Risks

Topic 1: Risk Management

Overview
What is Risk

Unknown Unexpected

Undesirable Unpredictable
 What is Risk?
Risk has two characteris:cs:
Risk is related to an uncertain event
A risk may aect the project objec:ves for good
or for bad
Project risk includes both threats to the
projects objec:ves and opportuni:es those
objec:ves
It may happen or it may not.
 What is Risk Management?
Integration

Stakeholder Scope

Procurement Time

Risk Cost

Communication Quality

Human
Resources
Risk Management

The objectives of risk management are to increase the

probability and impact of positive events and decrease the
probability and impact of negative events.

The aim is to identify and prioritize risks before

they occur, and provide action-oriented
information concerning risk to all key
stakeholders.
When it performed
1. At the start of a project,
2. At the beginning of major project phases
(such as requirements, design, coding and
deployment), and
3. When there are signicant changes (for
example, feature changes, target plaOorm
changes and technology changes).

Other Processes 7
 Risk Overview in Project Lifecycle
Total Project Life Cycle
Initiate / Plan Execute Close
Define
INCREASING RISK

Opportunity and
R isk

$ Value
Period when
Highest Risks
are Incurred

Period of
take Highest
t at S
A moun Risk Impact

TIME
 Risk Management Terms
There are two types of risks:
Known risks
Unknown risks.
Risk management is not a one-:me event. It is
itera:ve.
It must be repeated throughout the life of a
project.
Risk Management Terms
Risk appetite is the degree of uncertainty
an entity is willing to take on in anticipation
of a reward, may different among
organizations
 Risk Tolerance

Risk tolerance is organiza:ons or stakeholders

readiness to tolerate the risk aUer risk
treatment in order to achieve its objec:ves
What is your tolerance?

Why do we take
risks?
How to lower risk?
Stakeholders have a
low tolerance for
risk and usually try
to avoid risk and
withdraw from risky
situa:on
Risk Seeker

The one who likes

to take risks,
ac:vely seek risks,
in the belief that
higher the risk
equals higher
returns
Risk Threshold

Risk threshold for risk levels

that are unacceptable, or its risk
tolerance may select a dierent
risk response
 Business Risks
These risks can be either opportuni:es or threats and result in
either prot or loss.
Business en::es employ stas of specially trained managers,
professionals, technicians, and skilled workers in order to
increase the chances of prot and reduce the chances of loss.
The essen:al purpose is to maximize prots.
Insurable Risks
These are also called
Pure Risks.
Insurable risk diers from
business risk in that it
involves only nega:ves
and there is no chance
for prot.
Outside the Project
Managers control.
q What are examples of schedule risks?
q What about quality risk? Give the examples

15 Minutes Discussion
 Key Success Factors

Integration
Stakeholder
Commitment

Communication
Organizationa
l Support
 Risk Management Steps

Inputs Tools Outputs

Knowing with absolute certainty in which stage of the process

Iden:fy the posi:on among the processes indirectly by
knowing which input, output or tools and techniques
 Risk Management Process
Plan Risk Management
How to approach & plan Control Risks
risk management ac:vi:es How eec:ve risk
responses and are there
new risks occurred?
Identify Risks
What could go wrong and
what could be opportuni:es

Evaluate Risks
Assessment & analysis the Respond Risks
consequences What can we do about it?
Topic 2: Risk Management Rela:on
to Other Aspects of Project
Management
Risk and Project Management
 Types of Es:ma:on
Analogous Estimating:

Referred to as Expert or Top Down Estimating, best when a project is

repeating or recurring and requires expertise and knowledge. This method is
fast since requires only a summary level WBS.

Parametric Estimating:

An objective estimating method that uses numeric data. For example: Units x
Time Required = Estimate. You must have accurate numerical data to perform
this method.

Bottom Up:

Analyzes data at activity or work package level and requires time, effort, and
detailed WBS. Information provided by those doing the work and best for
projects with ambiguity or unknowns.
 Type of Contracts
Fixed Price Contract
Pay a fixed amount of money to get desired output.
More risks are put on the seller
Usually costs more, as the seller will add a risk margin to cover anticipated risks.
The buyer should be very specific on the desired output.

Cost Reimbursable Contract:

The seller gets paid the cost of doing the job plus a profit margin.
More risks are present on the buyers part.
More flexible as it allows for changes more easily.

Time and Materials Contract:

Start the project before finalizing the scope but sets limits on some parameters like
the cost of certain materials used.
Buyer bears more risk
Stakeholder Management
Stakeholders are entities who have interests in project, such
as the project team, sponsor, the public, governmental
authorities, the client, subcontractor, customer, etc.

The project sponsor is one of the most important

stakeholders, because the sponsor is the one who
provides the financial resources.

Stakeholders can affect the project and the project can

affect them as well. These effects can be positive or
negative.
HOMEWORK (DUE 16
FEBRUARI 2017):

Summarize 1 published paper about risk

management (maximum 3 pages (A4));
A`ach the copy of the summarized
paper