Learning Outcome 10

Question 1

10.1 Explain each stage in a risk management process

Answer 1

• Risk management is a process that allows individual risk events and overall risk to be understood and managed
• Initiate: ensure common understanding, starting the risk management plan
• Identification: agree on impact scales (e.g. change to budget that would be intolerable), identify specific risk evenets through assumptons and constraints analysis (assessing their probability), brainstorming, checklists, prompt lists, SWOT analysis, workshops. These are then documented in a risk register (description, causes, probability, impact, mitigation, resposibilities, owners)
• Analysis: severity of risks (alone and combined), quantitative techniques (monte carlo method or sensitivity analysis), potential impacts, colour coding risks through probability/impact grid
• Response: determine whether to take risk or it’s best to proactively invest time and resources in lowering risk (implement this)
• Closure: closing each risk if it passes or happens and is dealt with

Question 2

10.2 Explain proactive and reactive responses to risk

Answer 2

• Proactive response: planned and implemented to decrease likelihood of the risk occuring or the size of its immpact. Avoiding (changing objectives or practices), reducing (literally just reducing likelihood of risk ocurring), transferring risk (transferring risk to another party e.g. insurance or getting an expert to do something).
• Reactive response: a provision for a cause of action only taken if the risk transpires (acceptance - accepting risk with contingent plan)
• Action will cause secondary risks
• If there is an opportunity, you can respond to these by exploiting them (changing project for more benefits for various stakeholders), enhancing them (enhancing the probability they will occur), sharing them (collaboration to realise a benefit) or rejecting them (little value or work to exploit it too great)

Question 3

10.3 Explain the benefits of risk management

Answer 3

• Enables better-informed and more credible plans which improved stakeholder confidence
• Increases the likelihood of a project adhering to schedules and budgets (achieveable targets)
• Allows a more meaninful assessment and justification of contingencies (avoids over or underprovision based on random estimates of blanket contingency)
• Discourages acceptance of financially unsound projects (assessing risk forces realism)
• Contributes to the build up of statistical information to assist in better management of future projects (knowledge can be kept in organisation after finishing project)
• Helps develop the ability of staff to assess risks (awareness of different risks and how they can be measured etc)
• Facilitates greater risk taking, increasing benefits gained (taking informed, smart risks)

Question 4

10.4 Explain the key aspects of issue management

Answer 4

• An issue occurs when agreed tolerances are breached (e.g. budget goes over 10% overspend) and contingencies don’t cover it
• Need response through work between PM and sponser
• Managing issues involves: identifying the issue and logging it on a register, performing analysis to understand causes and impacts, prioritising any issues, escalated to the sponsor (who could escalate to governance board), assigned to best person to address the issue, progress through change control and record in PMP, track through to closure