Chapter 7 Flashcards
Risk
Uncertain or chance events that planning may not be able to overcome or control.
Risk Management
A proactive attempt to recognize and manage internal events and external threats that affect the likelihood of a project’s success.
What can go wrong (risk event).
How to minimize the risk event’s impact (consequences).
What can be done before an event occurs (anticipation).
What to do when an event occurs (contingency plans).
Benefits of Risk Management
A proactive rather than reactive approach.
Reduces surprises and negative consequences.
Prepares the project manager to take advantage of appropriate risks.
Provides better control over the future.
Improves chances of reaching project performance objectives within budget and on time.
Managing Risk Steps
Step 1: Risk Identification
Step 2: Risk Assessment
Step 3: Risk Response Development
Step 4: Risk Response Control
Step 1: Risk Identification
Generate a list of possible risks through brainstorming, problem identification and risk profiling.
Step 2: Risk Assessment
Scenario analysis for event probability and impact
Risk assessment matrix
Failure Mode and Effects Analysis (FMEA)
Probability analysis
Decision trees, NPV, & Program Eval. Review Technique (PERT)
Semi-quantitative scenario analysis
Step 3: Risk Response Development
Mitigating Risk
Avoiding Risk
Transferring Risk
Retaining Risk
Step 4: Risk Response Control
Risk control Execution of the risk response strategy Monitoring of triggering events Initiating contingency plans Watching for new risks
Establishing a Change Management System
Monitoring, tracking, and reporting risk
Fostering an open organization environment
Repeating risk identification/assessment exercises
Assigning and documenting responsibility for managing risk
Contingency Plan
An alternative plan that will be used if a possible foreseen risk event actually occurs.
A plan of actions that will reduce or mitigate the negative impact (consequences) of a risk event.
Risks of Not Having a Contingency Plan
Having no plan may slow managerial response.
Decisions made under pressure can be potentially dangerous and costly.
Technical Risks
Backup strategies if chosen technology fails.
Assessing whether technical uncertainties can be resolved.
Schedule Risks
Use of slack increases the risk of a late project finish.
Imposed duration dates (absolute project finish date)
Compression of project schedules due to a shortened project duration date.
Cost Risks
Time/cost dependency links: costs increase when problems take longer to solve than expected.
Price protection risks (a rise in input costs) increase if the duration of a project is increased.
Funding Risks
Changes in the supply of funds for the project can dramatically affect the likelihood of implementation or successful completion of a project.
Risk and Contingency Planning
Technical Risks
Schedule Risks
Cost Risks
Funding Risks
Exploit
Seeking to eliminate the uncertainty associated with an opportunity to ensure that it definitely happens.
Share
Allocating some or all of the ownership of an opportunity to another party who is best able to capture the opportunity for the benefit of the project.