Risk Management

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Chapter 17

• Risk Management

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RISK MANAGEMENT

• RISK MANAGEMENT FOCUSES ON THE FUTURE
• RISK AND INFORMATION ARE INVERSELY RELATED

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RISK MANAGEMENT (CONT.)

• HISTORICALLY, WE FOCUSED OUR ATTENTIONS ON
  SCHEDULE AND COST RISK MANAGEMENT.
• TODAY, OUR PRIMARY EMPHASIS IS ON TECHNOLOGICAL
  RISK MANAGEMENT
• CAN WE DESIGN IT AND BUILD IT?
• WHAT IS THE RISK OF OBSOLESCENCE?

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Definition Of Risk
Risk f(Likelihood, Impact)
event

• Likelihood is the probability of occurrence of an
  event
• Impact is the amount at stake
• Likelihood up ? risk up
• Impact up ? risk up

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Definition Of Risk-2

• Risk f(Hazard, safeguard)
• Hazard source of danger
• Safeguards ways of overcoming
• Hazard up ? risk up
• Safeguard up ? risk down

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Tolerance For Risk

• Risk avoider
• Risk neutral
• Risk seeker

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Risk Management (RM)

• The act or practice of dealing with risk
• Is proactive rather than reactive
• Includes
• Planning for risk
• Assessing (identifying and analyzing) risk issues
• Develop risk handling strategies
• Monitor risk

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Decision-Making Categories

• Decision Making under certainty
• Decision making under risk
• Decision making under uncertainty
• Maximax, maximin, minimax, laplace criterion,
  decision trees

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Risk Management Processes

• Risk planning
• Risk assessment
• Risk identification
• Risk analysis/quantification
• Risk handling
• Risk monitoring

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Types Of Risks (General)

• Business risks
• Insurable (pure) risk
• Direct property damage
• Indirect consequential loss
• Legal liability
• Personnel

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Risk Planning

• Develop and document a comprehensive risk
  management strategy
• Determine the methods to be used
• Plan for adequate resources
• Develop Risk Management Plan (RMP)

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Risk Assessment

• One of the most important phases of risk
  management process
• Risk identification
• Identify all potential risk issues
• Life-cycle risk analysis
• Risk analysis

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Types Of Risk (PMI Method)

• External unpredictable
• External predictable
• Internal non-technical
• Internal technical
• Legal

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• After risk analysis convert the results into risk
  levels.
• High risk
• Moderate risk
• Low risk
• be careful with uncertainty statements

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Risk Handling

• Deal with known risk, identify who is responsible
• Assumption (retention)
• Avoidance
• Control (mitigation)
• Transfer

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• Assumption
• I know the risk exists, I am aware of
  consequences, I accept the risk should it occur
• Avoidance
• I will not accept this option, change the design,
  change the requirements
• Risk control
• I will take necessary measures to prevent
  unfavorable results

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• Risk transfer
• I will share the risk through insurance or
  warranty
• Which method to use?

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Risk Monitoring

• Earned Value
• Program metrics formal periodic performance
  assessments
• Schedule performance monitoring
• Technical performance measurement product design
  assessment

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How Much Risk Is Acceptable?

• High tolerance for risk
• Medium tolerance for risk
• Low tolerance for risk