10.PM Risk Analysis

8/10/2019 10.PM Risk Analysis

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Project Risk

Possibility or probability that the project willnot turn out as planned or desired


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Project RiskRisk includes potential benefits(opportunities) as well as hazardsOur focus: risk of serious problems or failure,i.e.,

Project not meeting performancerequirements, schedule, or budget

Failure

Not meeting time, cost, or performancetargets by a predefined margin


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Project Risk

Risk of involves two concepts: The likelihood that some event will occur. The impact of the event if it does occur.

It is a joint function of the two

Risk = f (likelihood, impact)


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Project Risk Management Process

1. Identify risks2. Assess the risks3. Develop appropriate responses to risks4. Track and control the risks

The risk management process repeats

throughout every phase of the project fromConception through Close-out


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Risk Management Elements and Process


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1. Identify Risks: Sources of Risk

Needs and Definition RiskFailure to correctly identify and define current orchanging customer needs and requirements

Environment

Project External

Internal

Internal


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Technical Risk

Failure of the end item. Risk due to nature ofthe end item or the process to create it:High complexityLow maturityLow reliability, produciblity, or testabilityHigh concurrency (overlap of project work)

Environment

Project Internal


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Risks in the project environmentMarket conditionsGovernment mandatePhysical environment (weather, geography, etc.)Labor and other resource availabilityProject prioritiesCustomer/supplier relationshipsExchange rates

Environment

Project

External


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Element Ref. Risk

Likelihood(H, M or L)

Impact(H, Mor L)

ProjectManagement

/authority 1 Project Manager's lack of Project Management experience

2 Difficulty in securing full funding.(e.g. if the funding is coming from more than one source there may be a greater riskin securing it at the same time)

3 Lack of understanding of project management standards by everyone in theproject team.

ProjectNature

6 Innovation or the introduction of new features.

7 The project is likely to need a large number of workdays.(e.g. low number of workdays = low risk, anything over six months =high risk)

8 Non-negotiable completion date.

ProjectStaff

11 The project team is inexperienced or lacking appropriate skills for the project.

12 The project team will be expected to support end-users after projectcompletion.

( ongoing support = low risk, no support project beyond closure = high risk) The

Customer 16 Customer support expected to be part of the project.

17 The project will affect current operations.

18The customer requirements will not be well documented. (e.g. poor documentation increases risk of delivered product being unsatisfactory)

Third Parties /External bodies

22 Third party suppliers are not well known to UEA.

Risk Checklist


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1. Identify Risks

AnalogyExperience and documentation

ChecklistsExperience and post-mortem reviews

WBS and work packages Example, next slide

Process flow charts


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WBS and work packages with assessed level of risk


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1. Identify Risks

AnalogyExperience and documentation

Checklists

Experience and post-mortem reviews

WBS and work packages

Process flow chartsExample, next slide


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1. Identify risks

BrainstormingDelphi TechniqueCause-Effect analysis

Causes EffectRisk sources Outcomes,and hazards Consequences

Example, next slide


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Cause and Effect DiagramHARDWARE

PEOPLE

FUNCTIONS MONEY

PRODUCTDELIVERED

LATE

Bought-in items may bedelivered late

Welding may bedefective

Material may be off-spec

Manufacture may notcorrespond with design

Key staff may be out ofaction

Staff productivity maybe lower than planned

External agencies maydelay

Procurement procedures maybe ineffective

Design may have to be re-engineered

Design specs may bechanged

Import taxes maybe raised

Fabricator may gobankrupt

Cash flow may not besufficient to pay bills

Design may not meetstandards


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2. Assess the Risk

Assess RC (the risk consequence orexposure)

RC = (Probability) x (Impact)


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2. Assess the Risk

Probability, expressed asnumerical estimate, 0-1.0or nominal rating, e.g, VH, H, M, L,VLor interval rating, e.g., 1-5

Impact, expressed asphysical impact on time (weeks), cost ($) or,performanceor nominal rating, e.g. VH, H, M, L, VL,or interval rating, e.g., 1-5


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2. Assess the RiskCombing several independent risk sources

omposite likelihood factor CLF = (W1) M H + (W2) C H + (W3) M S + (W4) C S + (W5)D

where

MH , M S , C H , C S , and D are failure likelihoods due toimmaturity of hardware and software, complexity inhardware and software,and dependency on externalfactors, respectively; each has value 0 to 1.0W1, W2, W3, W4, and W5 each has value 0 through 1.0and together total 1.0.


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2. Assess the Risk

Combing several independent risk sources

omposite impact factor ,

CIF = (W1)TI + (W2)CI + (W3)SI whereTI, CI, and SI are impacts due to failure in technicalperformance, cost, and schedule, respectively; each has

value 0 to 1.0W1, W2, and W3 each has value 0 through 1.0 andtogether total 1.0.


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2. Assess the Risk

Risk Consequence

RC = probability x impact

Example

RC = 0.75 x 5 = 3.75


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2. Assess the Risk

Risk Consequence

When probability and impact are expressedas nominal values (e.g., VH, H, M, L,VL; nextthree slides),

RC = f(probability,impact)


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Element Ref. Risk

Likelihood(H, M or L)

Impact(H, M or

L)

ProjectManagement

/authority 1 Project Manager's lack of Project Management experience

2

Difficulty in securing full funding.

(e.g. if the funding is coming from more than one source there may be a greater risk insecuring it at the same time)

3 Lack of understanding of project management standards by everyone in theproject team.

ProjectNature

6 Innovation or the introduction of new features.

7 The project is likely to need a large number of workdays.(e.g. low number of workdays = low risk, anything over six months =high risk)

8 Non-negotiable completion date.

ProjectStaff

11 The project team is inexperienced or lacking appropriate skills for the project.

12 The project team will be expected to support end-users after project completion.( ongoing support = low risk, no support project beyond closure = high risk)

TheCustomer

16 Customer support expected to be part of the project.

17 The project will affect current operations.

18 The customer requirements will not be well documented. (e.g. poor documentation increases the risk of the delivered product beingunsatisfactory)

Third Parties /External bodies

22 Third party suppliers are not well known to UEA.


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2. Assess the Risk

Example

RC = L x H = M (according to table)

VL L M H VHVH M M H H HH L M M H HM L L M M HL L L L M M

VL L L L L M

Impact

P r o

b a

b i l i t y


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2. Assess the Risk


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3. Decide Risk Response Strategies(Ways of Handling Risks)Transfer risk

InsuranceProperty damage or personal injury suffered as aconsequence of the projectDamage to materials while in transit or in storageBreakdown or damage of equipment

Theft of equipment and materialsSickness or injury of workers, managers, and staffForward cover: insure against exchange ratefluctuations.


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3. Decide Risk Response Strategies(Ways of Handling Risks)

Transfer risk (contd) Contracts

Fixed-price versus cost-plusFixed price contractor assumes all riskFixed price with incentive-contractor 60%

Cost plus incentive fee- contractor 40%Cost plus fixed fee- customer assumes all risk


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3. Decide Risk Response Strategies(Ways of Handling Risks)

Avoid risk Eliminate sources of risk Micromanage


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3. Decide Risk Response Strategies(Ways of Handling Risks)Reduce risk

Employ best workers

Use known and tested technology and toolsUse parallel efforts

Employ strong worker incentives

Increase frequency and severity of reviews and tests

Reduce system complexity

Use design margins


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3. Decide Risk Response Strategies(contd)

Contingency Plan

Study possible what-if scenarios anddevelop a plan for each

Accept risk (do nothing)


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4. Risk Tracking and Response Create a r i sk log or r i sk regis ter ; risks arerank ordered, greatest risk consequence first.

Risk log and mitigation planExample, next slide

Cont inuo us ly mo n i to r project for triggersymptoms of previously identified risks, and

for symptoms of risks newly emerging andnot previously identified.

Probability: 0 100% Impact: 1 5: Exposure: (Probability) X (Impact) Scale 0 500


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Probability: 0-100%, Impact: 1-5: Exposure: (Probability) X (Impact), Scale 0-500

Risk: Condition likelyto occur; inherent inevery project

Functionalareaimpacted

Effect:Consequences ifrisk occurs

Preventiveaction to reducerisk

11 Progeni solutions cant perform upto expectations.

ApplicationDevelopment

5 75% 375 Schedule delays. Cost ofhiring a replacement vendor.

Analyze pilot results andcreate documents that willstandardize the process.

8 Unknowns in migration project willoccurs.

TechnicalInfrastructure

4 90% 360 Scheduling delays andpossible re-engineering.Redundant system costs.

Build plan and trackingmechanism to manageschedule and resources

28 Client impact during migrationphase.

TechnicalInfrastructure

5 70% 350 Dissatisfaction of client basewith service levels.

Solid test process duringSystem and Client Beta

test. Focus from BusinessDevelopment staff.

22 Programs/WFL run ineffectively in amuti-Usercode environment on asingle system.


4 75% 300 Increased S&P support andservice level issues.

WFL training and testing.Technical support fromS&P.

5 Lift & Merge process wont meetmigration schedule, that calls for themoving of remaining clients, during themigration of the first V/Series site


4 75% 300 Difficulty in establishingremaining first site clients.Would force a change inmigration strategy.

Utilize knowledge learnedfrom Purple system Lift &Merge even scheduled forMay of 2000.

27 Excessive manual changes during post-syntran process.


4 70% 280 Schedule delays. After receipt of pilotdetermine extent ofexcess work and readjustresources.

10 Lift & Merge not kept up to date. ApplicationDevelopment

4 70% 280 Difficulty in establishingremaining clients, on first sitechosen, on the ClearPath.

Create Plan to keep L&Mon track and current.

1 Conversion process of Jobflows toWFL and applicational re-design


4 65% 260 If not handled properly, majorimpact on quality of product

delivered to client base.

Training early in theproject. Extensive quality

assurance of process.Dedicate proper staffing.

I t e m

N o .

P r o

b a

b i l i t y

I m p a c

t

E x p o s u r e


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Set Risk Management Practices andPolicies

Risk Management PlanSpecifies methods to identify, profile , assess, monitor, andhandle risksNames the risk officer Contains a budget and schedule reserveExample, next slide

Risk ProfileThe likelihood, impact, trigger symptoms,monitoring methods, and response strategy foreach identified risk


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Risk Management Practices and Policies

Risk OfficerPerson to oversee the identification, assessment,monitoring, and handling of project risks

devils advocate usually not the project manager

Risk Schedule and Budget ReserveTime and dollar amount in schedule and budget tocover risks


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Risk Management Practices and Policies

Communicate RisksPolices, procedures, and culture to ensure projectmanager is always quickly informed aboutproblems and risks

Standards and procedures for documentingthe project

Good documentation (proposals, plans, work orders,change requests, reviews, and post-project summary

reports) provides information necessary for identifyingrisks in future projects.Helps to identify risks on current project and predictrisks on future projects


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Columbia Space Shuttle

Photos: Nasa.gov

Photo released by Time Magazine,
http://www.abc.net.au/news/2003-05-02/shuttle-columbia-disintegrates/1870044http://www.abc.net.au/news/2003-05-02/shuttle-columbia-disintegrates/1870044http://www.abc.net.au/news/2003-05-02/shuttle-columbia-disintegrates/1870044http://www.fiddlersgreen.net/AC/aircraft/Space-Shuttle/heating.jpg


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Tiles on space shuttle

Photo by John Nicholas


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Criticality Index =f{P(tiles lost from debris or weak bonding),P(adjacent tiles lost),P(burn-through given tiles lost),P(failure of subsystems given burn-through),

P(LOV/C given failure of subsystem)}


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10.PM Risk Analysis

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