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Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing...

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Quick Recap Monitoring and Controlling
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Page 1: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Quick Recap

Monitoring and Controlling

Page 2: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Continuation of previous lecture….

• Lesson 7: Analyzing Risks and Planning Risk ResponsesTopic 7A: Examine a Risk Management Plan Topic 7B: Identify Project Risks and TriggersTopic 7C: Perform Qualitative Risk AnalysisTopic 7D: Perform Quantitative Risk AnalysisTopic 7E: Develop a Risk Response Plan

Page 3: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Outputs

• Sources of risk (i.e., categories)– Stakeholder actions– Estimates– Staffing plans– Common sources of risk:

• Changes in requirements• Design errors, omissions, and misunderstandings• Poorly defined R & R• Insufficiently skilled staff

Page 4: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Outputs

• Potential Risk events– Specific discrete events that might effect the

project– Generally include:

• Probability• Alternative outcomes• Timing• Frequency (more than once?)

Page 5: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Outputs

• Risk Symptoms– Triggers, or trip wires, or indicators– Indirect manifestations of risk events

• Poor morale• Lack of reported progress

• Inputs to other processes– Improved estimating– More training

Page 6: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Risk Quantification

R iskIdentification

11.1

R iskQ uantifica tion

11.2

R isk ResponseD evelopm ent

11.3

R isk ResponseC ontro l

11.4

P ro jec t R iskM anagem ent

11.0

Risk quantification consists of evaluating the risks and risk interactions to assess the range of possible project outcomes.

Page 7: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

PHASE 2: RISK QUANTIFICATION

INCREASE THE UNDERSTANDING OF THE PROJECT

IDENTIFY THE ALTERNATIVES AVAILABLE

ENSURE THAT UNCERTAINTIES AND RISKS ARE ADEQUATELY CONSIDERED IN A STRUCTURED AND SYSTEMATIC WAY AND INCORPORATED INTO THE PLANNING AND DEVELOPMENT PROCESS

ESTABLISH THE IMPLICATIONS OF THESE UNCERTAINTIES ON ALL OTHER ASPECTS OF THE PROJECT

GOALS OF QUANTIFICATION (OR ASSESSMENT)

Page 8: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Risk Quantification - Inputs

• Stakeholder risk tolerances• Sources of risk• Potential risk events• Cost estimates• Activity duration estimates

Page 9: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Risk QuantificationTools and Techniques

• Expected monetary value• Statistical sums• Simulation• Decision trees• Expert judgment

Page 10: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

RISK ANALYSIS TECHNIQUESBrainstorming - spontaneous contribution of ideas from team

Delphi method - method to derive consensus using expert opinion

Monte carlo - iterative simulation using random numbers to Incorporate probabilistic data and derive a Probability distribution of the final result

Sensitivity analysis - evaluate effect of a change in a single Variable on the entire project

Decision tree analysis - graphical "either / or" choices Utility theory - takes attitude of decision maker into account

Decision theory - Technique to reach decision under uncertainty And risk. Points to best possible course no matter The forecast accuracy

Probability analysis - next page

Page 11: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

SIMPLE PROBABILITYSIMPLE PROBABILITY EQUATION:

Pr (Event #1) x Pr (Event #2) = Pr (Both Events)

0.70 X 0.80 = 0.56 OR 56%

NOTE: THIS APPLIES TO INDEPENDENT EVENTS ONLY

OR

P(t) = P(A) * P(B)

Page 12: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

PROBABILITY EXAMPLEDATA:

Probability of Scope = 0.70Probability of No Scope = 0.30

Probability of Approval = 0.80Probability of No Approval = 0.20

EXAMPLE:

Pr(Scope) x Pr(Approval) = 0.70 x 0.80 = 0.56Pr(Scope) x Pr(No Approval) = 0.70 x 0.20 = 0.14Pr(No Scope) x Pr(Approval) = 0.30 x 0.80 = 0.24Pr(No Scope) x Pr(No Approval) = 0.30 x 0.20 = 0.06 Total= 1.00

PRACTICAL APPLICATION -- DECISION TREE ANALYSIS

Page 13: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Expected Monetary Value (EMV)

• Product of two values– Risk event probability– Risk event value

• Valuation of the risk event is key– Must include tangible as well as intangible

value– 1 week slippage with minor client impact– 6 week slippage with major client impact

Page 14: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Expected Monitary Value Example

Given the following: Cost Probability

Optimistic $100,000 0.20

Most likely $130,000 0.60

Pessimistic $180,000 0.20

Expected Value Calculation:

Optimistic $100,000 x 0.20 = 20,000

Most likely $130,000 x 0.60 = 78,000

Pessimistic $180,000 x 0.20 = 36,000

Expected Monitary Value $134,000

(*EMV = Opt imistic + 4(most likely) + Pessimistic)6

* formula if probability is not known

Page 15: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

EMV Example

• If no probabilities are given, useEMV=(Opt + 4*ML + Pes)/6

• EMV= ($100 +4*$130+$180)*1000/6

= $133,333

Page 16: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Descriptive Statistics

• Mean• Mode• Median• Variance• Standard Deviation• Range

Page 17: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Descriptive Statistics Example

Test scores are 10, 20, 25, 40, 45, 45, 50, 55, 55, 60, 60, 60, 65, 65, 65, 70, 70, 70, 70, 70, 75, 80, 80, 85, 90, 90, 90, 95, 100

Mean: number obtained by dividing the sum of a set of quantities by the number of quantities in the set. (answer is 1855 / 29=64)

Mode: value or item occurring most frequently in a series of observations. (answer is 70 -it occurs 5 times)

Median: middle value in a distribution, above and below which lie an equal number of values (answer is 65)

Variance: average of the squares of the variations from the mean of a frequency distribution. (answer is 486.4)

Standard deviation: square root of the variance. (answer is 22)

Range: measure of the dispersion equal to the difference or interval between the smallest and the largest of the set of quantities. (answer is 90 or 100-10)

Page 18: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Approximations

• Mean = (Opt + 4*ML + Pes)/6• SD = (Max - Min)/6

Page 19: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Exercise

Opt ML Pess EMV SDev Vari

Proj. A 100,000 125,000 180,000 130,000 13,000 169,000,000

Proj.B 80,000 100,000 125,000 100,833 7,500 5,625,000

Proj.C 75,000 130,000 180,000 129,167 17,500 306,250,000

Page 20: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

So What?• Normal Distribution

– Mean is expected value– Mean = Mode = Median– Standard deviation is a measure of dispersion

about the mean• 68.27% of cases occur between Mean + SD and

Mean - SD• 95.45% of cases occur between Mean+2SD and

Mean-2SD• 99.73% of cases occur between Mean+3sd and

Mean-3SD

Page 21: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Mean

+ SD + 2SD + 3SD- SD- 2SD- 3SD

Blue = 68%

Blue + Green = 95%

Blue + Green + Red = 99.7%

Normal Distribution

34.1% 34.1%

13.6% 13.6% 1.1%1.1%

Page 22: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Mode

Mean

Median

Skewed Normal Distribution

Page 23: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

BETA vs. TRIANGULAR DISTRIBUTIONS

EXPECTED VALUE

COST ESTIMATE

PROBABILITY

EXPECTED VALUE

COST ESTIMATE

PROBABILITY

BETA DISTRIBUTION

TRIANGULAR DISTRIBUTION

Variance = [(b - a) / 6]

Mean = (a + 4m + b) / 6 2

Mean = (a + m + b) / 3 Variance = [(b - a) 2 + (m - a) (m - b)] / 18

Page 24: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Simulation

Simulation uses a representation or model of a

system to analyze the behavior or

performance of the system.• Monte Carlo analysis is best known• results used to quantify risk of various schedule

choices

Page 25: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Monte Carlo

• Requires Optimistic, Most Likely, and Pessimistic estimates.

• Uses random number generator to select which value to use

• Calculates the database multiple times to develop a probability distribution of the data

Page 26: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Decision Trees

Aggressive schedule EMV = $110,000

Conservative schedule EMV = $7,000

Given the following decision tree: Outcome250 k

100 k

45 k

20 k

EMV150 k

40 k

9 k

16 k

60%

40%

20%

80%

aggressive

conservative

Choiceevent

Choiceevent

Choiceevent

Page 27: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

UTILITY THEORY

• Definition– Endeavors to formalize management’s attitude

toward risk of the decision maker.

• Types– Risk Seeking

– Risk Neutral

– Risk Averse

Page 28: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Expert Judgment

Expert judgment can often be applied in lieu of or in addition to the mathematical techniques described above.

Derived from:• team members• others in or outside of organization• published findings• industry averages / statistics

Page 29: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

QUALITY RISK

GOALS OF RISK MANAGEMENT

- Increase understanding of project

- Improve plans, delivery, and id greatest risks

- Where to focus attention

REMAINING MAJOR PROJECT RISK AREA ...

What if project fails to perform as expected during operational life / product life cycle?

Conformance to quality requirement remembered long after cost and schedule performance.

\ Quality management has most impact on long-term perceived & actual success of project

Page 30: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

SCHEDULE RISK

CAN MANAGE “CRITICAL PATH” BUT NOT MANAGE DURATION

REASON --> SCHEDULE RISK

Highest risk path = path with most project completion risk

Risk in all activity duration because future is uncertain

LONGEST DURATION ACTIVITY ¹ RISKIEST

Therefore, need to id & manage what could contribute to project delay -- could override management of critical path

Page 31: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

C

START

FINISH

A D

B

E

MOST MEAN

ACTIVITY LOW LIKELY HIGH EXPECTED

A-B 8 9 10 9

B-C 4 5 6 5

C-E 0 0 0 0

B-E 1 6 7 4.7

A-D 4 9 14 9

D-E 1 2 7 3.3

SCHEDULE RISK (CONT'D)

Page 32: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

SCHEDULE RISK (CONT'D)

START

FINISH

A D

B

E

SUM OF SUM OF SUM OF

PATH MOST LIKELY MEANS HIGHS

A-B-C-E 14 14 16

A-B-E 15 13.7 17

A-D-E 11 12.3 21

MOST RISKY A-B-E A-B-C-E A-D-E

Page 33: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Risk Quantification- Outputs

Opportunities to pursue, threats to respond to

Opportunities to ignore, threats to accept

Page 34: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Risk Response Development

R iskIdentification

11.1

R iskQ uantifica tion

11.2

R isk ResponseD evelopm ent

11.3

R isk ResponseC ontro l

11.4

P ro jec t R iskM anagem ent

11.0

Risk response development defines the enhancement steps for opportunities and responses to threats.

Page 35: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Risk Response Development

• Defines steps for– enhancing opportunities– responding to threats

Page 36: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Types of Responses

• Avoidance - eliminate• Mitigation

– Reduce EMV by reducing probability– Reduce Impact - buy insurance

• Acceptance– Active: develop plan to deal with risk if it

occurs – Passive: Accept risk (e.g., lower profit)

Page 37: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

PLANNING ALTERNATIVES

• Project Managers have Several Response Options– Avoidance– Absorption– Adjustment– Deflection– Contingent Planning– A Combination of the Above

Page 38: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

AVOIDANCE

• Defined– Characterized by project manager

statements such as: “This alternative is totally unacceptable to me

– You would take the appropriate steps to avoid this situation.

Page 39: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

ABSORPTION

• Risk is Recognized-But Not Acted Upon• Accept the Risk AS IS• It’s a Matter of Policy• Retained & Absorbed (by prudential

allowances)

• Unrecognized, Unmanaged, or Ignored (by default)

Page 40: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

ADJUSTMENT

• Modification of the Project– Scope

– Budget

– Schedule

– Quality Specification

– Combination of the Above

Page 41: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

DEFLECTION

• Involves transfer of risk by such means as:– Contracting Out to Another Party

– Insurance or Bonding

– By Recognizing it in the Contract

Page 42: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

CONTINGENT PLANNING

Contingent planning is a means to address risks to the Project through a formal process and provide resourcesTo meet the risk events.

It is the establishment of management plans to be invokedIn the event of specified risk events

Examples:

The provision and prudent management of a contingency allowance in the budget

The preparation of schedule alternatives and Work-arounds

Emergency responses to deal with major specific Areas of risk

An assessment of liabilities in the event of a Complete project shut-down

Page 43: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Types of Responses

• Prevent risk from occurring– Reduce the probability that the event will occur– Eliminate means P=0

• Reduce the impact (think “containment”)– Buy insurance (monetary)– Alternative strategies (additional supplier to

PDQ)

Page 44: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

CONTRACT STRATEGY

• To Select the Right Form of Contract Requires:– Identification of Specific Risks– Determination of how they should be shared

between the parties, and – The insertion of clear, legal language in the

contract documents to put it into effect.

Page 45: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

CONTRACT TYPE vs. RISK

SCOPE OF WORK INFORMATION

UNCERTAINTY

DEGREE OF RISK

SUGGESTED RISKALLOCATION

CONTRACTTYPES

CPPF CPIF CPFF FPPI FFP

VERY LITTLE PARTIAL COMPLETE

HIGH MODERATE LOW

HIGH MEDIUM LOW

100%

0%

0%

100%

AGENCY (BUYER)

SELLER (CONTRACTOR)

Page 46: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

CONTRACT TYPE vs. RISK (CONT'D)

COST ESTIMATE VALUE

PROBABILITY

80% 90% 95% 100% 110% 120% 140%

+/- 15%: FFP

+/- 50%: CPIF

+/- 25%: CPFF

> 50%: CPPF

Project A Well defined scope and work content. High probability of achieving realistic cost estimate at 100%

Project c Poorly defined scope and content. Low probability of 100% cost estimate

Project B Fairly well defined scope and work content. Fair probability of achieving 100% cost estimate

Suggested types of contract for various spreads

Page 47: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

FAST-TRACKING

• Awarding contracts before all the information is complete to reduce the overall time for the project

• Much higher risk category!!• Appropriate contingency allowances must

be increased accordingly.

Page 48: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Risk Response Development - Inputs

Opportunities to pursue, threats to respond to

Opportunities to ignore, threats to accept

Page 49: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Risk Response DevelopmentTools and Techniques

• Procurement– Buy outside skills

• Contingency planning– what to do if the event occurs– containment

• Alternative strategies– Prevention

• Insurance

Page 50: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Risk Response Development - Outputs

• Risk management plan• Inputs to other processes• Contingency plans• Reserves• Contractual agreements

Page 51: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Risk Response Control

R iskIdentification

11.1

R iskQ uantifica tion

11.2

R isk ResponseD evelopm ent

11.3

R isk ResponseC ontro l

11.4

P ro jec t R iskM anagem ent

11.0

Risk response control involves responding to changes in risk over the life of the project.

Page 52: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

PHASE 4: RISK RESPONSE

CONTROL• Execute the risk management plan from phase

-Id, quantify and respond to any changes Execute workarounds -- unplanned responses

To negative events -Additional risk response development

•Current project database

-Documenting on-going risks

•build historical databases

Reliable data is hard to find! Should consist of:

-Recorded risk events -Experience on past projects (similar is preferred)

•Post-project assessment and archive update

Page 53: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Risk Response Control

• Respond to the changes in project risk over the life of the project

Page 54: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Risk Response Control - Inputs

• Risk management plan• Actual risk events• Additional risk identification

Page 55: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Risk Response ControlTools and Techniques

• Workarounds– Unplanned responses to unforeseen risks that

actually occur

• Additional risk response development– Revisions to the response, if it proves

inadequate

Page 56: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Risk Response Control - Outputs

• Corrective action– Implementing the risk management plan when

the risk occurs

• Updates to risk management plan– Revisions to the risk management plan as

circumstances require• Risk never materializes• Probability of occurrence is reduced

Page 57: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Risk Documentation

Historical database

Current project database

Post project assessment and archive update• Lessons learned• Plan variances• Actuals• Methods, tools and techniques• Case studies

Page 58: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

When Should Risk Assessments be Carried Out?

Risk assessments should be carried out

as early as possible and then continuously.

Page 59: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Don’t take the risk if...

• the organization cannot afford to lose.• the exposure to the outcome is too great.• the situation (or project) is not worth it.• the odds are not in the project’s favor.• the benefits are not clearly identified.• there appear to be a large number of

acceptable alternatives.

Page 60: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

Don’t take the risk if...

• the risk does not achieve the project objective.

• the expected value from baseline assumptions is negative.

• the data is unorganized, without structure or pattern.

• there is not enough data to understand the results.

• a contingency plan for recovery is not in place should the results prove unsatisfactory.

Page 61: Quick Recap Monitoring and Controlling. Continuation of previous lecture…. Lesson 7: Analyzing Risks and Planning Risk Responses Topic 7A: Examine a Risk.

SUMMARY

Projects are launched to take advantage of opportunities,But opportunities are associated with uncertainties whichHave risks attached

Risk can never be 100% eliminated

For the project to be viable, the expected value resultingFrom a favorable probability of gain must be higher thanThe consequences and probability of loss

Therefore, the risks associated with a project must receiveCareful examination in the context of the organization'sWillingness or aversion to taking risks

This is the domain of project risk management, which formsA vital and integral part of project management


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