CHAPTER 4

PLAN RISK MANAGEMENT

Purpose and Objectives of the Plan Risk Management Process
 Objectives:
o Develop overall risk management strategy for the project
o Decide how risk management processes will be executed
o Integrate Project Risk Management with all other project management activities
 Risk management plan:
o Describes how the risk management processes should be conducted and how they
relate to the other project management processes.
o Adapted in subsequent stages as the needs of the project and its stakeholders become
clearer or change.
o Describes the evaluation, allocation, and management of the part of the project budget
which is specific to risk management activities in order to track, control, and defend the
corresponding expenditures throughout the project
o Elaborates on the need for repetition of risk management activities; defines both
normal frequency of repetition of processes and specific or exceptional conditions when
corresponding actions should be initiated.
o Specifies the project’s risk management roles and responsibilities.
o Defines the principles for risk-related communication, which happens at two levels:
(a) within the project team, and (b) between the project team and the other project
stakeholders. Project team should carry out risk management processes in accordance
with the descriptions (of frequency, scope, structure, and content of meetings and
reports) given in this plan.
o Communication between the project manager and stakeholders is required to identify
changes in stakeholder risk attitudes and, wherever required, escalate risk-related
information to management and other stakeholders.
o Specifies critical values and thresholds that serve as parameters for the tools, and
common terms used to describe the risks.
o Establishes type and level of risk detail to be addressed and provides a template of risk
register.
o Two categories of success criteria for risk management:
 Project-related Criteria: The risk management plan should present the
objectives for the project-related criteria (like cost, time, and scope) to ensure
consistency and agreement among stakeholders. This ascertains the success of
Project Risk Management.
  Process-related Criteria: The measures for success in the Project Risk
Management process depend on factors like the inherent level of uncertainty of
the project.
o The risk attitudes of both the organization and the stakeholders, including their
tolerance for uncertainty and the importance to them of achieving or missing specific
project objectives, need to be analyzed for setting thresholds and providing weighting
factors in the application of Project Risk Management processes because these attitudes
influence the level of risk considered acceptable in a project.

Critical Success Factors for the Plan Risk Management Process

Criteria for valid risk management plan:

 Acceptance by stakeholders
 Alignment with internal and external constraints on project
 Balance between cost/effort and benefit
 Fulfill requirements of Project Risk Management process.

1. Identify and Address Barriers to Successful Project Risk Management

 The organization management and stakeholders of the project should recognize the benefits of
dedicating time and effort to the risk management process.
 For a valid basis for risk management the project manager should ensure provision of clear
definition of project objectives, project environment, and approach to problem resolution.
 The inexperience of an organization in risk management planning may be dispelled by use of a
proprietary or pre-existing approach which requires tailoring. Chances of success of the risk
management activities increase with availability of organizational process assets such as
standard templates, predefined risk categories, established project management methodology
incorporating risk management procedures, and definition of concepts and terms, roles, and
responsibilities.
 The activities of the risk management plan should be built into the project breakdown structure
and included in the corresponding schedule, budget, and work-assignment documents.

2. Involve Project Stakeholders in Project Risk Management

 Project Manager should ensure involvement of stakeholders to build on their skills and to
ensure their understanding of, and commitment to, the Project Risk Management process.
 Address and resolve disagreements between stakeholders in the areas of risk tolerance and
evaluation measures.

3. Comply with the Organization’s Objectives, Policies, and Practices

 Identify relevant organizational procedures, factors like strategic risk management or corporate
governance processes, culture of the organization, its capabilities from the point of view of
people and facilities, and its values, goals, and objectives.
Tools and Techniques for the Plan Risk Management Process

1. Planning Sessions
 Planning sessions contribute to a consultative team approach and should include:
o project manager
o selected team members
o other stakeholders
o members of the organization having responsibility for risk
o subject matter experts/facilitators
 The risk responsibilities, methodology, templates, terms, definitions, time schedules, cost
budgets, and tool specifications should be assigned and accepted, and documented in the risk
management plan which is the principal deliverable of the Plan Risk Management process.
2. Templates
 Templates for work products like risk status reports, risk breakdown structures or risk register
should be adapted and included in the risk management plan as they record experience and
existing best practice.

Documenting the Results of the Plan Risk Management Process

 Results of risk management planning are documented in the risk management plan. Table 4.1
gives an overview of the key areas of focus for the Plan Risk Management process.

Table 4.1 Key areas of Focus for the Plan Risk Management Process

People Tools Business

Attitudes Toolbox Constraints

Roles, responsibilities, authority Parameters Amount of detail and effort

Communications Definitions

 Contents of a risk management plan:

o Introduction
o Project description
 Objectives
 External dependencies
 Stakeholder analysis
o Risk Management scope and objectives
 Thresholds and corresponding definitions
o Risk management methodology
 Relationship with organizational environment
  Risk management activities and their relationship with project management
methodology and other project management processes
 Risk taxonomy/risk breakdown structure (either generic or project-specific)
 Format of risk statement description (“metalanguage”)
 Key deliverables

o Risk management organization

 Roles, responsibilities, and authority levels
 Adapt and add risk budget to project budget
 Schedule risk management activities in the project schedule
 Rules of reporting and disclosure
o Use of tools
 Risk management tools and guidelines for use
 Tool description
 Structure of the risk database
o Communications plan
 Documents, usage, rules for distribution (frequency, audience, etc.)
 Document templates-Risk Register, Risk Status Reports

Techniques and Templates for Risk Management Planning:

 An example of a technique for Risk Management Planning is Planning Meetings and Analysis
which requires the involvement of core team members. Critical Success Factors for its effective
application include availability of risk management plan templates, prior stakeholder analysis,
and use of existing organizational guidelines for risk management.
 Templates relevant to Risk Management Planning may include:
o Risk Statement Metalanguage: a standard structure for the statement that describes the
risk, its causes, and effects.
o Methods of categorizing risk, for instance a risk breakdown structure (Refer: Techniques
and Templates for Identify Risks, Chapter 5- ‘Identify Risks’)
o Definitions of probability and impact scales
o Risk prioritization and selection guidelines: linked to project objectives.
o Status report templates
o Typical agenda for status meetings