Faculty of Technology

University of Sri Jayewardenepura

PROJECT RISK MANAGEMENT

(Lesson 05)

Dr. (Eng.) T. Manori Perera

manori@sjp.ac.lk
 Faculty of Technology
University of Sri Jayewardenepura

Learning Outcomes

On successful completion of this session, students should be able to:

• LO- 3 Illustrate how the project management knowledge areas apply to the project
management process groups
 Faculty of Technology
University of Sri Jayewardenepura

Content
• Project Management Framework
• What is a Risk?
• What is a Project Risk?
• Definitions for Project Risks
• Uncertainty
• Risks and Uncertainties
• Project Life Cycle
• Strategic vs. Tactical Risks
• Strategic Risks- Background (External)
• Strategic Risks- Market Conditions
Faculty of Technology
University of Sri Jayewardenepura

Project Management Framework

Faculty of Technology
University of Sri Jayewardenepura

Project Management Framework

Source: Project Management

Framework (Schwalbe, 2006, p9)
 Faculty of Technology
University of Sri Jayewardenepura Risk of Working at Heights

What is a Risk?
Political Risk

A situation involving exposure to danger

Child Risk

Natural or man-made hazards

Faculty of Technology
University of Sri Jayewardenepura
What is a Project Risk?
Based on the project category;
• Risk definitions can be different
• The risk management approach can be different
• However, the fundamentals of risk management
are common for all projects
Project Risk Management
Includes the processes of
conducting risk management
planning, identification, analysis,
response planning, response
implementation, and monitoring
risk on a project
Faculty of Technology
University of Sri Jayewardenepura

Definitions for Project Risks

 Faculty of Technology
University of Sri Jayewardenepura

Project Risk- PMI

“An uncertain event or condition that, if it occurs, has a positive
or negative effect on a project's objectives”

e.g. 1. Weather forecast about Homagama

2. Inflation in Sri Lanka

3. Foreign currency exchange rate- Executing a project with its estimated budget in 2015
2015 2020 2022
1 USD (LKR150) (LKR200) (LKR367.22)
 Faculty of Technology
University of Sri Jayewardenepura

Project Risk
1. Positive or Negative Impact on project objectives
2. One or more causes
3. One or more impacts

Examples for Causes

• Covid-19 pandemic
• Bad weather (Rain, flooding, and etc.)
• Foreign exchange rate fluctuation + Impact
• Change in the market condition - Impact
• Human resource union actions
• Key resource person id getting sick
• Main machinery failure or malfunction
 Faculty of Technology
University of Sri Jayewardenepura

Uncertainty

“The gap between the information required to estimate an

outcome and the information already possessed by the
decision maker”
 Faculty of Technology
University of Sri Jayewardenepura

Uncertainty Explanation
a= Information required to estimate an outcome
b= Information already possessed by the decision maker
U= Uncertainty

U= a-b
If you can improve your knowledge, b then U
Project Manager 1 Project Manager 2 Project Manager 3 [a]
U1 U2 U3
U1>U2>U3
b ????
This Project Manager 3 is having very good control over the other
 Faculty of Technology
University of Sri Jayewardenepura

Risks and Uncertainties

➢ Expand certainty level

➢ Reduce uncertainty level
➢ Manage risk level properly
 Faculty of Technology
University of Sri Jayewardenepura

Uncertainty
Results from LACK of information regarding:
• What to do
• How to do
• The conditions under which it will be done OR
• Combination of all three
 Faculty of Technology How to invest this money ???
University of Sri Jayewardenepura
Need to carry out the proper
research on your project
Uncertainty
Contributing Factors to Uncertainty:
• Insufficient project initiation effort
• Un-reconciled objectives
• Incomplete or unclear information
• Deficiency in knowledge
• Unstable information
Franchise companies
Very innovative fashion industry all over the world
This company could not adapt to the online market …
Report bankruptcy
Forever 21 is a multinational fast fashion retailer headquartered in Los
Angeles, California, United States. Originally founded as the store
Fashion 21 in Highland Park, Los Angeles in 1984.
 Faculty of Technology
University of Sri Jayewardenepura

Uncertainty
Most Effective way to deal with uncertainty is to:

Collect more information and knowledge

• When this is expensive or not feasible, try to quantify uncertainty using analytical
or simulation techniques
Faculty of Technology
University of Sri Jayewardenepura

Risk and Uncertainty

Level of Information
 Faculty of Technology
University of Sri Jayewardenepura

Project Life Cycle

Amount at stake- It is being risked or

might be lost or damaged if you are
not successful
Faculty of Technology
University of Sri Jayewardenepura

Elon Musk With an estimated net worth of around $210 billion as of October 27, 2022,
Musk is the wealthiest person in the world according to both the Bloomberg
Billionaires Index and Forbes' real-time billionaires list.
 Faculty of Technology
University of Sri Jayewardenepura
Sending people to outer space ???

Example to illustrate “Amount at stake”

Risk is very high

Faculty of Technology
University of Sri Jayewardenepura

Strategic vs. Tactical Risks

 Faculty of Technology
University of Sri Jayewardenepura

Strategic Risks
• Requires management attention at the executive/corporate
level
• Typically ignored or partially addressed by the project team
• Lack of a practical and disciplined approach to managing
strategic risks
• Strategic Risk Management is needed to deal with strategic
risks
 Faculty of Technology
University of Sri Jayewardenepura

Strategic Risks- Background (External)

• Political Conditions
• Scope Changes
e.g., LRT Project (Light Rail Transit Project)…. Ministry of Megapolis and Western Development ???

• Market Conditions
• Location
Sri Lanka is in a strategically attractive location (The USA, China and India are in the interest of Sri Lanka)

• Business partnerships
 Faculty of Technology
University of Sri Jayewardenepura

Strategic Risks- Market Conditions

Casio G-Shock Smartwatch

• Time It can count your steps,

• Date distance, calories, heart
• Light rate and pulse rate

Make payment using Text, make calls and

Smartwatch listen to music with ease
Faculty of Technology
University of Sri Jayewardenepura

Strategic Risks- Market Conditions

Kodak Camera
Canon PowerShot Smartphone
 Faculty of Technology
University of Sri Jayewardenepura

Strategic Risks-
Market Conditions
 Faculty of Technology
University of Sri Jayewardenepura

Strategic Risks-
Market Conditions

This a teledrama from the future

Released in 1982

-Michael Knight-
-Wristwatch-
-Smart Vehicle-
 Faculty of Technology The autopilot is the most advanced on the market, and the best 'self-driving’ software is
University of Sri Jayewardenepura in Tesla vehicles. Tesla is so far ahead of the game with autonomous driving that some
companies don't even bother to compete. <Digital screen, pairing with smartphones and
smartwatches>

Strategic Risks-
Market Conditions
 Faculty of Technology
University of Sri Jayewardenepura

Strategic Risks-
Market Conditions

SMART Products
 Faculty of Technology
University of Sri Jayewardenepura

References
• Project Management Institute. (2017). A guide to the project management body of
knowledge (PMBOK guide). Project Management Institute, Inc., Newtown Square,
Pennsylvania, USA.
• Global Text Project, Andrew R. Barron, Merrie Barron, etc. (2019). Project
Management 101. OpenStax, Rice University, USA.
THANK YOU !