QL10: risk Flashcards
1) The greatest project risk occurs when:
o A) The probability of the event is high and the consequences of the event are high.
o B) The probability of the event is high and the consequences of the event are low.
o C) The probability of the event is low and the consequences of the event are high.
o D) The probability of the event is low and the consequences of the event are low.
A) The probaility of the event is high and the consequences of the event are high
• 2) Risk and opportunity:
o A) Both increase throughout the project life cycle.
o B) Vary inversely throughout the project life cycle.
o C) Both decrease throughout the project life cycle.
o D) Do not vary throughout the project life cycle.
C) Both decrease throughout the PJ life cycle
3) To protect his poultry from meteorites, the gentleman farmer made hard hats for each bird and installed a meteor detection system that opened umbrellas throughout the yard if a meteor were detected. The safety of his flock thus assured, the farmer was surprised when he read his latest issue of Risk Management Magazine and discovered that this event was:
o A) High in consequence and high in probability.
o B) Low in consequence and low in probability.
o C) Low in probability and high in consequence.
o D) High in probability and low in consequence.
C
How does risk level vary with project life cycle stages? Where is the period of highest risk impact? Why?
- highest during PJ concept phase, falling gradually during development phase, reducing dramatically during execution/termination phase
- lowest at PJ completion
→ man hours of labour, material and other expenses rise. Therfore highest impact is at late PJ LC (execute and finish phase of PJ) + amount of stake is high before completition
→ impact at the end is also high, cause customer acceptance is a form of risk
→ higest at start of PJ, cause uncertainty is high: visions from customer and PJ leader a far from realization
- question are answered and uncertainties shrink as PJ progresses
- impact
What are the four distinct stages of systematic risk management and what takes place at each?
- Risk identification
- process of determining the specific risk factors that can reasonably be expected to affect the PJ -
Analysis of probability and consequences
- potential impact of risk factor is determined by their likelyhood and impact on the PJ-
Risk mitigation strategies
- steps to minimize potential impact of risk factors
1. Control and documentation - creating knowledge base for future PJ based on lessons learned
- steps to minimize potential impact of risk factors
-
Risk mitigation strategies
What are the basic qualitative methods for identifying risk factors? What are the advantages and disadvantages of each method? (+/-)
1.Brainstorming
+ brings a team together and generates ideas quickly
-if one dominates or member judge idea of others its less valuable
2.Delphi-Method
+collects opinions anonymously in two or more rounds
+little chance of a single member dominating
-no “in the moment” synergy among experts, unless real-time decision support is beeing used
-
3.Past history patterns
+examines patterns from past to current structure
+great when same structure is assumed to exist in the future
-not guranteed that history repeats
-
Multiple or team based approaches
* *+**brings together team member that specialize on different subjects → different perspectives on risks
- negatives of group discussions (bias, one is louder)
What are the four alternatives a project organization can adopt in deciding how to address their risks? What are the advantages and disadvantages of each? Which is best and why?
- Accept risk
-risks of minor natur are there normally, but likelihood/impact are so small, its not worth to fight against them - Minimize risk
-strategies to minimize risk seeks to prevent risk from happening or minimize its impacts - Share risk
-shared with PJ members, subcontractors, departments and between customer/PJ orginazer
-shared risk will reduce the burden for everyone
→ signed contracts minimize the “point at one” mentality - Transfer risk
-done contractually
→ risk is no longer own problem, but transfer is often costly
Best Method
→ depends on the involved risk and stage of PJ. Small risks should be accepted, serious one could be accepted depending on the ressoucres the company has
There are four alternatives a project organization can adopt in deciding how to address their risks. Develop four different scenarios, one each for which each of the alternatives would be appropriate. Justify your selections.
- ## Accept risk
What are fixed-price contracts and liquidated damages? Which party to the contract bears the burden?
-both are financial incentives
→ fixed price contracts set a price for the PJ before it begins. If the PJ gets problems, cost of completion are borne by the PJ organization
→liquidated damages penalty clause that kick in when a certain milestone is reached in PJ development and implementation
What are the two types of contingency reserves and how are they handled?
→ money that is saved, for a possible problem that might occur
- Task contingencies
-most common form of contingency
→ used for offset budget cutbacks, schedule overruns or other circumstances affecting individual work PJ
-offset of 20% means that PJ cost are 20% less then in the contract. The 20% are then safed for problems - Mangerial contingencies
-budget safe for higher level risks
→ clients want different PJ scope, “acts of god” like natural disasters
How do mentoring and cross-training mitigate risk?
→ two approaches to risk minimization by training PJ team members
-
Mentoring
-paires junior PM wir senior manager to learn best practices
→ mitigates risk by easing the juniors to new duties and asking questions to the seniors -
Cross-training
-team members not only learn their own duties, but also the roles from other team members
→ if one member is away or PJ need more time, other member can help
Despite never knowing every possible risk discuss the importance of risk identification
-its a critical point
→ has to be implemented from ealy on, so risk can be indentified and then quantified
BUT: this process is biased, incomplete and affected by estimation errors, because risk identification processes attempt to forecast PJ scenarios
- despite the problems it help to build the RM strategy to minimize negative effects
- because it is an iterative process and evolves thought the PJ lifecycle, the info collected become strategic asset for future PJ
Provide an example of Risk register and explain why it is useful
useful because:
- includes all relevant persons
- gives probabilty/impact of risk
- all risk are presented in a good structure
- base for risk mitigation
