MIDTERM PROJECT MANAGEMENT
RISK MANAGEMENT
 In project management, risk management is
the practice of identifying, evaluating, and
preventing or mitigating risks to a project that
have the potential to impact the desired
outcomes.
 Project managers are typically responsible for
overseeing the risk management process
throughout the duration of a given project.
 Cost: The risk of events that impact the
budget, especially those that cause the
project to be completed over budget. Errors in
cost estimation commonly generate risk in
addition to external factors.
 Schedule: The risk of unplanned scheduling
conflicts, such as events that cause the project
to be delayed. Scope creep is a common
reason for scheduling issues and project
delays.
 Performance: The risk of events that cause
the project to produce results that are
inconsistent with the project specifications.
METHODS DEALING WITH RISKS
Avoid the risk – The only way to avoid a risk is to
abandon the possible causes, which could even mean
deciding not to undertake a project at all.
Take precautions to prevent or mitigate risk impact –
requiring the active participation of all managers and
staff. It needs high-level risk prevention strategy
combined with executive determination to ensure
that all preventive measures are always followed
throughout all parts of the organization.
Accept the risk– Rain might make the day chosen for
office relocation miserable for all concerned but the
risk would have to be accepted.
Share the risk– If a project, or a substantial part of it,
appears to carry very high risk, the contractor might
seek one or more partners to undertake the work as a
joint venture.
Limit the risk – There are occasions when project risks
should only be accepted with safeguards in place to
limit their potential effect.
Transfer the risk – Some risks, or substantial parts of
them, can be transferred to another party on payment
of a fee or premium. This leads to the important
subject of insurance.
RISK
Risk that must be insured
 Statutory requirement
 Contractual requirement
Risk that can be insured if required
 Management choice
Risk that are difficult or impossible to insure
 The contractor or the customer must accept
the risk.
CRITICAL PATH METHOD (CPM)
The critical path method (CPM) is a technique that’s
used by project managers to create a project schedule
and estimate the total duration of a project.
In project management, the critical path is the longest
sequence of tasks that must be completed to
complete a project. The tasks on the critical path are
called critical activities because if they’re delayed, the
whole project completion will be delayed.
Finding the critical path is very important for project
managers because it allows them to:
 Accurately estimate the total project duration.
 Identify task dependencies, resource
constraints and project risks.
 Prioritize tasks and create realistic project
schedules.
ALGORITHM
A process or set of rules to be followed in calculations
or other problem-solving operations, especially by a
computer.
CPM IMPONTANCE
Projects are made up of tasks that have to adhere to a
schedule in order to meet a timeline.
● It sounds simple, but without mapping the work,
your project scope can quickly get out of hand and
you’ll find your project off track.
● Using the critical path method is important when
managing a project because it identifies all the tasks
needed to complete the project, then determines the
tasks that must be done on time, those that can be
delayed if needed and how much float or slack you
have.
When done properly, critical path analysis can help
you:
 Identify task dependencies, resource
constraints and project risks.
 Accurately estimate the duration of each task.
 Prioritize tasks based on their float or slack
time, which helps with project scheduling and
resource allocation.
 Identify critical tasks that have no slack and
make sure those are completed on time.
 Monitor your project progress and measure
schedule variance.
 Use schedule compression techniques like
crash duration or fast tracking.
CPM KEY ELEMENTS
Earliest start time (ES): This is simply the earliest time
that a task can be started in your project. You cannot
determine this without first knowing if there are any
task dependencies.
Latest start time (LS): This is the very last minute in
which you can start a task before it threatens to delay
your project schedule.
Earliest finish time (EF): The earliest an activity can be
completed, based on its duration and its earliest start
time.
Latest finish time (LF): The latest an activity can be
completed, based on its duration and its latest start
time.
Float: Also known as slack, float is a term that
describes how long you can delay a task before it
impacts its task sequence and the project schedule.
The tasks on the critical path have zero float, because
they can’t be delayed.
Project activities are represented by letters and the
critical path is highlighted in green.
● Tasks F, G and H are non-critical activities with float
or slack.
● We can also identify task dependencies between
the critical path activities, and also between activities
(A, F and G) or (A, H and E), which are parallel tasks.
PROJECT EVALUATION REVIEW TECHNIQUE (PERT)
is used to identify the time it takes to finish a
particular task or activity.
 It is a system that helps in the proper
scheduling and coordination of all tasks
throughout a project.
 It also helps in keeping track of the progress,
or lack thereof, of the overall project.
 Knowing the time, it should take to execute a
project is crucial, as it helps project managers
decide on other factors such as the budget
and task delegation
 No matter how big or small a project is,
estimates can be too optimistic or pessimistic,
but using a PERT chart will help determine
realistic estimates.
There are four definitions of time used to estimate
project time requirements:
Optimistic time – The least amount of time it can take
to complete a task
Pessimistic time – The maximum amount of time it
should take to complete a task
Most likely time – Assuming there are no problems,
the best or most reasonable estimate of how long it
should take to complete a task.
Expected time – Assuming there are problems, the
best estimate of how much time will be required to
complete a task.
CREATING A PERT CHART
 A flowchart is used to depict the Project
Evaluation Review Technique.
 Nodes represent the events, indicating the
start or end of activities or tasks.
  The directorial lines indicate the tasks that
need to be completed, and the arrows show
the sequence of the activities.
Here are several terms used in a PERT chart:
Float/Slack – Refers to the amount of time a task can
be delayed without resulting in an overall delay in
completion of other tasks or the project
Critical Path – Indicates the longest possible
continuous path from the start to the end of a task or
event
Critical Path Activity – Refers to an activity without
any slack
Lead Time – Refers to the amount of time needed to
finish a task without affecting subsequent tasks
Lag Time – The earliest time by which a successor
event/task can follow a prior event/task
Fast Tracking – Refers to handling tasks or activities in
parallel
Crashing Critical Path – Shortening the amount of time
to do a critical task
GANTT CHART
A Gantt chart is a popular project management tool
that aids in planning and scheduling projects of all
sizes. It provides a visual representation of the
project’s timeline and assists project managers,
stakeholders, and team members in understanding:
 A project’s roadmap
 Task progress
 Key milestones
 Work dependencies
 Resources required
 Risks involved
 A Gantt chart, like most charts, has two axes.
The horizontal axis represents the timeline for
all project tasks.
 On the other hand, the vertical axis lists the
activities or tasks that must be completed to
finish the project.
BUDGET MANAGEMENT
 is the art of planning and controlling how money is
spent and saved
6 PROJECT MANAGEMENT BUDGETTING METHODS
ANALOGOUS ESTIMATING
estimating a budget consists of analyzing an already
completed project with a similar scope to the current
one and using its budgeting calculations.
● primarily using a fully-furnished past project as a
blueprint for the current one.
● Even though certain qualitative and quantitative
parameters may alter, inspiration can be drawn from
some of your best work from the past.
● In the cases wherein data and information are
lacking and your client needs a budget estimate
beforehand, analyzing data into quantifiable variables
analogous to previous projects can help you develop
scopes for your current project.
PARAMETRIC ESTIMATING
consists of using historical data and other related
variables for estimating the project's scope, duration
and total costs.
● Even though the odds of having two projects that
are similar in size, as well as high levels of complexity,
are high, parametric estimating seems to be more
viable.
● Parametric estimating is a more specific type of
analogous estimating, adjusted for its advanced
precise accuracy which can be accounted for by the
availability of data and is primarily based on unit rates
per activity.
TOP-DOWN ESTIMATING
consists of looking at the project budget in its entirety
and then calculating individual costs for each of the
required processes.
● A very logical deduction of budget estimation, the
top-down method, requires the project manager to
make a rough framework of all the possible individual
stages and make a rough estimate of the costs
involved.
● The next step is to research to educate oneself
about market rates per activity.
● Once calculated, the total costs per stage will then
be compared to the rough estimation of costs, and
necessary changes will be made to make the process
more cost-effective.
BOTTOM-UP ESTIMATING
divides the project into multiple processes and
calculates the individual costs for each. And, project
manager attempts to directly generate a total project
budget.

● Contrary to the previous method, bottom-up

estimating is based on the integration of all costs
concerning all the basic units of the processes to find
the overall costs by drawing in variables like the
required time for project completion, the number of
laborers, etc.

● The authenticity of cost information is directly

proportional to the final estimation of the budget
before you hand over the information to your client.

THREE-POINT ESTIMATING

uses three different calculations to estimate a budget:

the most expensive scenario, the most cost-effective
scenario and the scenario that's most likely to occur.

● This method is used especially when there is very

limited data.

● Since the margin of error is astronomical, three-

point estimating allows one to ruminate on risk
factors.

● It is quite mathematical and uses probability

calculation to measure the probability of a most likely
outcome, the pessimistic estimate, and the optimistic
estimate.

● The pessimistic estimate is the amount of work

needed to complete the project if risks and negative
conditions factor in whereas an optimistic estimate is
the amount of work needed to ensure project
completion without any risk hindering its progress.

EARNED VALUE ANALYSIS

a way of estimating the accuracy of a project's budget

during the execution of the project.

● Earned Value Analysis comes into effect once the

project work commences.

● It is done to analyze the real value and ideal value of

costs at all stages of the project.

● This produces a broad range of working knowledge

for the future and a better understanding of risk
assessment and management.