Project Planning

CHAPTER 3

PROJECT PLANNING
 Project Planning

Table of Contents
PROJECT PLANNING...................................................................................................1
3.1 Introduction....................................................................................................................1
3.2 Project Planning.............................................................................................................1
3.3 Project Planning Steps...................................................................................................2
3.4 Elements of Project Planning........................................................................................4
3.5 Triple Constraints of Project Planning........................................................................5
3.6 Project Charter...............................................................................................................7
3.7 Sample: Project Charter Table of Contents.................................................................7
3.8 project work breakdown structure (WBS)................................................................10
3.9 Rules to Create the Perfect Work Breakdown Structure.........................................10
3.10 Steps of Breakdown Structure...................................................................................12
3.11 Tools to Help Project Manager Plan for Crises.......................................................13
3.11.1 Risk Analysis:..................................................................................................................13
3.11.2 Contingency plan:...........................................................................................................21
3.11.3 Logic Chart:....................................................................................................................21
3.11.4 Table Top Exercise:........................................................................................................21
3.12 Approaches of Project Planning:..............................................................................22
3.12. 1 Project planning by objective........................................................................................22
3.12.2 Participatory rural appraisal (PRA).............................................................................24
 Project Planning

3.1 Introduction
Planning Is a general term that sets a clear road map that should be followed to reach a
destination. The term therefore has been used at different levels to mean different things.
Planning involves the breakdown of the project into definable, measurable, and identifiable
task and then establish a logical interdependence among them. Generally Planning answers
three main questions:

 What is to be done?
 How to do it?
 Who does it?

Detailed planning for tendering purposes and the preparation of project need to be conducted
through brainstorming sessions among the planning team. The inputs and outputs of the
planning process are shown in Figure 3.1
 Activities
 Contract information
 Relationship
 Drawings
among activities
 Specification
 Method
 Available resources
statements
 Bills of quantities
PLANNING  Responsibility
 Site reports
 Reporting levels
 Organizational
 Project network
 construction methods
diagram
 Activities duration
 Activities cost

3.2 Project Planning

Project planning is a procedural step in project management, where required documentation
is created to ensure successful project completion. Some of the important definitions are
given below.

According to Kerzner, “Project planning is a part of project management, which relates to the
use of schedules such as Gantt charts and subsequently report progress within the project
environment”.

According to Marline, “A project planning establishing the duration of the project, the
resources needed to complete each activity and the required sequence of performance of each
job”.

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So, we can say that the primary purposes of planning are to establish a set of direction in
sufficient detail to tell the project team exactly what must be done, when it must be done, and
what resources to use in order to produce the deliverables of the project successfully.

3.3 Project Planning Steps

A well-planned project has a higher chance of success. For this reason, this stage called the
project planning process is crucial for the whole project lifecycle. the following steps may be
used a guideline or checklist to develop a project plan:

1. Define: the project planning process group activities define how you will approach
project planning as well. They help to create a proper project planning.
2. Finalize requirements: All of the requirements including scope, quality, cost, schedule
etc. must be finalized in the beginning of the planning. Because the overall project
plan will be shaped based on the project requirements.
3. Create scope statement: Project scope statement defines what will be done during the
project. Also, what is included in the major deliverables and outputs of the project?
4. Determine what to purchase: During project planning process, a project manager must
determine and plan the tools, equipment’s or any other resources which need to be
purchased or leased.
5. Determine the team: During the planning phase, the project manager should determine
the project resources that will be working throughout the project.
6. Create work breakdown structure and strategy: Work breakdown structure is
abbreviated as WBS. It actually depicts the hierarchy of the project deliverables in a
project.
7. Create network diagram; this is another project planning process group activity. The
network diagram of a project shows the interdependencies of project activities.
8. Estimate resource requirements; how many temporary will be needed? which tools
and equipment those are required? What material that will be used? These are all
estimated during project planning process.
9. Estimate the time and cost: Project are temporary endeavours. they should have a start
and a end. Based on the scope and quality requirements of the project, the schedule
and budget, required to complete this scope on determine schedule, are estimated.

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10. Determine critical path: There are several activities of a project. Also, there are
interdependencies between these activities. while some activities can be performed
simultaneously, some other activities will depend on the activities to finish.
11. Develop schedule: The schedule plan of a project shows which activity will start
when. It also includes national holidays, annual leaves, public holidays etc. Schedule
of a project start and end dates for each project activity.
12. Develop budget: the budget plan of a project shows how much money will be spent
for what in a project. it includes the expected payment dates and amount of money
that will be paid to the sellers, vendors or partners etc.
13. Determine quality, standards, procedure and metrics: what will be the quality
objectives of the project? Are there any standard that the project must be compliant?
For instance, ISO 9001. What will be the procedure to follow?
14. Create process improvement plan: Especially recurring processes needs to be
improved throughout the project. Because there is always room for better doing an
activity. how to improve the processes should be also planned continuously.
15. Determine all roles and responsibilities; clear roles and responsibilities matrix is
essential for the project success.
16. Plan communication: How will you communicate the project information with your
stakeholders?
17. Perform risk identification, qualitative and quantitative risk analysis and risk response
planning: Project risks that are visible in the planning phase must be listed. These
risks must be addressed with risk response strategies: it is good for reducing the
impact of these risks when they occur.
18. Go back iterations: project planning is interactive. Because an action or plan you did
later, might eliminate the validity of a previous action or plan. Therefore, progressive
planning and iterations are done to reach the most appropriate project planning in the
end.
19. Prepare procurement documents: If there will be tools, equipment. material or
resources that will be purchased from external organizations, how to purchase them
from the vendor to suppliers must be documented. For instance, how will you select
the supplier? What will be the conditions to make a payment to one of your suppliers
etc.?
20. Finalize “how to execute and control “parts of all management plans: At the end of
the project planning process, the execution and monitoring and controlling approaches

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of the project must be concrete. And these plans must be implemented to reach the
goals of the project in the end.
21. Develop final PM plan and performance measurement baseline that are realistic: The
final project plan must be completed by the end of the project planning process. This
plan should include measurable objectives, attainable cost and schedule targets.
22. Gain formal approval of the plan; This step is crucial. Once the project planning is
completed, this plan must be approved by all project stakeholders. The project
manager must be sure that everybody is on the same page about the project objectives
and targets by the end of the planning phase.
23. Hold kick off meeting: The kick off meeting is organized by the project manager, who
invites the critical stakeholders to the meeting. The project plan is overviewed, project
objectives, targets and outcomes are summarized to the project stakeholders.

After the project planning process group activities are completed, the next the project
management process group will be the executing process group Activities.

3.4 Elements of Project Planning

Project planning is part of project management, which relates to the use of schedules such as
Gantt charts to plan and subsequently report progress within the project environment. Key
elements of project planning are stated below;

1. Over view; This is short summary of the objective and scope of the project is directed
to top management and contains a statement of the goals of the project, a brief
explanation of their relationship to the firms objectives, a description of the
managerial structure that will be used for the project and list of the major milestone in
the project schedule.
2. Objective: this contains a more detailed statements of the general goals noted in the
overview section. The statement should include profit and competitive aims as well as
technical goals.
3. Genial approach: This section Describes both the managerial and the technical
approaches to the work. The technical discussion describes the relationship of the
project to available technologies.
4. Contractual aspects : This critical section of the plan includes a complete list and
description of all the reporting requirement, customer supplied resources , liaison
arrangements, advisory committees, project review and cancellation procedures ,

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proprietary requirements , any specific managements arrangements , as well as then

technical deliveries and their specification, delivery schedules and a specific
procedure for changing of the above
5. Schedules: This section outlines the various schedules and lists all milestone events.
Each risk is listed, and the estimated time for each task should be obtained from those
who will do the work.
6. Resources: there are two primary aspect to this section. the first is the budget, second
monitoring and controlling procedure should be described.
7. Personnel; this section lists the expected personnel requirements of the project. special
skills, types of training needed, possible recruitment problems, legal or policy
restriction on work force composition, and any other special requirements, such as
security clearance, should be noted here.
8. Risk management plans; This covers potential problem as well as potential lucky
breaks that could affect the project. Sometimes it is difficulties to convenience lanners
to make a serious attempt anticipate potential difficulties.
9. Evolution Methods: Every project should be evaluated against standards and by
methods established at the project’s inception, allowing for both the direct and
ancillary goals of the project.

3.5 Triple Constraints of Project Planning

The triple constraints are the combination of the three most significant restrictions on any
project: Scope, schedule and cost.

The triple constraints sometimes referred as the project management triangle or the iron
triangle, with quality as the centre theme.

Cost

Scope time

Figure: The Triple Constraints

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The three constraints are interdependent: none of them can be altered without affecting one or
both of the others. For example, it the scope of a project increased, it is likely to take more
cost. Likewise, an earlier deadline is almost certain to either to require more money or a less
ambitious scope.

1. Cost: All projects have a finite budget; the customer is willing to spend a certain
amount of money for delivery of a new product or services. if you reduce the project
cost, you will either have to reduce its scope or increases its time.
2. Time (Schedule): As saying goes “time is money “, a commodity that slips away too
easily. Projects have a deadline date for delivery. When you reduce the project time,
you will either have to increases its cost or reduces its scope.
3. Scope: Many projects filed on these constraints because the scope of the project is
either fully defined or understood from the start. When you increase a project scope
you will either have to increases it cost or time.

The difficulty of satisfying expectations of all three constraints is sometimes expressed as

pick two: the concept that in any set of three desired qualities, only two can be delivered.
More recently, the triangle has given way to a project management diamond: cost, time,
scope, and quality are now for vertices, with customer expectations as a central theme. No
two customer expectations are the same, so you must ask specific questions about the
customers’ expectations.

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3.6 Project Charter

In project management, a project charter, project definition, or project statement is a
statement of the scopes, objectives, and participants in a project. It provides a preliminary
delineation of roles and responsibilities, outlines the project objectives, identifies the main
stakeholders, and defines the authority of the project manager. It serves as a reference of
authority for the future of the project. The terms of reference are usually part of the project
charter.

For example, if you are an investor or a contributor in a project, you want to get a clear
understanding of what this project will bring about. After all, it is important to know what
resources it requires before you sign for it and that’s exactly what a project charter provides.

It clarifies general specifications, the purpose of the project, the key stakeholders, and the
possible outcomes. A fully decorated sample of project charter is given below:

3.7 Sample: Project Charter Table of Contents

Project (Project Name)
Created By (Your Name) Date (Creation Date)
Phone (Your Phone Email (Your Email)
Number)

Mission Instructions:
 Expand all the rows as necessary to
include your text.
 You may also want to replace the
key Consulting logo with the
project's logo.
 Not all the sections listed here may
be needed on a particular project.
There may also be items you need to
include that are not included here.
 Many of these items listed will be
visited in more detail when you start
planning. The objective of the

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charter is to document the

information as it is known at the
beginning of the project - not to get
into the planning itself.
 The mission, or goal for the project
should be documented in this row.

What is the project?

Objectives Why is it important to achieve the project

mission? What do you hope to achieve by
executing the project?
Scope This is a high-level description of the
features and functions that characterize the
product, service, or result to be delivered by
the project.

Deliverables What will the project actually produce?

Stakeholders
Cross Organization Team Member
These should be measurable items.
Who will be on the team? Who is the
project sponsor? What other stakeholders
have already been identified? Include
contact information if possible.
- Use an organizational chart to show
the structure of the project team as
well as the relationships between
team members

- You should also show how the team

interacts with or relates to the
governance structure for the project.

- For small projects, the names of the

team members can be included; for
larger projects, the organizational
chart should name the groups or

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entities that form the project teams.

Roles and Responsibilities
High-Level Work Breakdown Structure
-
Are there some roles and responsibilities
that need to be clarified now before the
detailed planning begins?
Are you dear on your responsibilities as the
project manager?
How will the project be structured at a high-
level?

Assumptions What high-level assumptions have already

been made about the project?
Communications What will be the main channels of
communications? Do you anticipate any
communication problems that should be
clarified here? How often will the team
meet?
Risks What are main high-level risks that have
already been identified?
Documentation Where will project documentation be kept?
How will it be kept up-to-date?
Are there specific items that are not within
Boundaries the scope of the project?
Decision Making Process What will be the decision-making
process(es) for the project?

Signatures You may want to ask people to sign an

agreed upon final version of the charter to
document everyone’s agreement.

3.8 project work breakdown structure (WBS)

WBS is described as a hierarchical structure which is designed to logically subdivide all the
work-elements of the project into a graphical presentation. The full scope of work for the
project is placed at the top of the diagram, and then sub-divided smaller elements of work at

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each lower level of the breakdown. At the lowest level of the WBS, the elements of work are
called a work package. A list of project's activities is developed from the work packages.

Effective use of the WBS will outline the scope of the project and the responsibility for each
work package. There is not necessarily a right or wrong structure because what maybe an
excellent fit for one discipline may be an awkward burden for another. To visualize the WBS,
consider Figure 4.2 which shows a house construction project.

House

Civil Plumping Electrical

Foundations Walls/Roofs Wiring Fittings

Piping H/C Water

As shown in Figure 4.2, level 1 represents the full scope of work for the house. In level 2, the
project is sub-divided into its three main trades, and in level 3 each trade is subdivided to
specific work packages.

3.9 Rules to Create the Perfect Work Breakdown Structure

Work breakdown structure aims to subdivide the deliverables and project work into smaller
and manageable parts. This helps to make better estimates and to conduct a better
management, have a better coordination and also better monitoring. There are rules for
creating work breakdown structure respectively. If these rules are followed properly ng the
creation, the work breakdown structure of the project will be flawless. In this

article, we are going to list these 10 rules to follow to perfect the work breakdown structure.
These are:

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Rule #1: Work breakdown structure is created with the help of the team. The project team is
informed about the project scope and the product scope. Since project team will perform the
project activities, they should provide the breakdown of project deliverables respectively.

Rule #2: Each level of the work breakdown structure is a smaller piece than the level above.
Let's consider an Aircraft system, which is a product. In the second level of WBS, major
deliverables of the product should be listed. In the 3rd level, work packages of these major
deliverables should be listed.

Rule #3: Some levels will be broken down to further than others. This means that while some
branches can go up to further levels, some branches can stop at higher levels. For instance, a
work package might have been broken down to the 3rd level while another work package
might have been broken down to the 7th level.

Rule #4: Work breakdown structure includes only deliverables that are really needed.

Unnecessary activities or deliverables must not be in work breakdown structure of the

project.

Rule #5: Work packages are reached when their deliverables meet the following criteria:

 Deliverables can be realistically and confidently estimated.

 Deliverables must be completed quickly.
 Deliverables should be completed without interruption.
 Deliverables may be outsourced or contracted out.

Rule #6: After completing work breakdown structure of a project, project deliverables are
entered into the project scheduling software. These project management software tools help
to define project activity dependencies, start and finish dates of activities and help to
complete an end-to-end project schedule plan respectively.

Rule #7: Work Packages in the work breakdown structure are divided further into schedule
activities with the help of WBS dictionary. Because Work Packages are described as nouns
only with a couple words. And these work packages will require activities to be performed to
complete. Consider the aircraft system WBS. The engine was a work package under the air
vehicle major deliverable. The engine of an Aircraft is still very complex to manufacture and
activities that need to be performed to complete must be derived from the WBS dictionary.

Rule #8: After creation of the work breakdown structure, levels are numbered for ease of
location.

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Rule #9: If your organization works on similar projects, work breakdown structure from one
project may be used on another. Consider smartphone manufacturers. They release new
versions of same product frequently.

Rule #10: Whenever there is a new project, Project Management Office should collect work
breakdown structure examples and store it in the organizational process assets library. By this
way, in future, new projects can use work breakdown structure examples when they are
creating the WBS of the project.

3.10 Steps of Breakdown Structure

The basic steps to design and use the work breakdown structure are given below:

1. Using information from the action plan, list the task breakdown in successively finer

levels of detail. Continue until all meaningful tasks or work package have been
identified and each task or package can be individually planned, scheduled, monitored
and controlled.

2. For each such work package, identify the data relevant to the WBS (e.g., vendors,
Rations, equipment, materials, and special specifications).
3. All work package information should be reviewed with the individuals or
organizations that have responsibility for doing or supporting the work in order to
verify the WBS's accuracy.
4. For the purpose of pricing a proposal, or determining profit and loss, the total project.
Budget should consist of four elements.
5. Similarly, schedule information and milestone (significant) events can be aggregated
into a project master schedule.
6. As a project is carried out, step by step, the PM can continually examine actual
resources use, by work element, work package, task, and so on up to the full project
level.
7. Finally, the project schedule may be subjected to the same comparisons as the project
budget.

3.11 Tools to Help Project Manager Plan for Crises

There are four tools by which a project manager plans for the crisis situation. They are:

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1. Risk Analysis
2. Contingency Plan
3. Logic Chart
4. Table-top Exercise

3.11.1 Risk Analysis:

Risk analysis is the process of identifying and analysing potential issues that could negatively
impact key business initiatives or critical projects in order to help organizations to avoid or
mitigate those risks.

To carry out a Risk Analysis all possible threats should be identified which may be faced and
then it should be estimated the likelihood that these threats will materialize.

Risk Analysis can be complex, as we’ll need to draw on detailed information such as project
plans, financial data, security protocols, marketing forecasts, and other relevant information.
However, it's an essential planning tool, and one that could save time, money, and
reputations.

Concept of Risk Management

Risk management is a proactive process that focuses on identifying risk events and
developing strategies to respond and control risks. It is not a one-time event carried out at the
beginning of a project. It may be defined as an art and science of identifying, assigning, and
responding to risk throughout the life of a project. It can often result in significant
improvements in the ultimate success of projects.

Classification of Risk

Usually four categories of risk found in managing project, which are as follows:

1. Business risk: Normal risk of doing business that carries opportunities for both gains
and losses. It occurs as a result of business decisions such as the decision to use a new
technology in a project to leverage future business opportunities.
2. Insurable risk: Risk that presents an opportunity for loss only. For this type of risk you
could purchase insurance premium. Insurable risk is also known as pure risk.
3. Known risk: Risks that were identified for a particular project.
4. Unknown risk: Risks that were not identified or managed, unknown risk if they occur
on a project and found positive are called windfalls.

Broad categories of risk include:

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 Market risk:
Will the project product be marketable and competitive?
 Financial risk:
Is the project affordable and will it provide the expected ROI?
What about opportunity cost?
Could the money be better spent elsewhere?
 Technology risk:
Is the project technically feasible?
Will the technology meet project objectives?
Will the technology be obsolete before the product is produced?

Risk Management Process

The PMBOK provides and overview of the process as follows:

 Risk management planning: Deciding how to approach and plan the risk management
activities for a project.
 Risk identification: Determining which risks might affect the project and documenting
their characteristics.
 Qualitative risk analysis: Performing a qualitative analysis of risks and conditions to
priorities their effects on project objectives.
 Quantitative risk analysis: Measuring the probability and consequences of risks and
estimating their implications for project objectives.
 Risk response planning: Developing procedures and techniques to enhance
opportunities and reduce threats to the project's objectives.
 Risk monitoring and control: Monitoring residual risks, identifying new risks,
executing risk reduction plans, and evaluating their effectiveness throughout the
project life cycle.

All processes interact with each other and with all knowledge areas within the PMBOK. The
PMBOK also defines inputs, tools & techniques and outputs for each of the process identified
within risk management.

The process description for risk management is depicted as under:

1. Risk identification
2. Risk analysis
 Qualitative

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 Quantitative
3. Risk response development
4. Risk response control
 Implement strategy
5. Evaluate results
6. Document results

The major issues of risk management process have been elucidated below:

A. Risk identification

Risk identification involves identifying symptoms of risks. Risk Symptoms are the indictors
or triggers for the actual risk event. For example, cost overrun may be symptomatic of poor
estimation, or product defects may be symptomatic of a poor-quality supplier. Identification
and documentation of potential risk symptoms provides a diagnostic tool for project teams
and suggests potential corrective action.

The most effective way of identifying project risks is by using some form of systematic
approach, whether it be by project management knowledge area, systems development life
cycle phase or developing a customized checklist based on previous project experience.

Risk events are specific things that may occur to the detriment of the project (e.g., significant
changes in project scope, strikes, supply shortages, etc.).

To characterize or define a risk event you need to examine and document the following
parameters:

1. What is the probability of occurrence?

2. What is the impact to the project or the outcome if it does occur (severity)?
3. When it might occur?
4. How often it might occur (frequency)?

Risk Analysis

Risk qualitative and quantification assessments

Risk analysis (qualitative or quantitative) is the process of evaluating risk to assess the range
of possible project outcomes. The approach involves estimating probability of occurrence,
potential impact on the project and possible mitigation strategies. By quantifying risks,

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project managers and terms can then rank and priorities them and establish acceptable risk
thresholds.

Expert judgment Many firms use the past experience and intuition of experts in lieu of or as a
supplement to quantitative risk analysis. One common approach to gathering expert opinion
is the Delphi method. The Delphi method is an approach used to derive a consensus among a
panel of experts to make predictions about future developments. The method uses repeated
rounds of questioning including feedback of earlier responses to take advantage of group
input to refine the response. The process is continued until the group responses converge to a
specific solution. This method works well in developing probability assessments for risk
events.

Expected monetary value: Expected monetary value is defined as the product of the risk event
probability times the risk event's monetary value. That is, if the estimated cost of a risk event
(e.g., the senior subject matter expert quitting and having to recruit and hire a new one) is
$10,000 and the probability of it occurring is 20%, the expected monetary value would be
20% X $10,000=$2,000.

PERT estimations

Program evaluation and review technology (PERT) analysis, discussed in Block 2, is actually
a highly simplified risk analysis method. It involves the provision of their estimates of an
activity's duration- pessimistic, optimistic and most likely. The technique places four times
the weight on the most likely estimate than on the optimistic or pessimistic ones. A more
accurate and flexible method is something called Monte Carlo simulation.

Monte Carlo Simulation for project risk analysis: Simulation uses a system model to analyse
expected behaviour or performance. Monte Carlo analysis is a risk quantification technique
that simulates a model's outcome many times (1001000 times) to provide a statistical
distribution of the calculated results)

It ties together sensitivity analysis and scenario analysis at a time. This is also a risk analysis
technique which uses a computer to simulate future events and thus to estimate profitability
and riskiness of the project. In simulation analysis, a computer firstly takes at random
different values of each input variables (such as selling price, sales volume, variable cost per
unit etc.) Then the values are combined and NPVs are calculated for each combination and
stored in the computer. The process perhaps repeats for 1000 times to generate 1000 NPVs.
Then the mean and standard deviation is calculated for every set of NPVs. Mean is used as a

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measure of project's profitability and standard deviation or co-variance is used as a measure

of project's risk.

Monte Carlo analysis

Monte Carlo analysis also uses pessimistic, optimistic, and most likely estimates and the
probabilities of their occurrence. Simulations such as these are a more sophisticated method
for creating estimates than PERT and can more accurately help determine the likelihood of
meeting project schedule or cost targets. Many organizations globally use Monte Carlo
simulation for risk analysis. PC software programs like @RISK provide Monte Carlo
simulation capability to project management software like MS project and to standard PC
spreadsheet.

Sensitivity analysis

Sensitivity analysis is a project risk analysis technique which indicates how much the net
present value of a project will be changed in response to a given change in a input variable
(such as unit sales, variable cost per unit), other things remain same. Since the future is
uncertain, one may like to know what will happen to the variability of the project when some
variable like sales or investment deviates from its expected values. In other ward, one may
want to do a ‘if what analysis or sensitivity analysis. Sensitivity analysis begins with a base
case situation in which an NPV is calculated using expected value for each input. Then, each
of the input variables is changed by several percentage points above & below the expected
value and a new NPV is a calculated using value of input variables. Finally, a set of NPV is
plotted in a graph to show how sensitive the NPV is to change in input variables. The slope of
the line in the graph shows how sensitive the NPV is to change in input variable. Steeper the
slope indicates risk or more sensitivity of the NPV to the given input variable and vice versa.

Scenario analysis

In sensitivity analysis, only one variable varies at a time. If the variable is interrelated, as they
are most likely to be, it will be helpful to look at some reasonable scenarios, each scenario
representing a consisting combination of variables.

Scenarios in a project may be: -

Best scenario: High demand, high selling price, low variable cost and so on. Normal scenario:
Average demand, average selling price, average variable cost and so on.

Worst case scenario: low demand, low selling price, high variable cost and so on.

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In scenario analysis the best and worst NPV is compared with normal NPV. Analysis begins
with a normal or base case condition, then, financial analyst asks for information from the
respective departments about the worst case and best-case scenarios. Finally, NPVs are
calculated for every scenario. If the project is successful, the combination of high demand,
high selling price, low variable cost, results high NPV and vice versa.

Break-even analysis

In sensitivity analysis we ask what will happen to the project if basic input variable changes
(if sales increase, cost decline or something else happens). As a project manager, one should
know how much should be produced or sold at a minimum to ensure that the project does not
lose money. Such an analysis is called Break-even analysis. And the level of production at
which loss can be avoided is called break-even production. Break-even analysis may be
defined in accounting terms or financial terms. In accounting terms, the focus of Break-even
analysis is on 'accounting profit. That is, it will identify at sales level or production level the
net income will be zero. In financial terms, the focus of break-even analysis is on NPV. That
is, it will identify at sales level or production level NPV will be zero.

Using software in risk analysis

Software tools are available to assist in various aspects of risk management. Risks can be
tracked in databases or spreadsheets. Spreadsheet software can also assist in simple risk
analysis. More sophisticated risk management software is also available that can help you
build models and run simulations to analyse and respond to project risks. Monte Carlo
simulation software is a particularly useful tool for helping to get a better idea of project risks
and risk drivers. The sign of good risk management is that minimal crisis management is
required (i.e., fires to put out) during the life of the project.

Risk response development

Risk response development is the process of taking steps to enhance opportunities and
developing responses to risks. The following are the four basic responses to risk.

Risk avoidance involves eliminating a risk or threat, usually by eliminating its causes (e.g.,
using hardware or software that is known to work, even though there may be newer solutions
available)

Risk acceptance can be either activate or passive

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Passive acceptance means accepting the consequences should a risk occur. Active acceptance
means developing a contingency plan should the risk occur-e.g. work around.

Risk mitigation involves reducing the probability and /or the impact of a risk event.

Risk transference involves transferring the risk to a third party e.g. buying insurance in the
event that you have an accident.

Risk management plans, contingency plans and contingency reserves

A risk management plan documents the procedures for managing risk throughout the project.
summarizes the results of risk identification and analysis processes and describes what the
project team's general approach to risk management will be.

A risk management plan should address the following questions:

 Why is it important to take / not take this risk in relation to the project objectives?
 What is the specific risk and what are the risk mitigation deliverables?
 What risk mitigation approach will be used?
 Who are persons responsible for implementing the risk management plan?
 When will the milestones associated with the mitigation approach occur?
 How much is required in terms of resources to mitigate risk?

Contingency plans are predefined actions that the project team will take if an identified risk
event occurs. Contingency reserves are provisions held in reserve by the project sponsor for
possible changes in scope or quality that can be used to mitigate cost and or schedule risk.

Risk response control

Risk response control involves responding to risk events over the course of the project by
executing the risk management plan and risk management processes.

This requires on going risk awareness and monitoring. New risk may be identified during the
course of the project and should go through the same assessment process as those identified
in advance. When contingency plans are not in place or an unplanned risk event occurs, a
workaround or temporary fix may need to be found.

Top ten-risk item tracking

Top ten-risk item tracking is a communication tool used for marinating awareness of risk
throughout the life of a project. It consists of a periodic review with management and the
customers of what they fell are the periods most significant risk items. A risk-tracking chart is
developed that shows current and previous months to ten risks.

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Risk management reviews

Keep key stakeholders aware of factors that could prevent project success; Provide
opportunities to develop and /or consider alternate risk mitigation strategies; & Promote
confidence in the project team by demonstrating its ability to proactively manage risk.

Measurement of risk

Risk refers to the variability. It's a complex and multi-faceted phenomenon. A variety of
measures have been uses to capture different facets of risk. The more important ones are:

1. Range
2. Standard deviation
3. Variance
4. Co-efficient of variation
5. Risk-adjusted rate of discount (RAD) method.
6. Sensitivity Analysis: Optimistic, most likely and pessimistic
7. Scenario Analysis: Tight, Aggressive, Average or worst, Best & Base situations
8. Decision-Three Analysis & Probability Analysis
9. Simulation - Monte Carlo
10. Measuring Beta risk of a project or a port-folio & pure play method

Why risk and uncertainty are so indispensable in project management?

1. Risk and uncertainty are indispensable in capital budgeting exercise or project

management as it involves long period of time and deals with future which is highly
uncertain.
2. Risk differs due to nature of investments e.g. expansion project, R & D project,
replacement project, etc.
3. It is highly unlikely that project planners can suggest accurate amount of cash inflows
or useful life of the project.
4. Ever-increasing changes in technologies increase further risk and uncertainty.
5. Change in market, taste & fashion of the people, income level, etc increase risk.
6. Change in economic conditions, interest and inflation rates as well as exchange rate
further intensify the risk and uncertainty in project management.
7. Informal and unsystematic competition is a great challenge to project management e.g
smuggling, formation of trade blocs, etc.

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8. Degree of Political risk. Degree of Country risk. Chance of nationalization and

expropriation. Risk of civil disobedience and war. Uncongenial legal framework.

3.11.2 Contingency plan:

A contingency plan is a course of action designed to help an organization respond
effectively to a significant future event or situation that may or may not happen.
A contingency plan is sometimes referred to as "Plan B," because it can be also used
as an alternative for action if expected results fail to materialize. Contingency
planning is a component of business continuity, disaster recovery and risk
management.

3.11.3 Logic Chart:

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3.11.4 Table Top Exercise:

Tabletop exercises are discussion-based sessions where team members meet in an informal,
classroom setting to discuss their roles during an emergency and their responses to a
particular emergency situation. A facilitator guides participant through a discussion of one or
more scenarios.

3.12 Approaches of Project Planning:

Several participatory approaches have been developed to assist in project planning and
implementation. The purpose is to create better and sustainable projects that apply
appropriate methods to focus on real problems. These approaches are:

Appreciative Inquiry

Appreciative Inquiry builds on existing strengths, resources and accomplishments of a

community. The goal is to improve the self-esteem and initiative of the community and its
members, ultimately to enhance the ability to develop itself further. This approach includes
four stages: definition, hypothesis, design and destiny which are used for a project planning.
These stages are also known as '4Ds'.

Outcome mapping
Outcome mapping is a participatory approach developed for planning, monitoring and
evaluation, where the outcome is defined as the changes of behaviour and action of people
and organisations. This approach emphasises learning, for instance, through monitoring and
evaluating both the progress and selected methods of the project.
Logical Framework Approach
Logical Framework Approach focuses on recognizing problems and analysing their cause-
and-effect relationships. It consists of background analyses and the Logical Framework
Matrix.
3.12. 1 Project planning by objective
1. To identify the activities needed to deliver each work package and sequence them
according to their logical dependencies.
2. To estimate the time and resources needed to carry out the activities in the specific
sequence.

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3. To construct a schedule that takes account of logical dependencies and resource

availability.
4. To ensure that all the work and products needed to achieve the project objectives are
included in the plan.
5. To develop a hierarchical framework for integrating the key planning and control
functions (scope, quality, cost, time, risk) at different levels of management.
6. To specify the organization and responsibilities for managing the work and delivering
the products.

3.12.1.1 Phases of Project Planning by Objective

The Project Planning Phase is the second phase in the project life cycle. It involves creating
of a set of plans to help to guide team through the execution and closure phases of the project.

The plans created during this phase will help to manage time, cost, quality, change, risk and
issues. They will also help to manage staff and external suppliers, to ensure that project can
be delivered on time and within budget.

There are 5 Project Planning steps to take to complete the Project Planning Phase efficiently.
They are:

1. Create a project plan:

The Project Plan is the most important document in the project, as it provides the Project
Manager with a roadmap ahead, and it tells them during the journey whether they are on-
track. Using this Project Plan template, there can be created a comprehensive project
management plan for the project today.

2. Create a Resource Plan:

A Resource Plan summarizes the level of resources needed to complete a project. A properly
documented Resource Plan will specify the exact quantities of labour, equipment and
materials needed to complete the project. This Resource Planning template also helps to gain
approval from Sponsor, ensuring their buy-in.

3. Create a Financial Plan:

A Financial Plan identifies the Project Finance (i.e. money) needed to meet specific
objectives. The Financial Plan defines all of the various types of expenses that a project will
incur (labour, equipment, materials and administration costs) along with an estimation of the

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value of each expense. The Financial Plan also summarizes the total expense to be incurred
across the project and this total expense becomes the project budget. As part of the Financial
Planning exercise, a schedule is provided which states the amount of money needed during
each stage of the project.

4. Create Communication Plan:

A Communication Plan (or Communications Plan) describes how to communicate the right
messages to the right people at the right time. Within a Communication Plan, the
communication goals, stakeholders and strategies, activities and timeframes are described. A
Communication Plan helps to keep everyone informed to communicate a consistent message
to the target audience.

5. Create Project Phase Review:

A Project Phase Review is completed at the end of each project phase. During this project
management review, the reviewer completes a Phase Review Form describing the progress of
the project to date and recommending whether or not it should continue to the next project
phase. If approved, the next project phase can be commenced.

3.12.2 Participatory rural appraisal (PRA)

Participatory rural appraisal (PRA) is an approach used by non-governmental organizations
(NGOs) and other agencies involved in international development. The approach aims to
incorporate the knowledge and opinions of rural people in the planning and management of
development projects and programs.

It is an approach which encourages the community to share their ideas, opinions and
experiences pertaining to the local problems, issues and needs. This approach emphasizes on
local knowledge and help local community to make own plans, analysis and appraisal.

PRA can be abbreviated like-

Participatory – Means that people are involved in the process – a “bottom-up” approach that
requires good communication skills and attitude of project staff.
Rural – The techniques can be used in any situation, urban or rural, with both literate and
Illiterate people.

Appraisal – The finding out of information about problems, needs, and potential in a rural
area. It is the first stage in any project.

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3.12.2 .1 Advantages of PRA:

1. Identification of genuine priorities for target group.
2. Devolution of management responsibilities.
3. Motivation and mobilization of local development workers.
4. Forming better linkage between communities and development institution.
5. Use of local resources
6. Mobilization of community resources
7. More sustainable development activities.

3.12.2 .2 Disadvantages of PRA:

1. Raising expectations which can’t be realized
2. Proposal of development plans which participating agencies can’t respond to.
3. Risk of capture of activities by local interests.
4. Failure to take amount of stratification in communities.

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