Business Project Management – Chapter 7
• X: Anything that can go wrong, will go wrong
• Y: It will go wrong at the worst possible time
• What can go wrong (risk event).
• How to minimize the risk event’s impact (consequences).
• What can be done before an event occurs (anticipation).
• What to do when an event occurs (contingency plans).
– The probability of a X is greatest in the concept, planning and early execution phases of the project
– The cost impact of a X dramatically rises nearer the end of the execution phase and peaks during delivery
• Proactive vs. reactive approach.
• Reduces surprises and negative consequences.
• Prepares team to take advantage of appropriate risks.
• Provides better control over the future.
• Improves chances of completing project within budget and on time.
Step 1: I
Step 2: A
Step 3: RD
Step 4: RC
Generate a X of possible risks through brainstorming, problem identification and risk profiling.
• Don’t focus on events, rather look at event(s) that could produce consequences
• Example: Risk – Failing to meet schedule; should be events like poor estimates, bad weather, shipping delays, etc.
• Macro risks first, then specific events
• Reduces the chance a risk will be missed
– List of questions specifically designed to address known areas of risk
• probability risk will occur
• impact if risk does occur
• Figure 7.5 shows an example of a table listing impacts by objective area (Cost, Time, Scope, Quality)
• Figure 7.6 is a partial example of one type of documentation of the risk scenario analysis (a risk assessment form)
– X matrix
• Major (red); Moderate (yellow); Minor (green) risks
– Failure Mode and Effects Analysis (FMEA)
• Probability x Impact x Detection = Risk Value
– Probability analysis
• Decision trees, NPV, and PERT
-Semi-quantitative scenario analysis
• FMEA: Impact 1 x Probability 5 x Detection 5 = Impact 5 x Probability 5 x Detection 1!
• Reducing the likelihood a risk event will occur – example: testing
• Reducing impact of risk event – example: preplanning alternatives
• Changing the project plan to eliminate the risk or condition
• Paying a premium to pass the risk to another party (e.g., insurance)
• Requiring Build-Own-Operate-Transfer (BOOT) provisions
• Making a conscious decision to accept the risk
– An alternative plan that will be used if a possible foreseen risk event actually occurs.
– A plan of actions that will reduce or mitigate the negative impact (consequences) of a risk event
X and Y Plans
• Technical risks
• Cost risks (Price changes)
• Funding risks (Funding supply)
• Schedule risks (Funds set aside to expedite or “crash” the project to get it back on track)
– X: an event that can have a positive impact (positive risk)
– Four different types of response to an X
• Budget Reserves (risk is identified): at work package or deliverable level
• Management Reserves (risk is unknown): at the project level
X – time added to uncertain activities
• Activities with severe risks
• Merge activities prone to delay
• Non-critical activities that may create a new critical path
• Activities that require scarce resources
Details all identified risks, including descriptions, category, probability of occurring, responses, contiguity plans, owners and current status
– Y involves:
• Execute the risk response strategy, triggering events, initiating contingency plans, watching for new risks
1. Identify proposed changes.
2. List expected effects on schedule and budget.
3. Review, evaluate, and approve or disapprove changes formally.
4. Negotiate and resolve conflicts of change, condition, and cost.
5. Communicate changes to parties affected.
6. Assign responsibility for implementing change.
7. Adjust master schedule and budget.
8. Track all changes that are to be implemented
1. Inconsequential Xs are discouraged
by the formal process.
2. Costs of Xs are maintained in a log.
3. Integrity of the WBS and performance measures is maintained.
4. Allocation and use of budget and management reserve funds are tracked.
5. Responsibility for implementation is clarified.
6. Effect of changes is visible to all parties involved.
7. Implementation of change is monitored.
8. Scope changes will be quickly reflected in baseline and performance measures.
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