Avneet Mathur - Essentials of Risk Management

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Risky Business
Essentials of Risk Management
Avneet Mathur (PMP)
avneet_mathur_at_hotmail.com
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What is a Project?

• A project is a temporary endeavor undertaken to
  produce a unique product or service
• Temporary Definitive beginning and end
• Unique New undertaking, unfamiliar ground

Unique
Temporary
Characteristics of Projects
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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 19963
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Issue vs. Risk
RISK
ISSUE
TODAY
FUTURE
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Issue vs. Risk
RISK
ISSUE
If not fixed today, task stops
If not identified, may become issue later
Issue already impacting the cost, time or quality
Risk POTENTIAL negative impact to project
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Whats the Plan?
Identification
Quantification
Response
Monitoring and Control
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Identification

• Risk Types
• Business (risk to overall business)
• Delivery (risk to project delivery)
• Technical (specific to particular technology)

Vendor not meeting deadline
Budget will be exceeded
Cause
Impact
"The vendor not meeting deadline will mean that
budget will be exceeded"
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Quantification
Risk
Impact
Likelihood
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Quantification
Title Score Description
Very low 20 20 Highly unlikely to occur based on current information, as the circumstances likely to trigger the risk are also unlikely to occur.
Low 40 Unlikely to occur. However needs to be monitored as certain circumstances could result in this risk becoming more likely to occur during the project.
Medium 60 Likely to occur as it is clear that the risk may eventuate.
High 80 Very likely to occur, based on the circumstances of the project.
Very High 100 Highly likely to occur as the circumstances that will cause this risk to eventuate are also very likely to eventuate
LIKELIHOOD
Title Score Description Impact
Very low 20 Insignificant impact on the project. -
Low 40 Minor impact on the project. lt 5
Medium 60 Measurable impact on the project. 5 - 10
High 80 Significant impact on the project. 10 - 25
Very high 100 Major impact on the project. gt 25
IMPACT
Deviation in scope, scheduled end-date or
project budget
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Quantification
Priority Score Priority Rating Priority
Color --------------------------------------------
--------------------------- 020 Very
Low Black 2140 Low Green 4160
Medium Yellow 6180 High
Orange 81100 Very High Red
Priority Likelihood Impact
------------------------------ 2
Risk ID Likelihood Impact Priority Rating
1.1 20 80 50 Medium
1.2 80 60 70 High
1.3 100 40 70 High
2.1 40 20 30 Low
2.2 90 100 95 Very High
2.3 20 80 50 Medium
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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 Rating Preventive Actions ActionResource ActionDate ContingentActions ActionResource ActionDate
2.2 Very High Clearly identify theexpected businessbenefits Project sponsor DDMMYY Measure the actual business benefits achieved by the project Project Manager DDMMYY
2.3 High All requirements need to be well defined. Project sponsor DDMMYY Stakeholders need to sign-off on the requirements. Project Manager DDMMYY
               

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Monitoring and Control

• Continually monitor risks to identify any change
  in the status, or if they turn into an issue.
• Hold regular risk reviews
• To identify actions outstanding, risk probability
  and impact
• Remove risks that have passed
• Identify new risks

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Case Study Buying a Used Car online

• Requirements
• Buy a car over the internet
• Price less than 15,000
• Reliable
• Specific make and model
• Mileage

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Case Study Buying a Used Car online

• Sample Risks
• Buy a car over the internet
• Most people would say dont! to eliminate the
  risk, but this is a requirement
• Websites that do not have good ratings
• Price less than 15,000
• Owner may increase price or add additional cost
  after finalizing the deal.
• Hidden cost
• Reliable
• Does not need frequent repairs
• Does not breakdown
• Good brand
• Specific make and model
• Not getting the same model after finalizing the
  car
• Mileage
• Odometer rollback

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Case Study Buying a Used Car online

• Risk Quantification
• Buy a car over the internet
• Websites that do not have good ratings
• Price less than 15,000
• Owner may increase price or add additional cost
  after finalizing the deal.
• Hidden cost

ID Likelihood Impact Priority
1.1 40 60 (4060)/2 50
Medium
ID Likelihood Impact Priority
2.1 20 40 (2040)/2 30
Low
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Case Study Buying a Used Car online

• Risk Quantification
• Reliable
• Does not need frequent repairs
• Does not breakdown
• Good brand
• Specific make and model
• Not getting the same model after finalizing the
  car

ID Likelihood Impact Priority
3.1 60 100 (60100)/2 80
3.2 20 80 (2080)/2 50
3.3 40 80 (4080) /2 60
High
Medium
Medium
ID Likelihood Impact Priority
4.1 20 40 (2040)/2 30
Low
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Case Study Buying a Used Car online

• Risk Quantification
• Mileage
• Odometer rollback

ID Likelihood Impact Priority
5.1 80 80 (8080)/2 80
High
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Case Study Buying a Used Car online

• Risk Response

Risk ID Rating Preventive Actions ActionResource ActionDate ContingentActions ActionResource ActionDate
5.1 High Get a Car Fax report and check mileage history Project sponsor DDMMYY Avoid cars with no car fax history. Project Manager DDMMYY
1.1 Medium Check website rating before initiating a purchase Project sponsor DDMMYY Avoid suspicious websites or too good to be true deals. Project Manager DDMMYY
               

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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
Measure Risk
Control Risk
Identify Risk
Analyze Risk
Prioritize Risk
Asses Risk
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About the Author
Avneet Mathur is a Certified Project Management
Professional, as awarded by the Project
Management Institute, USA and has been involved
in IT for more than a decade. He holds an MBA
in General Business Administration, with an
additional Master's Degree in Computer Science
and Networking from University of Missouri,
Kansas City. He also has a Bachelor's Degree in
Computer Science from the Aurangabad University,
India. He can be reached at avneet_mathur_at_hotmail.
com
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About Project Perfect

• Project Perfect is a project management software
  consulting and training organisation based in
  Sydney Australia. Their focus is to provide
  organisations with the project infrastructure
  they need to successfully manage projects.
• Project Perfect sell Project Administrator
  software, which is a tool to assist organisations
  better manage project risks, issues, budgets,
  scope, documentation planning and scheduling.
  They also created a technique for gathering
  requirements called Method H?, and sell
  software to support the technique. For more
  information on Project tools or Project
  Management visit www.projectperfect.com.au