Lecture # 6

ENGINEERING
PROJECT
MANAGEMENT

DR AFSHAN NASEEM

DEPARTMENT OF ENGINEERING MANAGEMENT

NUST COLLEGE OF E&ME
 PROJECT
RISK MANAGEMENT
 What
What is
is Risk?
Risk?
“A risk is an uncertain potential condition or
event that, if it occurs and is not mitigated, may
have negative or positive impact on the project
objectives.”
 Positive
Positive &
& Negative
Negative Risks
Risks
Negative Risk: “Each day that a critical piece of
equipment is late in reaching the site, will throw the
start up schedule off by these days.”
Positive Risk :“If we buy pumps for all our facilities
bundled together in one purchase order, we can obtain
a volume discount.”
In general, we find that a positive risk is an
opportunity to be pursued, while a negative risk is an
issue to avoid or mitigate.
 Risk
Risk Management
Management
“Practices and procedures that enable managers
to identify, assess, categorize, monitor, control,
and mitigate risk before or while it is
transitioning to a problem.”
 Main
Main steps
steps of
of Risk
Risk Management
Management

• Risk Management Planning

- Deciding how to approach and plan the risk
management activities
• Risk identification (Qualitative & Quantitative)
▫ Determining which risks might affect the project
and documenting their characteristics. i.e
Identify project, product and business risks
 Main
Main steps
steps of
of Risk
Risk Management
Management

• Qualitative risk analysis

▫ Performing a qualitative analysis of risks and
conditions to prioritise their effects on project
objectives
• Quantitative risk analysis
▫ Measuring the probability and consequences of
risks and estimating their implications for
project objectives
 Steps
Steps involved
involved in
in Risk
Risk Management
Management
• Risk Response Planning
- Developing procedures and techniques to
enhance opportunities and reduce threats to the
project objectives
• Risk Monitoring & Control
- Control-monitoring residual risks, identifying
new risks, executing risk reduction plans, and
evaluating their effectiveness through out the
project life cycle.
 Risk
Risk Response
Response

Risk
Eliminate Risk
Mitigate
Deflect

Accept Risk
Cost
 Risk
Risk Response
Response
• Eliminating Risk
▫ remove the cause
▫ alternative course of action
▫ this should occur during the design and planning
stage
• Mitigating Risk
▫ reduce the risk
▫ use proven technology
▫ simulate, model and develop prototypes
 Risk
Risk Response
Response
• Deflecting risk
▫ transfer the risk (in part or whole) to another party
• Accepting risk
▫ Typically developed for
 Underestimating bill of materials
 unexpected procurement price changes
 change in project scope
 schedule delays
 Identifying
Identifying Risks
Risks

• Risk identification tools and techniques

include:
▫ Brainstorming
▫ The Delphi Technique
▫ Interviewing
▫ SWOT analysis
 Brainstorming
Brainstorming
• A technique by which a group attempts to generate
ideas or find a solution for a specific problem by
amassing ideas spontaneously and without
judgment
• An experienced facilitator should run the
brainstorming session
 Delphi
Delphi Technique
Technique
▫ It is used to derive a consensus among a panel of
experts who make predictions about future
developments
▫ Provides independent and anonymous input
regarding future events
▫ Uses repeated rounds of questioning and written
responses and avoids the biasing effects possible in
oral methods, such as brainstorming
 Interviewing
Interviewing

• A fact-finding technique for collecting

information in face-to-face, phone, e-mail, or
instant-messaging discussions

• Interviewing people with similar project

experience is an important tool for identifying
potential risks
 SWOT
SWOT Analysis
Analysis

• SWOT analysis (strengths, weaknesses,

opportunities, and threats) can also be used during
risk identification

• Helps identify the broad negative and positive

risks that apply to a project
 Risk
Risk Register
Register
▫ A document that contains the results of various
risk management processes and that is often
displayed in a table or spreadsheet format
▫ A tool for documenting potential risk events and
related information
 Risk
Risk Register
Register

• The main output of the risk identification process is

a list of identified risks and other information
needed to begin creating a risk register
 Risk
Risk Register
Register Contents
Contents
 An identification number for each risk event
 Rank for each risk event
 Name of each risk event
 Description of each risk event
 Category under which each risk event falls
 Root cause of each risk
 Risk
Risk Register
Register Contents
Contents
 Triggers for each risk; triggers are indicators or
symptoms of actual risk events
 Potential responses to each risk
 The risk owner or person who will own or take
responsibility for each risk
 The probability and impact of each risk occurring.
 The status of each risk
Sample
Sample Risk
Risk Register
Register
 Sample
Sample Risk
Risk Register
Register
• No.: R44
• Rank: 1
• Risk: New customer
• Description: We have never done a project for this
organization before and don’t know too much about
them. One of our company’s strengths is building
good customer relationships, which often leads to
further projects with that customer. We might have
trouble working with this customer because they are
new to us.
• Category: People risk
• Etc.
Example of Top Ten Risk Item Tracking
Sample Probability/Impact Matrix
CLASS ACTIVITY
Class Activity
• Prepare a Risk Register for your FYP.
Discussion