IS333: Project Management Tutorial 08 Questions and Answers Semester I 2021

IS333: Project Management – Semester I 2021

Risk Management

Week 9: Tutorial 08 Questions with Possible

Solutions

1. Do you agree with the following statement: “With proper planning, it is possible to eliminate
most/all risks from a project”? Why or why not?

 It is not possible to eliminate risk from a project regardless of planning.

 The role of risk management is to identify and analyze potential risks associated with a
project.
 Once risks have been identified, preventative action or contingency plans may be established
to reduce the impact of the risk on the success of the project.
 While this presents a way to help control the effects of risk, it does not eliminate risk from the
project management equation.

2. What are the benefits and drawbacks of using the various forms of risk identification
mentioned in the chapter (e.g., brainstorming meetings, expert opinion, etc.)?

 Brainstorming, expert opinion, and multiple assessment approaches share similar benefits
and drawbacks. The benefits include a variety of experience and multiple angles of analysis
due to different points of view and areas of expertise. Synergy among group members may
also create a wider range of risk identification. Although there are shortcomings to these
approaches. It may be difficult to come to an agreement or consensus in such processes due
to conflicting opinions and personal issues.
 Brainstorming, expert opinion (when performed in a forum setting rather than through the
Delphi approach) and multiple assessments may also have difficulty reaching consensus due
to egos/authority issues and functional biases (when members of different departments are
present). When the Delphi technique is employed, many of these issues are resolved because
members do not meet face to face. The process becomes anonymous reducing interference
of egos and personal problems. However, the Delphi approach can take considerable time to
complete successfully.
 Past history is a unique approach to the other three. It uses historical facts to reach
conclusions, which removes many obstacles that the other techniques encounter. The
benefits of risk identification through past history is that, if past projects were well documented,
information related to similar projects can easily be found and project teams can avoid pitfalls
by learning from the mistakes of others. Unfortunately, the drawback is that past performance
does not always predict future performance. Project-specific data (i.e., competitive
environment, economy, etc.) is unaccounted for. Thus, past history may do little to forecast
present risks.

3. What are the benefits and drawbacks of using a qualitative risk impact matrix for classifying
the types of project risk?

 Qualitative risk assessment matrix is beneficial in providing a visual depiction of potential risk
factors. The matrix enables the project team to prioritize risk based on severity of
consequences and likelihood of occurrence. For instance, those that rest in the “high” portion
of both consequences and likelihood would be top priorities during project planning.
Drawbacks of the matrix may revolve around differences in opinion as to where risk variables
should be placed on the matrix. It may also create tunnel vision where the team fails to
acknowledge the significance of tasks that fall outside of the high-priority areas.

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IS333: Project Management Tutorial 08 Questions and Answers Semester I 2021

4. What are the benefits and drawbacks of using a quantitative risk assessment tool such as the
one shown in the chapter?

 One benefit of such tools is in the ability to set thresholds based on calculations of probability
and consequence. A numerical point system creates an easy way to compare different risk
variables. This point system also provides more detail than a matrix in depicting the level of
risk. Additionally, once the point system is designed, it can be used over and over to compare
risk factors of future projects. Problems with these tools may arise in disagreement over
assigning points and creating thresholds. Also, the point system is not an exact science. It
relies on rules of thumb and may be subject to interpretation.

5. Explain the difference between managerial contingency and task contingency.

 Contingency reserves are provisions set aside in case of unforeseen problems. The primary
differences between task and managerial contingency are that managerial contingency is
applied at the project level while task contingency is applied at the individual task or work
package level.
 Managerial contingencies are budgeting buffers that teams can fall back on in case of natural
disasters, severe divergence from original process or technical plans or other “acts of God.”
 Task contingencies are established because estimates (made during initial planning) for
individual tasks may be unreliable. Reserves for these contingencies may be adjusted as the
project advances and estimates become more accurate.

6. Assessing Risk Factors. Consider the planned construction of a new office building in downtown
Suva at a time when office space is in surplus demand (more office space than users). Construct
a risk analysis that examines the various forms of risk (technical, commercial, financial, etc.)
related to the creation of this office building. How would your analysis change if office space
were in high demand?

 This question can be answered by students in a number of ways. The key point is to get them
thinking in terms of potential risks that are bound to exist prior to initiating a new project.
Commercial risk is paramount here because office space is in low demand, making any new
office building project questionable from a financial perspective.

7. Quantitative Risk Assessment. Assume the following information:

Probability of Failure Consequences of Failure

Maturity = .3 Cost = .1
Complexity = .3 Schedule = .7
Dependency = .5 Performance = .5

Calculate the Overall risk factor for this project. Would you assess this level of risk as low,
moderate, or high? Why?

Using the formula from the chapter, the solution to this problem is:

Pf = (.3 + .3 + .5)/3 = .37

Cf = (.1 + .7 + .5)/3 = .43

Risk factor = .37 + .43 − (.37 × .43) = .6409, or .64

According to the severity levels, this would be classified as medium risk.

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IS333: Project Management Tutorial 08 Questions and Answers Semester I 2021

8. Quantitative Risk Assessment. Assume the following information for an IT project.

Probability of Failure Consequences of Failure

Maturity = .7 Cost = .9
Complexity = .7 Schedule = .7
Dependency = .5 Performance = .3
Client Concerns = .5 Future Business = .5
Programmer Skill = .3

Calculate the overall risk factor for this project. Would you assess this level of risk as low,
moderate, or high? Why?

Using the formula from the chapter, the solution to this problem is:

Pf = (.7 + .7 + .5 + .5 + .3)/5 = .54

Cf = (.9 + .7 + .3 + .5)/4 = .6

Risk factor = .54 + .6 – (.54 × .6) = .82.

According to the severity levels, this would be classified as a high-risk project.

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