Proj586 Week 5 – Risk Management
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Week 5 – Risk Management
This week, there are two deliverables:
- Create risk matrix, and address how risk response plans would be addressed using the template(excel sheet included)
- Essay addressing the following: total 2 pages for point a and b
- To help guide you through this deliverable, please follow the six step process of risk management below:
Project Management practitioners generally take a slightly different view of risk on a project than we have seen above. To begin, as mentioned above, risks are not necessarily bad. A project has both good and bad risks which are referred to as positive and negative risks. Some use the terms opportunities and negative risks to differentiate the two. For positive risks, the project manager may choose to attempt to make them happen or do nothing at all. Conversely, for negative risks, a project manager may choose to prevent them from happening or do nothing at all. What actions a project manager may take depend on a number of things.
In the practitioner world, risk management is a stepwise process. In step one, we do this; in step two, we do that. So it is often best to describe the process in a stepwise fashion as shown below.
Plan Risk Management: The plan risk management will use the project charter, project plan, project documents, enterprise environmental factors, and organizational process assests as inputs for the risk planning process. In Plan Risk Management, we review the following areas of risk management.
Methodology: In this section, we determine how we will perform the following sets of the risk management process. The risk management process allows the project manager some latitude in how to perform various steps of the process. Here we review this and decide how to proceed.
Roles and Responsibilities: In this section, we denote who is responsible for what steps within the risk management process.
Budget: How much are you willing to spend to do this process? Schedule. When and how much time are you planning on devoting to risk management? Risk categories. How do you plan on subdividing risks for ease of understanding?
Definitions of Risk and impact: Here you create your rating system that you will use later to rate your risks. This ensures all team members understand and are rating risks in the same manner.
Stakeholder Tolerance: How much risk are the stakeholders willing to accept on this project?
Identify risk: In this step, we begin to identify both positive and negative risks associated with our project. There are a number of methods recommended to do this. These include brainstorming, Delphi, nominal group, interviewing, SWOT, Fishbone diagramming, checklist analysis, and assumption analysis. The output of this step is called a risk register which simply put is a list of identified risks. The PMBOK further indicates that we will use the project plan and documents, project agreements/contracts, procurement information, enterprise environmental factors, and organizational process assets to achieve the following outputs: (a) Risk ter, (b) Risk Report, and (c) Project Document Updates.
Qualitative Risk Analysis: In this process, we rank our risks. We examine the impact of each risk and the probability of each risk. Impacts and probabilities are listed on a scale of either one to three, one to five, high to low, or very high to very low. Below is an example of a very high to very low scale. Each risk is rated based on its impact and probability to give it a color code. Red risks usually require a proactive response, yellow risks usually require a contingency plan, and green risks are placed on a watch list as they are too low in impact or probability to require an action plan.
Taken from Polaris: Lessons in Risk Management
Quantitative Risk Analysis: In this step, we further analyze our red risks from qualitative risk analysis. In this way, we further refine which of the red risks are the most important to do something about. There are a number of methods available to do this step, such as simulations, expected monetary value, and decision trees.
Plan Risk Responses: Now that we have analyzed our project’s risks, it is now time to plan proactive and reactive response plans for those risks needing them. In the practitioner world, there are a number of possible responses for a positive risk and a number of possible responses for a negative risk. Let’s start with the positive risks.
Exploit: Exploitation ensures the positive risk will occur. Work is added to the WBS to ensure the risk occurs.
Enhance: Enhance means just that—enhance to probability of the risk occurring or enhance its impact should it occur.
Share: Partner with another party to help ensure the risk occurs.
Active Acceptance: In active acceptance, no proactive action is taken to increase the likelihood the risk will occur. However, a contingency plan is created so that should the risk occur, the project team will be ready to take advantage of it.
Passive Acceptance: In passive acceptance, nothing proactive or reactive is done concerning this risk. This method is usually reserved for green risks on the risk register.
Now let’s look at negative risk responses.
Avoid: To avoid a negative means to prevent the risk from happening in the first place. This is usually done by removing the work from the WBS in which the risk would have occurred.
Mitigate: To mitigate means to lessen the impact or lessen the chance the risk will occur.
Transfer: To transfer a risk means to transfer the responsibility for that risk to a third party. This is normally accomplished by insurance or hiring contractors to do the work.
Active Acceptance: In active acceptance, no proactive action is taken to decrease the likelihood of occurrence. A contingency plan can be created so the team is ready to address the risk immediately, in case the risk occurs.
Passive Acceptance: In passive acceptance, nothing proactive or reactive is done concerning this risk. This method is usually reserved for green risks on the risk register.
Control Risks: In this final process, the project monitors the project to ensure the risk plans and responses are working to assist in the project’s success. We do this through project status meetings, risk audit, risk reassessments, and the creation of workarounds. A workaround is a plan created for a newly discovered risk.
- Using the Risk Matrix template located in the Project Templates section near the top of this page, identify five positive and five negative risks that could occur on this project, and complete the risk matrix.
Explanation & Answer
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