Risk management is the process in which the project manager and project teamidentify project risks, analyze and rank them, and determine what actions, if any,need to be taken to avert these threats. Associated with this process are the costs,time, and quality concerns of the project brought about by the solutions to thoserisks. In addition, the reactions to risks are analyzed for any secondary risks thesolutions may have created.In this chapter, we’ll discuss risk management planning, risk identification, analysis,response planning, and the monitoring and control of the identified risks. For the PMPexam, you’ll need a firm grasp on these concepts. You’ll be taking a
real
risk if you don’tknow them well.
Positive risks are called opportunities.
Planning for Risk Management
417
CERTIFICATION OBJECTIVE 11.01
Planning for Risk Management
Risk management planning is about making decisions. The project manager,the project team, and other key stakeholders are involved to determine the riskmanagement processes. The risk management process is related to the scope of theproject, the priority of the project within the performing organization, and theimpact of the project deliverables. In other words, a simple, low-impact projectwon’t have the same level of risk planning as a high-priority, complex project. It’simportant to complete risk management planning in order to successfully manage,plan for, analyze, and react to identified risks.
Projectpriority
Risk planning
Examining Stakeholder Tolerance
Depending on the project, the conditions, and the potential for loss or reward,stakeholders will have differing tolerances for risk. Stakeholders’ risk tolerance maybe known at the launch of the project, through written policy statements, or bytheir actions during the project.Consider a project to install new medical equipment in a hospital: there’s littleroom for acceptance of errors because life and death are on the line. No shortcuts orquick fixes are allowed. Now, consider a project to create a community garden. Notonly are life and death not on the line in the garden project, but the acceptance of risk is different as well.A person’s willingness to accept risk is known as the utility function. The timeand money costs required to eliminate the chance of failure is in proportion to thestakeholders’ tolerance of risk on the project. The cost of assuring there are nothreats must be balanced with the confidence that the project can be completedwithout extraordinary costs. Figure 11-1 demonstrates the utility function.
of 00
2008_PMP_Chap11_RiskManagement
3,617 Reads
Info and Rating
| Category: | Uncategorized. |
| Rating: | |
| Upload Date: | 06/23/2009 |
| Copyright: | Attribution Non-commercial |
| Tags: |
Free download as PDF File (.pdf), text file (.txt) or read online for free.
Leave a Comment