10.pm risk analysis
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Project Risk
Possibility or probability that the project willnot turn out as planned or desired
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Project RiskRisk includes potential benefits(opportunities) as well as hazardsOur focus: risk of serious problems or failure,i.e.,
Project not meeting performancerequirements, schedule, or budget
Failure
Not meeting time, cost, or performancetargets by a predefined margin
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Project Risk
Risk of involves two concepts: The likelihood that some event will occur. The impact of the event if it does occur.
It is a joint function of the two
Risk = f (likelihood, impact)
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Project Risk Management Process
1. Identify risks2. Assess the risks3. Develop appropriate responses to risks4. Track and control the risks
The risk management process repeats
throughout every phase of the project fromConception through Close-out
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Risk Management Elements and Process
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1. Identify Risks: Sources of Risk
Needs and Definition RiskFailure to correctly identify and define current orchanging customer needs and requirements
Environment
Project External
Internal
Internal
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1. Identify Risks: Sources of Risk
Technical Risk
Failure of the end item. Risk due to nature ofthe end item or the process to create it:High complexityLow maturityLow reliability, produciblity, or testabilityHigh concurrency (overlap of project work)
Environment
Project Internal
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1. Identify Risks: Sources of Risk
Risks in the project environmentMarket conditionsGovernment mandatePhysical environment (weather, geography, etc.)Labor and other resource availabilityProject prioritiesCustomer/supplier relationshipsExchange rates
Environment
Project
External
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Element Ref. Risk
Likelihood(H, M or L)
Impact(H, Mor L)
ProjectManagement
/authority 1 Project Manager's lack of Project Management experience
2 Difficulty in securing full funding.(e.g. if the funding is coming from more than one source there may be a greater riskin securing it at the same time)
3 Lack of understanding of project management standards by everyone in theproject team.
ProjectNature
6 Innovation or the introduction of new features.
7 The project is likely to need a large number of workdays.(e.g. low number of workdays = low risk, anything over six months =high risk)
8 Non-negotiable completion date.
ProjectStaff
11 The project team is inexperienced or lacking appropriate skills for the project.
12 The project team will be expected to support end-users after projectcompletion.
( ongoing support = low risk, no support project beyond closure = high risk) The
Customer 16 Customer support expected to be part of the project.
17 The project will affect current operations.
18The customer requirements will not be well documented. (e.g. poor documentation increases risk of delivered product being unsatisfactory)
Third Parties /External bodies
22 Third party suppliers are not well known to UEA.
Risk Checklist
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1. Identify Risks
AnalogyExperience and documentation
ChecklistsExperience and post-mortem reviews
WBS and work packages Example, next slide
Process flow charts
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WBS and work packages with assessed level of risk
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1. Identify Risks
AnalogyExperience and documentation
Checklists
Experience and post-mortem reviews
WBS and work packages
Process flow chartsExample, next slide
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SCALED,SORT BYPOSTAGE
METERED,PUT INTOFOREIGN AIRMAIL BAG
MACHINESTAMPSPOSTAGE
BUNDLESORT TO SIZE QC FORSEAL,
ADDRESSPOSTAGE
PUTINTOBAGS
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MACHINESTAMPSPOSTAGE
BUNDLESORT TO SIZE QC FORSEAL,
ADDRESSPOSTAGE
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BLDG. 231
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METERED, QCCHECK
SORT INTOPOSTOFFICEBAGS
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1. Identify risks
BrainstormingDelphi TechniqueCause-Effect analysis
Causes EffectRisk sources Outcomes,and hazards Consequences
Example, next slide
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Cause and Effect DiagramHARDWARE
PEOPLE
FUNCTIONS MONEY
PRODUCTDELIVERED
LATE
Bought-in items may bedelivered late
Welding may bedefective
Material may be off-spec
Manufacture may notcorrespond with design
Key staff may be out ofaction
Staff productivity maybe lower than planned
External agencies maydelay
Procurement procedures maybe ineffective
Design may have to be re-engineered
Design specs may bechanged
Import taxes maybe raised
Fabricator may gobankrupt
Cash flow may not besufficient to pay bills
Design may not meetstandards
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2. Assess the Risk
Assess RC (the risk consequence orexposure)
RC = (Probability) x (Impact)
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2. Assess the Risk
Probability, expressed asnumerical estimate, 0-1.0or nominal rating, e.g, VH, H, M, L,VLor interval rating, e.g., 1-5
Impact, expressed asphysical impact on time (weeks), cost ($) or,performanceor nominal rating, e.g. VH, H, M, L, VL,or interval rating, e.g., 1-5
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2. Assess the RiskCombing several independent risk sources
omposite likelihood factor CLF = (W1) M H + (W2) C H + (W3) M S + (W4) C S + (W5)D
where
MH , M S , C H , C S , and D are failure likelihoods due toimmaturity of hardware and software, complexity inhardware and software,and dependency on externalfactors, respectively; each has value 0 to 1.0W1, W2, W3, W4, and W5 each has value 0 through 1.0and together total 1.0.
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2. Assess the Risk
Combing several independent risk sources
omposite impact factor ,
CIF = (W1)TI + (W2)CI + (W3)SI whereTI, CI, and SI are impacts due to failure in technicalperformance, cost, and schedule, respectively; each has
value 0 to 1.0W1, W2, and W3 each has value 0 through 1.0 andtogether total 1.0.
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2. Assess the Risk
Risk Consequence
RC = probability x impact
Example
RC = 0.75 x 5 = 3.75
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2. Assess the Risk
Risk Consequence
When probability and impact are expressedas nominal values (e.g., VH, H, M, L,VL; nextthree slides),
RC = f(probability,impact)
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Element Ref. Risk
Likelihood(H, M or L)
Impact(H, M or
L)
ProjectManagement
/authority 1 Project Manager's lack of Project Management experience
2
Difficulty in securing full funding.
(e.g. if the funding is coming from more than one source there may be a greater risk insecuring it at the same time)
3 Lack of understanding of project management standards by everyone in theproject team.
ProjectNature
6 Innovation or the introduction of new features.
7 The project is likely to need a large number of workdays.(e.g. low number of workdays = low risk, anything over six months =high risk)
8 Non-negotiable completion date.
ProjectStaff
11 The project team is inexperienced or lacking appropriate skills for the project.
12 The project team will be expected to support end-users after project completion.( ongoing support = low risk, no support project beyond closure = high risk)
TheCustomer
16 Customer support expected to be part of the project.
17 The project will affect current operations.
18 The customer requirements will not be well documented. (e.g. poor documentation increases the risk of the delivered product beingunsatisfactory)
Third Parties /External bodies
22 Third party suppliers are not well known to UEA.
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2. Assess the Risk
Example
RC = L x H = M (according to table)
VL L M H VHVH M M H H HH L M M H HM L L M M HL L L L M M
VL L L L L M
Impact
P r o
b a
b i l i t y
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2. Assess the Risk
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3. Decide Risk Response Strategies(Ways of Handling Risks)Transfer risk
InsuranceProperty damage or personal injury suffered as aconsequence of the projectDamage to materials while in transit or in storageBreakdown or damage of equipment
Theft of equipment and materialsSickness or injury of workers, managers, and staffForward cover: insure against exchange ratefluctuations.
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3. Decide Risk Response Strategies(Ways of Handling Risks)
Transfer risk (contd) Contracts
Fixed-price versus cost-plusFixed price contractor assumes all riskFixed price with incentive-contractor 60%
Cost plus incentive fee- contractor 40%Cost plus fixed fee- customer assumes all risk
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3. Decide Risk Response Strategies(Ways of Handling Risks)
Avoid risk Eliminate sources of risk Micromanage
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3. Decide Risk Response Strategies(Ways of Handling Risks)Reduce risk
Employ best workers
Use known and tested technology and toolsUse parallel efforts
Employ strong worker incentives
Increase frequency and severity of reviews and tests
Reduce system complexity
Use design margins
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3. Decide Risk Response Strategies(contd)
Contingency Plan
Study possible what-if scenarios anddevelop a plan for each
Accept risk (do nothing)
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4. Risk Tracking and Response Create a r i sk log or r i sk regis ter ; risks arerank ordered, greatest risk consequence first.
Risk log and mitigation planExample, next slide
Cont inuo us ly mo n i to r project for triggersymptoms of previously identified risks, and
for symptoms of risks newly emerging andnot previously identified.
Probability: 0 100% Impact: 1 5: Exposure: (Probability) X (Impact) Scale 0 500
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Probability: 0-100%, Impact: 1-5: Exposure: (Probability) X (Impact), Scale 0-500
Risk: Condition likelyto occur; inherent inevery project
Functionalareaimpacted
Effect:Consequences ifrisk occurs
Preventiveaction to reducerisk
11 Progeni solutions cant perform upto expectations.
ApplicationDevelopment
5 75% 375 Schedule delays. Cost ofhiring a replacement vendor.
Analyze pilot results andcreate documents that willstandardize the process.
8 Unknowns in migration project willoccurs.
TechnicalInfrastructure
4 90% 360 Scheduling delays andpossible re-engineering.Redundant system costs.
Build plan and trackingmechanism to manageschedule and resources
28 Client impact during migrationphase.
TechnicalInfrastructure
5 70% 350 Dissatisfaction of client basewith service levels.
Solid test process duringSystem and Client Beta
test. Focus from BusinessDevelopment staff.
22 Programs/WFL run ineffectively in amuti-Usercode environment on asingle system.
ApplicationDevelopment
4 75% 300 Increased S&P support andservice level issues.
WFL training and testing.Technical support fromS&P.
5 Lift & Merge process wont meetmigration schedule, that calls for themoving of remaining clients, during themigration of the first V/Series site
ApplicationDevelopment
4 75% 300 Difficulty in establishingremaining first site clients.Would force a change inmigration strategy.
Utilize knowledge learnedfrom Purple system Lift &Merge even scheduled forMay of 2000.
27 Excessive manual changes during post-syntran process.
ApplicationDevelopment
4 70% 280 Schedule delays. After receipt of pilotdetermine extent ofexcess work and readjustresources.
10 Lift & Merge not kept up to date. ApplicationDevelopment
4 70% 280 Difficulty in establishingremaining clients, on first sitechosen, on the ClearPath.
Create Plan to keep L&Mon track and current.
1 Conversion process of Jobflows toWFL and applicational re-design
ApplicationDevelopment
4 65% 260 If not handled properly, majorimpact on quality of product
delivered to client base.
Training early in theproject. Extensive quality
assurance of process.Dedicate proper staffing.
I t e m
N o .
P r o
b a
b i l i t y
I m p a c
t
E x p o s u r e
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Set Risk Management Practices andPolicies
Risk Management PlanSpecifies methods to identify, profile , assess, monitor, andhandle risksNames the risk officer Contains a budget and schedule reserveExample, next slide
Risk ProfileThe likelihood, impact, trigger symptoms,monitoring methods, and response strategy foreach identified risk
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Risk Management Practices and Policies
Risk OfficerPerson to oversee the identification, assessment,monitoring, and handling of project risks
devils advocate usually not the project manager
Risk Schedule and Budget ReserveTime and dollar amount in schedule and budget tocover risks
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Risk Management Practices and Policies
Communicate RisksPolices, procedures, and culture to ensure projectmanager is always quickly informed aboutproblems and risks
Standards and procedures for documentingthe project
Good documentation (proposals, plans, work orders,change requests, reviews, and post-project summary
reports) provides information necessary for identifyingrisks in future projects.Helps to identify risks on current project and predictrisks on future projects
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Columbia Space Shuttle
Photos: Nasa.gov
Photo released by Time Magazine,
http://www.abc.net.au/news/2003-05-02/shuttle-columbia-disintegrates/1870044http://www.abc.net.au/news/2003-05-02/shuttle-columbia-disintegrates/1870044http://www.abc.net.au/news/2003-05-02/shuttle-columbia-disintegrates/1870044http://www.fiddlersgreen.net/AC/aircraft/Space-Shuttle/heating.jpg -
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Tiles on space shuttle
Photo by John Nicholas
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Criticality Index =f{P(tiles lost from debris or weak bonding),P(adjacent tiles lost),P(burn-through given tiles lost),P(failure of subsystems given burn-through),
P(LOV/C given failure of subsystem)}
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