Bina Nusantara University

Bina Nusantara University
0134M - Manajemen Proyek
The Risk Management Plan

Week 08
Learning Objectives
Describe the project risk management planning

framework introduced in this chapter.
Define risk identification and the causes, effects, and
integrative nature of project risks.
Apply several qualitative and quantitative analysis
techniques that can be used to prioritize and analyze
various project risks.
Describe the various risk strategies, such as
insurance, avoidance, or mitigation.
Describe risk monitoring and control.
Describe risk evaluation in terms of how the entire risk
management process should be evaluated in order to
learn from experience and to identify best practices.
8-3
Copyright 2012 John Wiley & Sons,

Inc.
PMBOK Risk Management Processes
Plan Risk Management
Identify Risks
Using a quantitative approach for developing a probabilistic model for understanding and
responding to the risks identified.
Plan Risk Responses
Focusing on a qualitative analysis concerning the impact and likelihood of the risks that
were identified.
Perform Quantitative Risk Analysis
Deciding which risks can impact the project. Risk identification generally includes many of
the project stakeholders and requires an understanding of the projects goal, as well as
the projects scope, schedule, budget, and quality objectives.
Perform Qualitative Risk Analysis
Determining how to approach and plan the project risk management activities. An output
of this process is the development of a risk management plan.
Developing procedures and techniques to reduce the threats of risks, while enhancing the
likelihood of opportunities.
Monitor and Control Risks
8-4
Providing an early warning system to monitor identified risks and any new risks. This
system ensures that risk responses have been implemented as planned and had the
effect as intended.

Inc.
Common Mistakes in Managing Project Risk
Not understanding the benefits of risk

management
Not providing adequate time for risk
management
Not identifying and assessing risk using a
standardized approach
8-5

Inc.
Effective & Successful Risk

Management Requires
Commitment by all stakeholders

Stakeholder responsibility
Different risks for different types of projects
8-6

Inc.
Definitions
Risk
An uncertain event or condition that, if occurs, has a

positive or negative effect on the project objectives.
Project Risk Management (PMBOK)
8-7
Includes the processes of conducting risk

management planning, identification, analysis,
response planning, and monitoring and control on a
project; most of these processes are updated
throughout the project. The objectives of Project Risk
Management are to increase the probability and
impact of positive events and decrease the
probability and impact of events adverse to the
project.
Inc.
IT Project Risk Management Processes
8-8

Inc.
Risk Planning
Requires firm commitment by all stakeholders

to a RM approach
Assures adequate resources are in place
Focuses on preparation
8-9

Inc.
Risk Identification
Framework
IT Project Risk Identification Framework
8-10

Inc.
Risk Identification Tools & Techniques
Learning Cycles
Brainstorming
Nominal Group Technique
Delphi Technique
Interviews
Checklists
SWOT Analysis
Cause & Effect (a.k.a. Fishbone/Ishikawa)
Past Projects
8-11

Inc.
Nominal Group Technique (NGT)

1. Each individual silently writes their ideas on a piece of paper
2. Each idea is then written on a board or flip chart one at a time
in a round-robin fashion until each individual has listed all of his or her
ideas
3. The group then discusses and clarifies each of the ideas
4. Each individual then silently ranks and prioritizes the ideas
5. The group then discusses the rankings and priorities
6. Each individual ranks and prioritizes the ideas again
7. The rankings and prioritizations are then summarized for the group
8-12

Inc.
Risk Check List

Funding for the project has been secured
Funding for the project is sufficient
Funding for the project has been approved by senior management
The project team has the requisite skills to complete the project
The project has adequate manpower to complete the project
The project charter and project plan have been approved by senior
management or the project sponsor
The projects goal is realistic and achievable
The projects schedule is realistic and achievable
The projects scope has been clearly defined
Processes for scope changes have been clearly defined
8-13

Inc.
SWOT Analysis
8-14

Inc.
Cause & Effect Diagram
8-15

Inc.
Risk Analysis & Assessment
Risk = f(Probability * Impact)

Risk assessment focuses on prioritizing risks so that
an effective strategy can be formulated for those risks
that require a response.
Depends on
Stakeholder risk
tolerances
8-16
Cant respond to all

risks!

Inc.

Qualitative Approaches
Expected Value & Payoff Tables

Decision Trees
Risk Impact Table & Ranking
Tuslers Risk Classification
Which risks require a response?
8-17

Inc.
Payoff Table
A
Probability
Schedule Risk
A*B
Payoff
Prob *
Payoff
(In thousands)
(In thousands)
Project completed 20 days early
5%
$ 200
$10
Project completed 10 days early
20%
$ 150
$30
Project completed on Schedule
50%
$ 100
$50
Project completed 10 days late
20%
Project completed 20 days late
5%
$ (50)
100%
8-18

Inc.
$0
($3)
$88
The
Expected
Value
Decision Tree Analysis
8-19

Inc.
Risk Impact Table
0 - 100%
0-10
P*I
Risk (Threats)
Probability
Impact
Score
Key project team member leaves project
40%
1.6
Client unable to define scope and requirements
50%
3.0
Client experiences financial problems
10%
0.9
Response time not acceptable to users/client
80%
4.8
Technology does not integrate with existing application
60%
4.2
Functional manager deflects resources away from project
20%
0.6
Client unable to obtain licensing agreements
5%
0.4
ITProjectRiskImpactAnalysis
8-20

Inc.
Risk
Rankings
Risk (Threats)
8-21
Rankin
g
Response time not acceptable to users/client
Technology does not integrate with existing application
Client unable to define scope and requirements
Key project team member leaves project
Client experiences financial problems
Functional manager deflects resources away from project
Client unable to obtain licensing agreements

Inc.

Quantitative Probability Distributions
Quantitative Approaches
Discrete
Binomial
Continuous
8-22
Normal
PERT
TRIANG

Inc.
Binomial Probability Distribution
8-23

Inc.
Normal Distribution
8-24

Inc.
Normal Distribution
Rules of thumb with respect to observations

Approximately.
68% + 1 standard deviations of mean

95% + 2 standard deviations of the mean
99% + 3 standard deviations of the mean
8-25

Inc.
PERT Distribution
PERT MEAN = (a + 4b + c)/6

Where:
a = optimistic estimate
b = most likely
c = pessimistic
8-26

Inc.
PERT Distribution
8-27

Inc.
Triangular Distribution
8-28

Inc.
Simulations
Monte Carlo
Technique that randomly generates specific values

for a variable with a specific probability
distribution
Goes through a number of trials or iterations and
records the outcome
@RISK
8-29
An MS Project add in that provides a useful tool for

conducting risk analysis of your project plan
http://www.palisade.com/riskproject/default.asp

Inc.
Monte Carlo Simulation
8-30

Inc.
Cumulative Probability Distribution
8-31

Inc.
Sensitivity Analysis Using a Tornado Graph

Tornado
Graph
8-32

Inc.
Risk Strategies
Accept or Ignore
Management Reserves
Contingency Reserves
Part of projects budget
Contingency Plans
Avoidance
Mitigate
Released by senior management
Reduce the likelihood or impact (or both)
Transfer
E.g. insurance
8-33

Inc.
Risk Strategies Depend On
The nature of the risk
Impact on MOV and project objectives
Probability? Impact?
Project constraints
Really an opportunity or threat?
Available resources?
Risk tolerances or preferences of the project

stakeholders
8-34

Inc.
Risk Monitoring & Control
Risk Audits
Risk Reviews
External to project team

Internal
Risk Status Meetings & Reports
8-35

Inc.
Risk Response Plan should include:
A trigger which flags that the risk has occurred

An owner of the risk (i.e., the person or group
responsible for monitoring the risk and ensuring
that the appropriate risk response is carried out)
A response based on one of the four basic risk
strategies
Adequate resources
8-36

Inc.
Risk Evaluation
Lessons learned and best practices help us

to:
Increase our understanding of IT project risk in

general.
Understand what information was available to
managing risks and for making risk-related
decisions.
Understand how and why a particular decision
was made.
Understand the implications not only of the
risks, but also the decisions that were made.
Learn from our experience so that others may
not have to repeat our mistakes.
8-37

Inc.
Copyright 2012 John Wiley & Sons, Inc.

All rights reserved. Reproduction or translation of this work beyond that
permitted in section 117 of the 1976 United States Copyright Act without
express permission of the copyright owner is unlawful. Request for further
information should be addressed to the Permissions Department, John Wiley
& Sons, Inc. The purchaser may make back-up copies for his/her own use
only and not for distribution or resale. The Publisher assumes no
responsibility for errors, omissions, or damages caused by the use of these
programs or from the use of the information herein.
8-38

Inc.

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Bina Nusantara University

0134M - Manajemen Proyek

The Risk Management Plan

Describe the project risk management planning

Copyright 2012 John Wiley & Sons,

PMBOK Risk Management Processes

Plan Risk Management

Plan Risk Responses

Perform Quantitative Risk Analysis

Perform Qualitative Risk Analysis

Monitor and Control Risks

Copyright 2012 John Wiley & Sons,

Common Mistakes in Managing Project Risk

Not understanding the benefits of risk

Copyright 2012 John Wiley & Sons,

Effective & Successful Risk

Commitment by all stakeholders

Copyright 2012 John Wiley & Sons,

An uncertain event or condition that, if occurs, has a

Project Risk Management (PMBOK)

Includes the processes of conducting risk

IT Project Risk Management Processes

Copyright 2012 John Wiley & Sons,

Requires firm commitment by all stakeholders

Copyright 2012 John Wiley & Sons,

IT Project Risk Identification Framework

Copyright 2012 John Wiley & Sons,

Risk Identification Tools & Techniques

Copyright 2012 John Wiley & Sons,

Nominal Group Technique (NGT)

Copyright 2012 John Wiley & Sons,

Risk Check List

Copyright 2012 John Wiley & Sons,

Copyright 2012 John Wiley & Sons,

Cause & Effect Diagram

Copyright 2012 John Wiley & Sons,

Risk Analysis & Assessment

Risk = f(Probability * Impact)

Cant respond to all

Copyright 2012 John Wiley & Sons,

Risk Analysis & Assessment

Expected Value & Payoff Tables

Which risks require a response?

Copyright 2012 John Wiley & Sons,

Project completed 20 days early

Project completed 10 days early

Project completed on Schedule

Project completed 10 days late

Project completed 20 days late

Copyright 2012 John Wiley & Sons,

Decision Tree Analysis

Copyright 2012 John Wiley & Sons,

Risk Impact Table

Key project team member leaves project

Client unable to define scope and requirements

Client experiences financial problems

Response time not acceptable to users/client

Technology does not integrate with existing application

Functional manager deflects resources away from project

Client unable to obtain licensing agreements

Copyright 2012 John Wiley & Sons,

Response time not acceptable to users/client

Technology does not integrate with existing application