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Definition An event, if occurs, can affect any There is no information about the future
project objective. event or impact.
Control As the outcomes are known, risk As the outcomes are unknown, uncertainty
can be controlled. cannot be controlled.
In conclusion, managing risks is easier because you can identify them and develop a response
plan based on your experience. However, managing uncertainty is very difficult, as previous
information is not available, too many parameters are involved, and you cannot predict the
outcome.
Ex. Assume two famous teams consist of renowned players, and they are going to play a
football match the next day. Can you tell me exactly which team is going to win? No, you can’t;
however, you can make an educated guess by reviewing and analyzing the past performances of
each player, the team, and the results of matches they played against each other. Then you can
come up with some numbers like there is a 30% chance of Team A or Team B winning, or there
is a 70% possibility of Team A or Team B losing the match.
Now, let us put the same football match in a different scenario. Let us say again that two
teams are going to play a game, and no players are selected for either team. In this situation, if
somebody asked you which team is going to win, what would your response be? You will be
clueless because you don’t know which team consists of which players, and you have no idea
how the teams will perform.
Here, you don’t have any information on past performance, and cannot predict the outcome
of the event, even though the rules and the stadium are the same.
Risk Management
All projects have risks that, if not managed, can affect the project or its objective. Project
risk management is vital for project success, but many organizations do not implement a plan,
considering it a burden. If it occurs, it can affect project either positive or negative effect.
If negative, you will try to reduce the impact or probability of the risk event happening.
For example, there is a chance that a critical employee may go on leave during the peak of
your project. In this case, you will find an employee in your organization having similar skills to
replace the team member if he leaves.
On the other hand, if it is a positive risk, you will try to increase the impact or the chance of
occurrence.
For example, you may get a discount for buying materials in bulk or win another project for
completing the project early. In this case, you might look for the requirement for the same
material in your organization and club the order.
A risk is anything that could potentially impact the project’s timeline, performance or budget.
Risks are potentialities, and in a project management context, if they become realities, they then
become classified as “issues” that must be addressed with a risk response plan. So risk
management, then, is the process of identifying, categorizing, prioritizing and planning for risks
before they become issues.
The first step in the risk management process is to identify all the events that can negatively
(risk) or positively (opportunity) affect the objectives of the project:
Project milestones
Financial trajectory of the project
Project scope
These events can be listed in the risk matrix and later captured in the risk register.
It can be characterized by who is responsible for its action. Each of these characteristics are
necessary for a risk (or opportunity) to be valid.
In order to be managed effectively, the Risks and Opportunities (R&O) identified must be as
precise and specific as possible. The title of the risk or opportunity must be succinct, self-
explanatory and clearly defined.
All members of the project can and should identify R&O, and the content of these is the
responsibility of the Risk (or Opportunity) Owners. Risk Managers are responsible for ensuring
that a formal process for identifying risks and developing response plans are conducted through
exchanges with risk owners.
There are two types of risk and opportunity assessments: qualitative and quantitative. A
qualitative assessment analyzes the level of criticality based on the event’s probability and
impact. A quantitative assessment analyzes the financial impact or benefit of the event. Both
are necessary for a comprehensive evaluation of risks and opportunities.
In order to treat risks, an organization must first identify their strategies for doing so by
developing a treatment plan. The objective of the risk treatment plan is to reduce the probability
of occurrence of the risk (preventive action) and/or to reduce the impact of the risk (mitigation
action). For an opportunity, the objective of the treatment plan is to increase the likelihood of the
opportunity occurring and/or to increase its benefits. Depending on the nature of the risk or
opportunity, a response strategy is defined for the project.
Risks and opportunities and their treatment plans need to be monitored and reported on. The
frequency of this will depend on the criticality of risk/opp. By developing a monitoring and
reporting structure it will ensure there are appropriate forums for escalation and that appropriate
risk responses are being actioned.
Project Uncertainty
Scheduling Techniques
There are a number of other project management scheduling techniques that can be choose,
depending on your project needs. Four popular project management scheduling techniques
include the critical path method (CPM), the program evaluation and review technique (PERT),
the Gantt Chart and Simulation.
A technique where you identify tasks that are necessary for project completion and determine
scheduling flexibilities. A critical path in project management is the longest sequence of
activities that must be finished on time in order for the entire project to be complete. Any delays
in critical tasks will delay the rest of the project.
Finding the critical path involves looking at the duration of critical and non-critical tasks.
1. List activities
Use a work breakdown structure to list all the project activities or tasks required to produce the
deliverables. The list of activities in the work breakdown structure serves as the foundation for
the rest of the CPM.
2. Identify dependencies
Based on your work breakdown structure, determine the tasks that are dependent on one another.
This will also help you identify any work that can be done in parallel with other tasks.
3. Create a network diagram
The next step is to turn the work breakdown structure into a network diagram, which is a
flowchart displaying the chronology of activities. Create a box for each task and use arrows to
depict task dependencies.
You’ll add other time-bound components to the network diagram until you have the general
project schedule figured out.
To calculate the critical path, the longest sequence of critical tasks, you first need to estimate the
duration of each activity.
Alternatively, try using the forward pass and backward pass technique:
· Forward pass: This is used to calculate early start (ES) and early finish (EF) dates
by using a previously specified start date. ES is the highest EF value from immediate
predecessors, whereas EF is ES + duration. The calculation starts with 0 at the ES of the
first activity and proceeds through the schedule. Determining ES and EF dates allows for
early allocation of resources to the project.
· Backward pass: This is used to calculate late start (LS) and late finish (LF) dates.
LS is LF - duration, whereas LF is the lowest LS value from immediate successors. The
calculation starts with the last scheduled activity and proceeds backward through the
entire schedule.
Calculating the critical path can be done manually, but you can save time by using a critical path
algorithm instead.
Step 1: Write down the start and end time next to each activity.
The first activity has a start time of 0, and the end time is the duration of the
activity.
The next activity’s start time is the end time of the previous activity, and the end
time is the start time plus the duration.
Do this for all the activities.
Step 2: Look at the end time of the last activity in the sequence to determine the duration of the
entire sequence.
Step 3: The sequence of activities with the longest duration is the critical path.
Critical tasks have zero float, which means their dates are set. Tasks with positive float numbers
belong in the non-critical path, meaning they may be delayed without affecting the project
completion date. If you’re short on time or resources, non-critical tasks may be skipped.
• Total float: This is the amount of time that an activity can be delayed from the early start
date without delaying the project finish date or violating a schedule constraint.
• Free float: This refers to how long an activity can be delayed without impacting the
following activity. There can only be free float when two or more activities share a common
successor. On a network diagram, this is where activities converge.
PERT is another construction scheduling method that project managers use to estimate the
duration of a project. PERT charts offer a visual representation of the major activities (and
dependencies) in a project. The activities are displayed sequentially (like a project roadmap) and
the tasks are connected via an activity line on the chart.
1. Optimistic time (O): The quickest time you can complete a project
2. Pessimistic time (P): The longest time it’ll take to complete a project
3. Most likely time (M): The realistic assessment of how long it will take to finish a project
if there are no problems
• Advantages
1. A mathematical approach to planning for project delays
2. You can share all three outcomes with shareholders, for increased transparency and manage
expectations
3. The pessimistic outcome provides a starting point for a revised timeline in the case of delays
• Disadvantages
1. Not all possible delays are known for an accurate pessimistic timeline
2. Easy to underestimate the effect of delays
3. Doesn’t provide a solution for avoiding delays
3. Simulation
Simulation scheduling is a technique that’s best to use when there are unknown variables that
will likely affect the finish dates. This scheduling technique involves making assumptions about
the resources needed to complete a task and providing a timeline based on those assumptions.
One of the models that can be used is a Monte Carlo Simulation. Before approving the schedule,
the project manager can run a Monte Carlo simulation. Monte Carlo analysis is a quantitative
risk analysis technique. It takes different assumptions and possible outcomes into account,
resulting in a forecasted duration. In the schedule management context, it is used to assess
schedule risk by answering questions such as:
1. What is the likelihood of finishing the project within a specific duration?
2. What should be the duration to ensure a specific level of confidence?
3. How much time do we need to add to the project as a contingency reserve to ensure a
specific level of confidence?
Monte Carlo is based on the simulation of multiple project iterations. Each iteration generates a
duration for all project activities using as input (optimistic, most likely, and pessimistic
estimates) issued by the team. Each iteration will then aggregate those activity durations into an
overall project duration according to the dependencies of the network diagram. By completing
multiple iterations, Monte Carlo analysis can calculate the probabilistic distribution of the project
duration
• Advantages
1. Provides the flexibility to create detailed timelines without knowing all the details
2. Allows for the anticipation of unknown variables
3. Can provide justification for adding or removing resources from a project to alter the timeline
• Disadvantages
1. Not all unknown variables can be accounted for
2. It’s not always known how a variable will affect the project
4. Gantt Charts
It is defined as a graphical device that illustrates the tasks, machines, personnel, and resources
used to complete a task. It is always done on a calendar-oriented grid. A project schedule Gantt
chart is a bar chart that represents key activities in sequence on the left vs time. Each task is
represented by a bar that reflects the start and date of the activity, and therefore its duration. For
tracking progress and reporting purposes, the Gantt Chart is a visualization technique used in
project management. It is used by project managers most of the time to get an idea about the
average time needed to finish a project.
• Horizontal axis – represents the time scale expressed as absolute time from the start of
the project to its end.
• Vertical axis – it represents the present point in time. Vertical lines are indicated to
denote progress and completion.
• Advantages
1. Real-time information on project progress
2. A common tool that has many free templates available
3. Acts as a single source of truth for all team members to reference
• Disadvantages
1. Doesn’t provide a way to adjust the project timeline
2. Spreadsheet format can be difficult to use