Presented by Frank V. Payne, PMP 1
Meet Your Speaker Frank V. Payne, PMP MBA/HRM, MBA/TM, CPME, CFPM Project Management Evangelist TM 2
Learning Objectives By the end of this presentation, you will be familiar with: Risk Management What is Riskonomics Who should use Riskonomics 3
Why Are You Afraid Of The R Word? 4
Riskonomics Addresses the Triple Constraint 5
PMI Risk Management Professional (PMI-RMP)SM 6
Complexity Of Risk 7
Fundamental Concepts Risk management A management discipline based on the continuous identification and control of events that can cause unwanted change Proper management requires a connection among Risk management Project planning & tracking Measurement & metrics Process improvement activities (project & corporate) Sponsor/contractual & acquisition constraints 8
Risk Management Strategy The scope used to bound the risk management effort Methods and tools to be used for risk identification, risk analysis, risk mitigation, risk monitoring, and communication Project-specific sources of risks How these risks are to be organized, classified, bounded and consolidated Global thresholds, parameters and criteria for taking action on identified risks 9
Risk Management Strategy Risk mitigation techniques to be used, such as prototyping, simulation, alternative designs, or evolutionary development Responsibilities such as control or approval levels Definition of risk measures to monitor the status of the risks Time intervals for risk monitoring or reassessment 10
Structured Risk Statements Risk (severity/importance) = [ probability of adverse event ] X [ impact if the event occurs ] Risks should be stated in a structured manner If adverse event happens, then impact Examples If the customer does not identify a key user requirement, then the system will not perform as the users desire and customer satisfaction will be diminished by 50% 11
Structured Risk Statements Impacts could be to: Cost Schedule Customer satisfaction Quality (functionality/usability/maintainability/ ) 12
Risk Management Objectives of Project Risk Management are to increase the probability and impact of positive events and decrease the probability Introduction and impact of events adverse to the project. (PMBOK Guide 4th Edition) Risk Management Risk Identification Risk Planning Risk Breakdown Structure Risk Monitoring & Control Risk Response Planning What is Riskonomics 13
What is Risk? an uncertain event or condition that, if it occurs, has an effect on at least one project objective. (PMBOK Guide 4 th Edition) project risk is always in the future can have multiple causes may have multiple impacts 14
Objectives of Project Risk Management to increase the probability and impact of positive events and decrease the probability and impact of negative events in the project. (PMBOK Guide 4 th Edition) Plan Risk Management Identify Risks Perform Qualitative Risk Analysis Perform Quantitative Risk Analysis Plan Risk Responses Monitor and Control Risks 15
Risk Events Boston s The Big Dig Project 16
Identify the Problem 17
Know your Stakeholders 18
Gather Requirements 19
Risk Tolerance 20
Types of Risk Scope Risk: Scope creep Hardware defect Software defect Scope gap Dependency change Integration defect Schedule Risk: Project dependencies Parts delay Estimation error Decision delay Hardware delay Resource Risk Outsourcing delays Lack of funds Attrition of resources People joining team late Scarcity of skills 21
Risk Assessment 22
3 Components of Risk 23
Risk Audit Identify project data, tools, operating systems, technology, facilities & personnel Identify business activities & processes within each of the categories Include profiles of significant business unit, departments, & product lines or systems Use a measurement or scoring system that ranks & evaluates business & control risk Implement audit plan through different phases of the project 24
Risk Audit Steps 25
Risk Response Planning 26
Measure what Counts Work Breakdown Schedule (WBS) Risk Breakdown Schedule (RBS) Risk Capability Maturity Model Failure Mode & Effects Analysis (FMEA) 27
5 Levels of Risk Capability Maturity Model 28
Components of Riskonomics 29
Risks vs. Concerns vs. Problems A risk is an event/uncertainty which causes a failure to execute the plan as expected This requires that a plan be in place If you don t yet have a plan, you have a concern I don t know where we re going to get developers We need to bid $X to win, but the true cost is $XX If a risk comes true, then you have a problem I didn t get Dan, and he was key to the effort 30
Why Manage Risk? Since so many things could go wrong (not as you expect), it makes sense to treat the planning in a probabilistic way Set aside extra resources to manage those things that Are most likely to go wrong Cause the worse damage to project success 31
Riskonomics Reality 84% of all capital projects have significant or major risk problems 53% of all capital projects are more than 50% over budget 23% of all capital projects are more than 100% over budget 54% of all capital projects delivers less than 50% of the promised functionality Source: Standish Group, Report: The Chaos Report into Project Failure 32
Risk Events Known-Unknown Risks that know will happen; just don t know when they will happen Unknown-Unknown Risks that do not know will happen nor when they will happen 33
Risk Response Planning Avoidance - Take action to avoid the risk Mitigation - Define actions to take when the risk occurs Transfer - Have someone else handle the risk i.e. insurance Acceptance - Identify the risk as acceptable and let it happen. 34
Problem Statement Problem statement defines issue causing abnormal events within a client s environment 35
Source Impact Map 36
Impact Risk Tolerance Allowance Y - Axis 100K 50K X- Axis 30K 10K 0 0.3 1 Probability The Client is willing to allow a Risk Tolerance of 30% or less at a cost of $30, 000 or less. 37
Risk Assessment Update 80 Hour Rule for Risk Mitigation Conduct Update Risk Assessment Every 2 weeks 38
Summary You should now be familiar with: Risk Management What is Riskonomics Who should use Riskonomics 39
Where To Get More Information Riskonomics : A Scalable Risk Mitigation Process By Frank V. Payne, PMP PMI Risk Management Professional (PMI-RMP)SM Examination Specification By Project Management Institute The Essentials of Risk Management By Michel Crouchy, Dan Galai 40
Questions? Get To Know Us! For more information about PQC International please visit www.pqcinternational.com 41
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