Chapter

7
Managing Project
Risk
We will learn:
1. Project Risk Management Planning
Framework
2. Apply risk identification tools
3. Apply qualitative and quantitative
analysis techniques
4. Risk Strategies
5. Risk Monitoring and Control
6. Risk Evaluation

1 Common mistakes
by Project Manager
Not understanding the benefits
of risk management
Not providing adequate time for
risk management
Not identifying and assessing
risk using a standardized
approach

Risk (PMBOK 2
Guide)

An uncertain event or condition that, if

occurs, has a positive or negative effect
on one or more of the project
objectives such as scope, schedule,
cost, and quality.

3 Project Risk
Management Process
1. Create a risk plan
2. Identify risk
3. Analyze risk
4. Develop risk strategies
5. Monitor and control risk
6. Respond and Evaluate response to
risk

Respond &
Identify Develop evaluate
Create a risk Analyze risk response to
Monitor &
risk plan risk strategies risk
control risk
 create a
Step 1
risk plan

1. Requires firm commitment by all

stakeholders to the entire Risk
Management (RM) approach
a. RM should align throughout
the organization

2.
Risk Planning focuses on
preparation
a. Systematic preparation and
planning can help minimize
adverse effects on the
project while taking
advantage of opportunities
as they arise

Respond &
Identify Develop evaluate
Create a risk Analyze risk response to
Monitor &
risk plan risk strategies risk
control risk

back to intro
 identify
Step 2
risk
Identify through
Project Risk
Identification Framework

Identify through
Project Risk
Past Projects
Identification Tools & Techniques Brainstorming Delphi Technique

Nominal Group
Learning Cycles
Technique (NGT) SWOT Analysis
Interviews

Checklists Cause & Effect

(Ishikawa model)

Respond &
Identify Develop evaluate
Create a risk Analyze risk response to
Monitor &
risk plan risk strategies risk
control risk

back to intro
 analyze
Step 3
risk
Risk = f(Probability * Impact)
Depends on Risk assessment focuses on prioritizing risks so that
stakeholder risk Can't respond to all
an effective strategy can be formulated for those risks
tolerances that require a response. risks!

qualitative approach
subjective analysis of risks based on a project stakeholder's experience
Deci
sion Tree

or judgment. Effective if done by a group for open communication.

Expe
cted
Valu
e

rank

quantitative
approach

Quantitative approaches to project risk analysis include mathematical

Two types: Discrete and Continuous or statistical techniques that allow us to model a particular risk
situation

Simulations: Monte Carlo & Cumulative

Probability Distribution

Respond &
Identify Develop evaluate
Create a risk Analyze risk response to
Monitor &
risk plan risk strategies risk
control risk
 develop
Step 4
risk
strategies
Risk strategies depend on:
Risk tolerances or preferences
of the project stakeholders

The nature of the risk itself The project’s constraints in

Really an opportunity or threat? Impact of the risk on the terms of scope, schedule,
project’s MOV and objectives budget, and quality
Likelihood? Impact? requirements
Develop Successful response possible with available resources?

risk to opportunities with potential positive

strategies impacts on the project goal and
Strategies to respond objectives
Sharing of ownership
joint partnerships
or joint ventures
to threats (negative impacts)

with customers or
vendors ​
Exploitation
1. Accept or Ignore attempt to take
advantage of the
a. Management Reserves situation​
i. Released by senior
management Acceptance
b. Contingency Reserves PM and project team
members’ minds are open in
i. Part of project’s budget order to take advantage
of opportunities as they
c. Contingency Plans arise ​
2. Avoidance
3. Mitigate
a. Reduce the likelihood or
impact (or both)
4. Transfer
a. E.g. insurance

Respond &
Identify Develop evaluate
Create a risk Analyze risk response to
Monitor &
risk plan risk strategies risk
control risk

back to intro
 monitor
Step 5
& control
risk
Risk Audits
External to project team
Risk Reviews
Internal
Risk Status Meetings & Reports

respond and Step 6

evaluate
response to risk
1. A trigger which flags that the risk has
Risk response plan occurred
2. An owner of the risk (i.e., the person or
group responsible for monitoring the risk and
ensuring that the appropriate risk response is
carried out)
3. A response based on one of the four basic
risk strategies
4. Adequate & relevant resources

Lesson
Increase our understanding of IT project risk in general.
learned Understand what information was available to managing risks and
for making risk-related decisions.
Understand how and why a particular decision was made.
Understand the implications not only of the risks, but also the
decisions that were made.
Learn from our experience so that others may not have to repeat
our mistakes.

Respond &
Identify Develop evaluate
Create a risk Analyze risk response to
Monitor &
risk plan risk strategies risk
control risk

back to intro