Risk management Flashcards
Risk management characteristics
• Project management decisions are made with an understanding of risks involved
in all project management activities,
• Risk management must be integrated into project management processes
- Plan risk management
- Document risk management
- Determine the methods to be used to execute a risk management
- Plan for adequate resources
- Risk identification
• Include all activities; business, political, contractual relationships, cost, time,
funding, scheduling.
• Include all project phases
• Involve all project personnel
- Project risk analysis
• A systematic process; projects involve technical, engineering, innovative and
strategic content
• Involve quantitative and qualitative methods
Quantitative methods;
- Expected value for cost based calculations, ROI
- Decision tree diagrams
- Prioritization lists - see diagram
Quantitative methods - more
• Pay-off matrices
• Modelling and simulation
• Monte Carlo simulation
• Probabilistic cost estimates at completion phase; schedule estimates for key milestones-, estimates of
meeting/ validating desired technical performance parameters-, meeting cost, technical performance,
and schedule activities.
Risk tolerance approaches
• Risk averter (avoider); benefits decreases - more money is added+ the project
manager’s satisfaction diminishes
• Risk neutral; benefits increases with a rate - the project manger accept risk and
costs associated with it.
• Risk seeker; benefits decrease at an increasing rate - the project manager’s
satisfaction increases at an increasing rate when more money is at stake.
Response Risk /opportunity Description
Tolerate Risk and opportunity Assume the level of risk or opportunity without engaging any actions to
control it. Budget, schedule and resources held in reserve.
Terminate Risk Eliminate risk by accepting another alternative, changing design, or
requirement. May affect probability and impact.
Treat Risk Reduce probability and/or impact through active measures
Transfer Risk Reduce probability and/or impact by transfer ownership or part of the
risk to another party (e.g. insurance company
Preventive controls:
Corrective controls:
- Designed to limit the possibility of an undesirable event occurring.
- Relevant before an event occurs (most important controls!)
• Designed to the scope for loss and reduce any undesirable outcomes that have been
realized. Risk is treated so it is less likely to occur.
• Relevant to loss prevention, damage limitation cost containment.
Directive controls:
Detective controls:
• Designed ensure that a particular outcome is achieved i.e. directives to employees
(guidelines, training to respond to risk) to ensure that losses do not occur.
• Relevant to loss prevention, damage limitation cost containment.
• Associated with actions that must be taken to limit the damage and contain cost.
- Designed to identify occasions when undesirable outcomes have been realized.
- Relevant after an occurred event.
- Related to monitoring activities
RMP
see diagram
Project Risk Analysis and Management (PRAM)
- Initiate
- Identify
• Qualitative analysis - Assess
• Qualitative analysis subjective assessment of risks
• Quantitative analysis ‘sub-stage’ objective assessment of the risks - Plan responses
- Implement responses
- Initiate
1. Initiate Recognize risk as consequence or uncertainty -> • Keep within budget; • Achieve the required completion date; • Achieve the required objective
- Identify
• interviewing key members of the project team;
• have brainstorming meetings;
• using personal experience in risk analysis;
• past corporate experience
-> qualitative analysis
Main risk sources or factors are identified
- Assess
Quantitative analysis ‘sub-stage’ objective assessment of the risks
• Assessment of uncertainty in cost and time;
• Cost, time - Key Performance criteria
