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Agenda
Project RiskProject Risk Management The Risk Management Process
Purpose: get an understanding of basic project risk management
Project
A project is a temporary organisation, separate from, but strongly dependent of the organisation, (the ordinary organisation). A project has a fixed, well defined and controllable objective. A project has its own resources (time, money, personal etc).
All projects have three interrelated objectives: to 1 meet the budget, 2 finish on time, 3 meet specifications that satisfy the client.
Project
A PROJECT is an organisational formwith a defined objectivelimited in resources and time.
Objectives
TimeResources
Risk
The chance that something happens that will have an impact on objectives. It is measured in consequence and likelihood. The consequences may be positive or negative
There is no human activity which does not have risks.
Risk Management
Risk Management: refers to the way in which risks faced by the business are dealt with. Risks may arise from the nature of the business operations and/or the way in which the business is financed.
The purpose of (Project) Risk Management is to minimize the risk of not achieving the objectives of the project.
Project Risk Management
Risk Management assists project managers in setting priorities, allocating resources and implementing actions and processes that reduce the risk of the project not achieving its objectives.
Risk Management facilitates better decision making and better project outcomes.
The Project Risk Management Approach
We must ensure that: All significant risks are identified Identified risks are understood (likelihood and
consequences) Assessment is undertaken of individual risks
relative to other risks Strategies for treating risks are established The process itself and the risk treatment
strategies are implemented cost-effectively
The Risk Management Process
Establish the context
The context is a framework in which all activities of a project takes place. Strategic Context
Relationship between the organisation(s) and their environment.
Organisational Context What is the organisation all about?
Risk Management Context This level focus on the project which the Risk Management
Process is being applied. Do we understand the project (goals, time frame etc.)?
Summary: Do we clearly understand what should be the role of risk management in the project?
Risk Identification
The process of determining: What could happen?How could it happen?Why can it happen?
A risk which is not identified can not be treated
Risk Identification
Methods: Brainstorming Examination of previous similar projects Standard Questioners and Surveys (sources:
insurance companies) Scenario analysis Work Breakdown Structure analysis
Risk Assessment
Risk assessment is the overall process of risk analysis and risk evaluation. Its purpose is to develop agreed priorities from identified risks.
Risk Analysis
The systematic use of available information to determine how often specific events may occur and the magnitude of their likely consequences.
Determine likelihood and consequence Two types of methods:
Qualitative: expresses in word form or in descriptive scales the likelihood and consequences of an event
Quantitative: using numerical values to determine likelihood and consequences
Risk Analysis
Likelihood How likely is the loss to occur? What is the probability of this loss?
Consequence If the loss occurred, how would it affect the
project? Financially? Operationally? The ability of the project to meet its objectives?
Risk Evaluation
Likelihood
Consequence
High
Low
Low High
Medium risk High risk
Low risk Medium risk
Risk Treatment
Identify the options for reducing the likelihood or consequence for each risk
Determine potential benefits and costs of the options
Select the best options for the projectDevelop and implement a detailed Risk
Treatment Plan Make appropriate provisions in project
budgets
Risk Treatment
Risk avoidance Possible?
Loss control options Reduce likelihood Reduce the expected consequence Transfer the risk to another entity
Contractual Insurance Joint ventures
Monitoring and review
Continuous monitoring and review of risks ensures new risks are detected and managed, and that treatment plans are implemented and progressed effectively.
Method Implement a review process as part of the
regular management meeting cycle. Undertake major reviews at significant project
phases and milestones.
Communication and reporting
Senior managers need to understand the risks they face, and risk reports provide a complement to other project reports in developing this understanding.
Method Submit reports on a regular basis or as required, as
part of standard project reporting.
Summary
How do we define a project? What is a risk?How can we analyse and treat risks?
Questions?