Risky Business

Essentials of Risk Management

Avneet Mathur (PMP)

avneet_mathur@hotmail.com

What is a Project?
A project is a temporary endeavor undertaken to

produce a unique product or service

Characteristics of Projects
Unique

Temporary

Temporary Definitive beginning and end

Unique New undertaking, unfamiliar ground

Risk
RISK can be defined as the threat or probability that

an action or event, will adversely or beneficially affect an organization's ability to achieve its objectives*.
In simple terms risk is Uncertainty of Outcome,

either from pursuing a future positive opportunity, or an existing negative threat in trying to achieve a current objective.

* Luhmann 1996:3

Issue vs. Risk

ISSUE RISK

TODAY

FUTURE

Issue vs. Risk

ISSUE RISK

If not fixed today, task stops

Issue already impacting the cost, time or quality

If not identified, may become issue later Risk POTENTIAL negative impact to project

Whats the Plan?

Identification Quantification Response

Monitoring and Control

Identification
Risk Types Business (risk to overall business) Delivery (risk to project delivery) Technical (specific to particular technology)

Vendor not meeting deadline

Budget will be exceeded

Cause

Impact

"The vendor not meeting deadline will mean that budget will be exceeded"

Quantification
Risk

Impact

Likelihood

Quantification
Title Score Description 20 Highly unlikely to occur based on current information, as the circumstances likely to trigger the risk are also unlikely to occur. Unlikely to occur. However needs to be monitored as certain circumstances could result in this risk becoming more likely to occur during the project. Likely to occur as it is clear that the risk may eventuate. Very likely to occur, based on the circumstances of the project. Highly likely to occur as the circumstances that will cause this risk to eventuate are also very likely to eventuate

LIKELIHOOD

Very low

20

Low Medium High

40 60 80

Very High

100

Title

Score 20 40

Description Insignificant impact on the project. Minor impact on the project.

Impact * < 5%

IMPACT

Very low Low

Medium
High Very high

60
80 100

Measurable impact on the project.

Significant impact on the project. Major impact on the project.

5 - 10 %
10 - 25 % > 25%

* Deviation in scope, scheduled end-date or project budget

Quantification
Priority = [Likelihood + Impact] -----------------------------2
Priority Score Priority Rating Priority Color ----------------------------------------------------------------------020 Very Low Black 2140 Low Green 4160 Medium Yellow 6180 High Orange 81100 Very High Red

Risk ID Likelihood Impact 1.1 20 80 1.2 80 60 1.3 100 40 2.1 40 20 2.2 90 100 2.3 20 80

Priority 50 70 70 30 95 50

Rating Medium High High Low Very High Medium

Response

Address risks rated based on severity . Very-High-rated risks warrant the highest priority, and should be addressed before the less severe classes of risks, and should be tracked until they can be downgraded. Create a Risk Schedule to address these risks. In a risk schedule, for every risk identified, preventive actions are listed that are required to reduce the likelihood of the risk occurring, as well as the contingent actions needed to reduce the impact to the project should the risk occur.
Risk ID 2.2 Rating Very High Preventive Actions Clearly identify the expected business benefits Action Resource Project sponsor Action Date DDMMYY Contingent Actions Measure the actual business benefits achieved by the project Stakeholders need to sign-off on the requirements. Action Resource Project Manager Action Date DDMMYY

2.3

High

All requirements need Project sponsor to be well defined.

DDMMYY

Project Manager

DDMMYY

Monitoring and Control

Continually monitor risks to identify any change in the

status, or if they turn into an issue.

Hold regular risk reviews To identify actions outstanding, risk probability and impact Remove risks that have passed Identify new risks

Case Study Buying a Used Car online

Requirements
Buy a car over the internet Price less than $15,000 Reliable Specific make and model

Mileage

Case Study Buying a Used Car online

Sample Risks
Buy a car over the internet Most people would say dont! to eliminate the risk, but this is a requirement Websites that do not have good ratings Price less than $15,000 Owner may increase price or add additional cost after finalizing the deal. Hidden cost Reliable Does not need frequent repairs Does not breakdown Good brand Specific make and model Not getting the same model after finalizing the car Mileage Odometer rollback

Case Study Buying a Used Car online

Risk Quantification
Buy a car over the internet Websites that do not have good ratings
ID Likelihood Impact Priority

1.1

40

60

(40+60)/2 = 50

Medium

Price less than $15,000 Owner may increase price or add additional cost after finalizing the deal. Hidden cost

ID 2.1

Likelihood 20

Impact 40

Priority (20+40)/2 = 30 Low

Case Study Buying a Used Car online

Risk Quantification
Reliable Does not need frequent repairs Does not breakdown Good brand
ID 3.1 3.2 3.3 Likelihood 60 20 40 Impact 100 80 80 Priority (60+100)/2 = 80 (20+80)/2 = 50 (40+80) /2 = 60 High Medium Medium

Specific make and model Not getting the same model after finalizing the car
ID 4.1 Likelihood 20 Impact 40 Priority (20+40)/2 = 30 Low

Case Study Buying a Used Car online

Risk Quantification
Mileage Odometer rollback
ID Likelihood Impact Priority

5.1

80

80

(80+80)/2 = 80

High

Case Study Buying a Used Car online

Risk Response
Action Resource Project sponsor Action Date DDMMYY Contingent Actions Avoid cars with no car fax history. Action Resource Project Manager Action Date DDMMYY

Risk ID 5.1

Rating High

Preventive Actions Get a Car Fax report and check mileage history Check website rating before initiating a purchase

1.1

Medium

Project sponsor

DDMMYY

Avoid suspicious websites or too good to be true deals.

Project Manager

DDMMYY

Summary
Risk management is a project management tool for handling events

that might adversely impact the project, thereby increasing the likelihood of success. A sound process like this removes the uncertainty and empowers the project manager to complete their project within schedule and within budget.
Mitigate Risk Control Risk Control Risk Identify Risk Analyze Risk Asses Risk Prioritize Risk Measure Risk

About the Author

Avneet Mathur is a Certified Project Management Professional, as awarded by the Project Management Institute, USA and has been involved in IT for more than a decade. He holds an MBA in General Business Administration, with an additional Master's Degree in Computer Science and Networking from University of Missouri, Kansas City. He also has a Bachelor's Degree in Computer Science from the Aurangabad University, India. He can be reached at avneet_mathur@hotmail.com

About Project Perfect

Project Perfect is a project management software consulting and training organisation based in Sydney Australia. Their focus is to provide organisations with the project infrastructure they need to successfully manage projects. Project Perfect sell Project Administrator software, which is a tool to assist organisations better manage project risks, issues, budgets, scope, documentation planning and scheduling. They also created a technique for gathering requirements called Method H, and sell software to support the technique. For more information on Project tools or Project Management visit www.projectperfect.com.au