information technology project management managing it project risk
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Information Technology Information Technology Project ManagementProject Management
Managing IT Project Risk
OutlineOutline
Defining IT FailureDefining Risk and Risk ManagementRisk Management Cycle
– Risk Identification– Risk Analysis– Risk Handling– Risk Monitoring
What do we mean by failure?What do we mean by failure?Lyytinen (1988) distinguishes between “development failure”
and “use failure”A more detailed categorization of IT failure would include:
– system grossly exceeds original budget– system grossly exceeds original schedule– system never functions technically– system functions, but quality is so poor that, for all practical purposes,
system is not usable– system functions but is not used--users reject the system because it is
cumbersome to use or because they have no incentive to use it– system functions, but completely lacks originally promised
functionality or fails to fit the task it was designed to support
“RunawaySystems”
Some Observations about Some Observations about Success/FailureSuccess/Failure
TotalFailure
TotalSuccess
Stakeholder A Stakeholder B
Success/Failure is often viewed as a binary classification
Success/Failure should be viewed along a continuum
Success is in the eyes of the beholder
Why IT Projects Fail:Why IT Projects Fail:The Traditional WisdomThe Traditional Wisdom
Systems are specified and initiated by IS without sufficient input from the user(s)
Inadequate estimates of development cost and time
Lines of responsibility not clearly specifiedUser acceptance test delayed until the project is
completedInadequate system testingImplementation difficulties
Warning SignsWarning Signs(Keider, 1984)(Keider, 1984)
Inadequate status reportingIsolationLack of schedule changesOveremphasis on how a system will be builtPremature programmingStaff reassignments
Defining Risk and Risk Defining Risk and Risk ManagementManagement
A project risk is a potential problem that would be detrimental to a project’s success should it materialize
Risk management is the identification and response to potential problems with sufficient lead time to avoid a crisis
Risk Management CycleRisk Management Cycle
RiskIdentification
RiskAnalysis
RiskHandling
RiskMonitoring
Risk IdentificationRisk IdentificationBusiness risk
– Market risk– Shifts in business strategy or senior management
Technical risk– Design and development problems– Testing and maintenance problems– Technical uncertainty
Project risk– Budget– Schedule– Personnel– Requirements problems
Tools for Identifying RisksTools for Identifying Risks
Checklists (e.g., Boehm’s top ten risk list)Frameworks (e.g., McFarlan’s framework)Questionnaires (e.g., Barki, Rivard, and
Talbot survey)
Risk Factors: What the Risk Factors: What the Literature Says . . .Literature Says . . .
Technological newnessApplication sizeApplication complexityTask complexityProject team expertiseOrganizational environmentMagnitude of potential loss
Barki, Rivard, and Talbot, 1993
What Project Managers SayWhat Project Managers Say0 2 4 6 8 10 12
Lack of top management commitment tothe project
Failure to gain user commitment
Misunderstanding the requirements
Lack of adequate user involvement
Failure to manage end user expectations
Changing scope/objectives
Lack of required know ledge/skills in theproject personnel
Lack of frozen requirements
Introduction of new technology
Insufficient/inappropriate staff ing
Conflict betw een user departments
HKG
USA
FIN
Risk AnalysisRisk Analysis
For each identified risk, evaluate the probability of occurrence
For each identified risk evaluate the impact if the risk should occur
Prioritize your risk handling effort based on both probability and impact
Assigning ProbabilitiesAssigning Probabilities
Here we ask: “What is the likelihood that something will go wrong?”
Establish a scale that reflects the perceived likelihood of a risk– Probability scales are commonly used– Can be qualitative or quantitative
e.g. highly improbable, improbably, moderate, likely, highly likely
e.g. 0-100% probability
Example Scale for Evaluation Example Scale for Evaluation of Probabilityof Probability
Score Probability
0 Highly unlikely (1% or less)
1 Very unlikely (1% - 24%)
2 Unlikely (25% - 49%)
3 Likely (50% - 74%)
4 Very likely (75% -94%)
5 Highly likely (95% or more)
Assessing ImpactAssessing Impact
Here we ask: “What is the damage or impact if something does go wrong?”
Three factors can be used to assess impact– Nature of the risk (i.e. the problems that are
likely if it occurs)– Scope of the risk (i.e. how serious is the risk
and how much of the project will be affected?)– Timing of the risk (i.e. when and for how long
will the impact be felt)
Example Scale for Evaluation Example Scale for Evaluation of Impactof Impact
Score Impact
0 Ignorable
1 Unimportant
2 Less important
3 Important
4 Very important / serious
5 Catastrophic / critical
Risk Matrix ExampleRisk Matrix Example
Risk Factor Probability Impact Probability x Impact
Priority
A 2 5 10 1
B 4 2 8 3
C 3 3 9 2
Risk HandlingRisk Handling Risk prevention
– Develop options to reduce the potential of the problem occurring Risk avoidance
– Accepting a lower risk (another solution) to avoid a high risk Risk remedy
– Monitoring risk status and developing solutions to reduce effect when risk becomes a problem
Risk assumption– Decision to accept the risk should it occur
Risk reduction– Obtaining additional information that will reduce risk (e.g., prototyping,
incremental development)
Risk MonitoringRisk Monitoring
Should be done periodically – (e.g., when certain milestones are reached, at the end
of project phases, at steering committee meetings, etc.)
Useful to regularly assess and update project risk exposure
Senior management should be involved in monitoring and should be aware of exposures
Listen to the project group
Establishing Risk Referent Establishing Risk Referent LevelsLevels
Risk referent levels can be set to define regions of acceptable and unacceptable risks
Three typical risk referent levels– Cost overrun– Schedule slippage– Performance criteria
ExampleProjectedScheduleOverrun
Projected Cost Overrun
Region in whichproject terminationwill occur
Referent level for cost/schedule overruns
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