-
8/20/2019 Risk Management_ How to Manage Your Project Risk Effectively
1/10
2/20/2016 R i sk M anagem ent: H ow to m anage your pr oj ect r i sk effecti vel y
http://w w w .edupr i sti ne.com /bl og/r i sk- m anagem ent- pr oj ects
[email protected]+1 347 647 9001Request a CallLogin
N ame E-mail Phone no.
Query
Call Me
+1 347 647 9001
Toggle navigation
Home » Blog » Project Management Professional (PMP) » Project Risk Management
S ea rc h t op ic s , ar ti c l es , c at eg Search
Project Risk Management
May 13, 2014PMP, Quantifying risks, Risk Identification, Risk Management, Risk monitoring, Risk response
Risk Management Overview
There is no project or technique that is 100% risk free. Risk in unavoidable when we take projects. However it is theresponsibility of the project manager to ensure that risks are reduced to a minimum. With a proper risk managementin place the risks can be monitored and controlled.
There are broadly four stages of risk management:
● Risk Identification
● Quantifying risks
● Risk response
● Risk monitoring and control
http://www.edupristine.com/blog/tag/pmphttp://www.edupristine.com/blog/tag/quantifying-riskshttp://www.edupristine.com/cahttp://www.edupristine.com/cahttp://www.edupristine.com/camailto:[email protected]://moodle.edupristine.com/http://www.edupristine.com/blog/managing-project-riskhttp://www.edupristine.com/blog/tag/risk-responsehttp://www.edupristine.com/blog/tag/risk-monitoringhttp://www.edupristine.com/blog/tag/risk-managementhttp://www.edupristine.com/blog/tag/risk-identificationhttp://www.edupristine.com/blog/tag/quantifying-riskshttp://www.edupristine.com/blog/tag/pmphttp://www.edupristine.com/blog/category/project-management-professional-pmphttp://www.edupristine.com/home/updateshttp://www.edupristine.com/http://www.edupristine.com/cahttp://moodle.edupristine.com/mailto:[email protected]://www.edupristine.com/http://www.edupristine.com/ca
-
8/20/2019 Risk Management_ How to Manage Your Project Risk Effectively
2/10
2/20/2016 R i sk M anagem ent: H ow to m anage your pr oj ect r i sk effecti vel y
http://w w w .edupr i sti ne.com /bl og/r i sk- m anagem ent- pr oj ects 2
Classic examples of poor risk management leading to project failures
1. Lufthansa Systems Germany- Airline Ticket reservation System cancelled after 2 years. Although littleinformation was available, the major reason was cited to be poor feasibility study and bad risk management
2. Los Angeles Unified School District- New payroll system goes wrong. Some teachers are paid $10000 for onemonth’s work while others are paid 20 cents
Reason cited was difficulty in cleaning the legacy data and poor training of the system
3.Qantas Australian Airline- Failure to engage the engineers in requirement gathering and testing of the system“Jetsmart” the new engineering parts system led to a system that was unusable by the engineers
In all these examples either the risks were not identified or were not properly monitored and controlled. Failure inany part of the risk management cycle can make the system unusable.
Risk Factors
● Probability of occurrence
● Range of outcome
● Timing of occurrence
● Frequency of the risk event
Risk Management Plan
A risk management plan comprises of the following:
● Roles, responsibilities and methodology
● Classification of risks
http://www.edupristine.com/blog/what-can-you-learn-from-project-failurehttp://www.edupristine.com/wp-content/uploads/2014/05/11.png
-
8/20/2019 Risk Management_ How to Manage Your Project Risk Effectively
3/10
2/20/2016 R i sk M anagem ent: H ow to m anage your pr oj ect r i sk effecti vel y
http://w w w .edupr i sti ne.com /bl og/r i sk- m anagem ent- pr oj ects 3
● Probability of risks and impact
● Reporting of risks and risk tracking
Types of risks in projects
There are basically four types of risks in project management
● Scope risk- This includes changes in scope of the project due to changes in complexity or changes in dependency
or any hardware or software changes
● Scheduling risk- This includes delays due to scheduling issues like vendor delays, error in estimation or delay inacquisition. A common method of avoiding scheduling risks is by critical path method
● Resource issues- This includes risks due to outsourcing and personnel related issues. A common resource risk isattrition risks. Availability of funds can also be an issue. Another area which needs the attention of the projectmanager is outsourcing because it is not under the direct purview of the project manager.
● Technology risks- This includes risks arising out of hardware or software failure or due to outdating of thehardware and software.
Risk Identification techniques for Project Management
● Information gathering techniques
- Brainstorming- Here a lot of thinking goes among the team members to identify the possible risks
- Delphi technique- Here a questionnaire is distributed to the experts and their response is collected. The process isthen iterated several times so that a consensus of opinion is reached.
- Root cause Analysis- Here a problem is identified, the cause is analysed and action is taken so that the problemdoes not occur in future.
● Checklist Analysis- Here a checklist is made of all the possible problems that may occur and care is taken so thatwe prevent the risk
● SWOT- A SWOT analysis helps us to focus the risk identification on the strengths and weakness of the project aswell as opportunities and threats.
● Influence diagrams- An influence is a visual representation of a decision problem. Influence diagrams help toidentify the decisions, uncertainties and objectives and how they influence each other.
Example of an influence diagram for a product decision
539Shar e s
↓Get our articles delivered to your inbox. Subscribe * Email Subscribe Now! ↑
-
8/20/2019 Risk Management_ How to Manage Your Project Risk Effectively
4/10
2/20/2016 R i sk M anagem ent: H ow to m anage your pr oj ect r i sk effecti vel y
http://w w w .edupr i sti ne.com /bl og/r i sk- m anagem ent- pr oj ects 4
Source: smartdraw
Fish bone diagram- Also known as cause and effect diagram it is one of the commonly used method for risk identification. In this method the various causes of a problem are categorised under People, machine, environment,measures and methods category. Very useful for project of all kinds
2 7 1
1 8 9
9
https://www.smartdraw.com/examples/view/product+decision+influence+diagram+flowchart/http://www.edupristine.com/wp-content/uploads/2014/05/21.png
-
8/20/2019 Risk Management_ How to Manage Your Project Risk Effectively
5/10
2/20/2016 R i sk M anagem ent: H ow to m anage your pr oj ect r i sk effecti vel y
http://w w w .edupr i sti ne.com /bl og/r i sk- m anagem ent- pr oj ects 5
source: salesperformance
The above diagram shows the risk management using fish bone diagram for Sales and Marketing business
Probability Impact Matrix- It is a qualitative method of risk identification. In this method. It categorises the risk and and its impact based on the probability of the occurrence of the risk
Impact
Probability Very less Minor Moderate Major Catastrophic
RareLow Low Low Medium Medium
UnlikelyLow Low Medium Medium Medium
Moderate Low Medium Medium Medium High
LikelyMedium Medium Medium High High
Very likelyMedium Medium High High High
The risks which have high impact and high probability of occurrence are highlighted n red. They are the ones thatshould be more emphasized on. All risks which fall in the red zone are the one that are unacceptable. Risks in yellow
http://salesperformance.com/help-sales-managers-put-out-the-fires-to-improve-results-this-yearhttp://www.edupristine.com/wp-content/uploads/2014/05/31.png
-
8/20/2019 Risk Management_ How to Manage Your Project Risk Effectively
6/10
2/20/2016 R i sk M anagem ent: H ow to m anage your pr oj ect r i sk effecti vel y
http://w w w .edupr i sti ne.com /bl og/r i sk- m anagem ent- pr oj ects 6
zone are the ones that can be tackled. Risks in green zone are the ones that will least bother us
Expected value method- Its a quantitative method of risk identification and risk analysis. In this method theexpected value of the decision tree alternatives is used to arrive at a decision.
EMV of decision 1= 10000-9000=1000
EMV of decision 2 =3200-8000=-4800
Hence choose decision 1
Risk Response
The Process of developing action to enhance opportunities and to reduce the threat is called Risk Response.
The following thing broadly encompass risk response:
● Strategies for negative risks
● Strategies for positive opportunities
● Contingency Plan
Strategies for threats are basically:
- Eliminate the threat
- Transfer the threat to a third party
- Reduce the threat
http://www.edupristine.com/wp-content/uploads/2014/05/41.png
-
8/20/2019 Risk Management_ How to Manage Your Project Risk Effectively
7/10
2/20/2016 R i sk M anagem ent: H ow to m anage your pr oj ect r i sk effecti vel y
http://w w w .edupr i sti ne.com /bl og/r i sk- m anagem ent- pr oj ects 7
Strategies for opportunities are:
- Ensure that the opportunities definitely happen
- Ensure that the probability or impact of the opportunities increase
Risk Monitoring and Control
The purposes of risk monitoring and control are:
● Monitoring existing risks
● Identifying new risks
● Implementing risk response plans
● To see of a risk can be retired
● Audit of risk management policy
So this is how you must ideally manage risks for your project in order to make it successful. Incase of any doubts or queries, kindly get back to us.
Related Links you will like
SMART GOALS FOR PROJECT MANAGEMENT
TIPS FOR EFFECTIVE PROJECT MEETINGS
http://www.edupristine.com/blog/tips-for-effective-project-meetings?utm_source=blog&utm_medium=relate-link&utm_term=related&utm_campaign=engagementhttp://www.edupristine.com/blog/smart-goals-project-management?utm_source=blog&utm_medium=relate-link&utm_term=related&utm_campaign=engagement
-
8/20/2019 Risk Management_ How to Manage Your Project Risk Effectively
8/10
2/20/2016 R i sk M anagem ent: H ow to m anage your pr oj ect r i sk effecti vel y
http://w w w .edupr i sti ne.com /bl og/r i sk- m anagem ent- pr oj ects 8
PMP: MANAGING YOUR TEAM EFFECTIVELY
Related Blog Posts
Financial Model: Libatech Limited Liability CompanyProblems of Small Data and How to Handle ThemCafé Coffee Day – IPO Valuation ModelEduPristine is once again CFA Approved Provider for Financial Modeling Course in 2016
Too many Accounting jobs, but very few suitable candidates, why?
Comments
7 comments
Top comments
Piyush Shah 1 week ago - Shared publicly
Interesting article....
· Reply
Ambuj Atreya shared this via Google+ 5 months ago - Shared publicly
· Reply
Enilde Silva Lima 7 months ago - Shared publicly
Before..!?
Add a comment
http://www.edupristine.com/blog/suitable-candidate-for-accountiinghttp://www.edupristine.com/blog/suitable-candidate-for-accountiinghttp://www.edupristine.com/blog/ipo-valuation-model-ccdhttp://www.edupristine.com/blog/ipo-valuation-model-ccdhttp://www.edupristine.com/blog/risk-management-projects?google_comment_id=z12lytszouzusf02l23xe11hcwyki54pc04https://apis.google.com/wm/1/106303272164333744562https://apis.google.com/wm/1/+AmbujAtreya/posts/ACSv1LwNjmphttps://apis.google.com/wm/1/115357080692618016608http://www.edupristine.com/blog/risk-management-projects?google_comment_id=z12yypuwnoicyvgyd04cihcgetvixrqjgwg0khttps://apis.google.com/wm/1/108239192365736572429http://www.edupristine.com/blog/suitable-candidate-for-accountiinghttp://www.edupristine.com/blog/edupristine-cfa-approved-provider-for-2016http://www.edupristine.com/blog/ipo-valuation-model-ccdhttp://www.edupristine.com/blog/managing-small-datahttp://www.edupristine.com/blog/financial-model-of-libatech-llchttp://www.edupristine.com/blog/project-management-manage-your-team?utm_source=blog&utm_medium=relate-link&utm_term=related&utm_campaign=engagement
-
8/20/2019 Risk Management_ How to Manage Your Project Risk Effectively
9/10
2/20/2016 R i sk M anagem ent: H ow to m anage your pr oj ect r i sk effecti vel y
http://w w w .edupr i sti ne.com /bl og/r i sk- m anagem ent- pr oj ects 9
· Reply
Linda Bradley via Google+ 11 months ago (edited) - Shared publicly
Identify and kill the risks involved in project Management before they kill your project.
http://bit.ly/1FkYwpq
· Reply
Aurangzeb Khan 5 months ago - Shared publicly
Excellent presentation with so many valuable information for betterment.
Thank you very much.
· Reply
Suryaprakash Vuppaladhadyam Rathnam 6 months ago - Shared publicly
Excellent presentation. It is exhaustive and informative.
Thanks
· Reply
victor osmar mencia lezcano 7 months ago - Shared publicly
Excelente articulo sobre la GESTION DE RIESGOS en un PROYECTO
Translate
· Reply
About the Author
EduPristine
Trusted by Fortune 500 Companies and 10,000 Students from 40+ countries across the globe, it is one of the leadingInternational Training providers for Finance Certifications like FRM®, CFA®, PRM®, Business Analytics, HR Analytics, Financial Modeling, and Operational Risk Modeling. EduPristine has conducted more than 500,000 man-hours of quality training in finance.
About | Sitemap | Partners | T & C | Privacy Policy | Contact
Disclaimer
Global Association of Risk Professionals, Inc. (GARP®) does not endorse, promote, review or warrant the accuracy
of the products or services offered by EduPristine for FRM® related information, nor does it endorse any pass rates
claimed by the provider. Further, GARP® is not responsible for any fees or costs paid by the user to EduPristine nor
is GARP® responsible for any fees or costs of any person or entity providing any services to EduPristine Study
https://twitter.com/edupristine/http://www.linkedin.com/company/edupristine/https://plus.google.com/112352201586522582395/postshttps://www.facebook.com/edupristinehttps://play.google.com/store/apps/details?id=com.onelearn.flashapp.edupristinehttp://www.edupristine.com/ca/contact-us/http://www.edupristine.com/ca/privacy-policy/http://www.edupristine.com/ca/terms-and-conditions/http://www.edupristine.com/ca/authorized-training-partners/http://www.edupristine.com/sitemap.xmlhttp://www.edupristine.com/ca/about/https://plus.google.com/u/1/107676630840999629830http://www.edupristine.com/cahttp://www.edupristine.com/blog/risk-management-projects?google_comment_id=z12xyz4gaoynelesq22xgpvhywnjzp3yy04https://apis.google.com/wm/1/102056608641610957756http://www.edupristine.com/blog/risk-management-projects?google_comment_id=z122t5pptxzowncao04ch1tg2znzxncwkechttps://apis.google.com/wm/1/100363849315135631706http://www.edupristine.com/blog/risk-management-projects?google_comment_id=z13euxcqhs3cef0iq04cgbxx5muiu34hmko0khttps://apis.google.com/wm/1/116017269199230330906http://bit.ly/1FkYwpqhttps://apis.google.com/wm/1/112883976566650391248/posts/Dn5mw7XbhMehttps://apis.google.com/wm/1/112883976566650391248
-
8/20/2019 Risk Management_ How to Manage Your Project Risk Effectively
10/10
2/20/2016 R i sk M anagem ent: H ow to m anage your pr oj ect r i sk effecti vel y
htt // d i ti /bl / i k t j t 10
Program. FRM®, GARP® and Global Association of Risk Professionals®, are trademarks owned by the GlobalAssociation of Risk Professionals, Inc
CFA Institute does not endorse, promote, or warrant the accuracy or quality of the products or services offered by
EduPristine. CFA Institute, CFA®, Claritas® and Chartered Financial Analyst® are trademarks owned by CFAInstitute.
Utmost care has been taken to ensure that there is no copyright violation or infringement in any of our content. Still,in case you feel that there is any copyright violation of any kind please send a mail to [email protected] and
we will rectify it.
Popular Blogs: Whatsapp Revenue Model | CFA vs CPA | CMA vs CPA | ACCA vs CPA | CFA vs FRM
2015 © Edupristine. ALL Rights Reserved.
Welcome to EduPristine ×
Email
Phone
Submit
http://www.edupristine.com/ca/http://www.edupristine.com/blog/cfa-vs-frmhttp://www.edupristine.com/blog/career-games-acca-vs-cpahttp://www.edupristine.com/blog/cma-vs-cpahttp://www.edupristine.com/blog/cfa-vs-cpahttp://www.edupristine.com/blog/cfa-alternative-investment-whatsapp-revenue-model-speculatedmailto:[email protected]