Essentials of Risk Management
Essentials of Risk Management
Essentials of Risk Management
What is a Project?
A project is a temporary endeavor undertaken to
Temporary
Risk
RISK can be defined as the threat or probability that
an action or event, will adversely or beneficially affect an organization's ability to achieve its objectives*.
In simple terms risk is Uncertainty of Outcome,
either from pursuing a future positive opportunity, or an existing negative threat in trying to achieve a current objective.
* Luhmann 1996:3
TODAY
FUTURE
If not identified, may become issue later Risk POTENTIAL negative impact to project
Identification
Risk Types Business (risk to overall business) Delivery (risk to project delivery) Technical (specific to particular technology)
Cause
Impact
"The vendor not meeting deadline will mean that budget will be exceeded"
Quantification
Risk
Impact
Likelihood
Quantification
Title Score Description 20 Highly unlikely to occur based on current information, as the circumstances likely to trigger the risk are also unlikely to occur. Unlikely to occur. However needs to be monitored as certain circumstances could result in this risk becoming more likely to occur during the project. Likely to occur as it is clear that the risk may eventuate. Very likely to occur, based on the circumstances of the project. Highly likely to occur as the circumstances that will cause this risk to eventuate are also very likely to eventuate
LIKELIHOOD
Very low
20
40 60 80
Very High
100
Title
Score 20 40
Impact * < 5%
IMPACT
Medium
High Very high
60
80 100
5 - 10 %
10 - 25 % > 25%
Quantification
Priority = [Likelihood + Impact] -----------------------------2
Priority Score Priority Rating Priority Color ----------------------------------------------------------------------020 Very Low Black 2140 Low Green 4160 Medium Yellow 6180 High Orange 81100 Very High Red
Risk ID Likelihood Impact 1.1 20 80 1.2 80 60 1.3 100 40 2.1 40 20 2.2 90 100 2.3 20 80
Priority 50 70 70 30 95 50
Response
Address risks rated based on severity . Very-High-rated risks warrant the highest priority, and should be addressed before the less severe classes of risks, and should be tracked until they can be downgraded. Create a Risk Schedule to address these risks. In a risk schedule, for every risk identified, preventive actions are listed that are required to reduce the likelihood of the risk occurring, as well as the contingent actions needed to reduce the impact to the project should the risk occur.
Risk ID 2.2 Rating Very High Preventive Actions Clearly identify the expected business benefits Action Resource Project sponsor Action Date DDMMYY Contingent Actions Measure the actual business benefits achieved by the project Stakeholders need to sign-off on the requirements. Action Resource Project Manager Action Date DDMMYY
2.3
High
DDMMYY
Project Manager
DDMMYY
Mileage
1.1
40
60
(40+60)/2 = 50
Medium
Price less than $15,000 Owner may increase price or add additional cost after finalizing the deal. Hidden cost
ID 2.1
Likelihood 20
Impact 40
Specific make and model Not getting the same model after finalizing the car
ID 4.1 Likelihood 20 Impact 40 Priority (20+40)/2 = 30 Low
5.1
80
80
(80+80)/2 = 80
High
Risk ID 5.1
Rating High
Preventive Actions Get a Car Fax report and check mileage history Check website rating before initiating a purchase
1.1
Medium
Project sponsor
DDMMYY
Project Manager
DDMMYY
Summary
Risk management is a project management tool for handling events
that might adversely impact the project, thereby increasing the likelihood of success. A sound process like this removes the uncertainty and empowers the project manager to complete their project within schedule and within budget.
Mitigate Risk Control Risk Control Risk Identify Risk Analyze Risk Asses Risk Prioritize Risk Measure Risk