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By: Anand Bobade (nmbobade@gmail.com)
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PMBOK Chapter 11 :
Project Risk Management (Part 2)
Monitor & Control Risk
Monitoring
& Control
Planning
Plan Risk
management
Identify Risk
Perform Qualitative
Risk Analysis
Perform Quantitative
Risk Analysis
Plan Risk Response
By: Anand Bobade (nmbobade@gmail.com)
Learning Objectives – 11.4 Perform Quantitative Risk Analysis
Definition
Diff. between Qualitative & Quantitative risk Analysis
Why Quantitative Risk Analysis?
Perform Quantitative Risk Analysis: ITTO
Summary
Guidelines for exam questions
By: Anand Bobade (nmbobade@gmail.com)
Introduction – Risk Management Processes
11.1 Plan Risk Management
• Define how to conduct risk management
activities
11.2 Identify Risks
• Determine & document which risks may
affect the project
11.3 Perform Qualitative Risk Analysis
• Prioritize risks by analyzing their probability
& impact.
By: Anand Bobade (nmbobade@gmail.com)
Introduction – Risk Management Processes
11.4 Perform Quantitative Risk Analysis
• Numerically analyze the effect of identified
risks.
11.5 Plan Risk Responses
• How to respond to enhance opportunities &
to reduce threats
11.6 Control Risk
• Track risk, monitor residual risks, identify new
risks, & evaluate effectiveness of risk planning.
By: Anand Bobade (nmbobade@gmail.com)
Numerically analyzing the effect of identified
risks on overall project objectives.
It produces quantitative risk information to support
decision making.
Prioritized Risk
(Qualitative Analysis)
Quantitative Analysis
Impact on project
objectives
11.4 Perform Quantitative Risk Analysis
By: Anand Bobade (nmbobade@gmail.com)
Purpose of this process:
Determine which risk events warrant a response.
Determine overall project risk (risk exposure).
Determine quantified probability of meeting proj. objectives.
Determine cost and schedule reserves.
Identify risks requiring the most attention.
Create realistic & achievable cost, schedule, or scope targets.
11.4 Perform Quantitative Risk Analysis
By: Anand Bobade (nmbobade@gmail.com)
This process can be skipped if Risks doesn’t require this
approach
PM may not consider this process due to insufficient
data to develop analysis models
There is no need to perform in depth Risk analysis for
every project.
PM should exercise expert judgment to decide on the
need.
Availability of Time & budget should be consider to
decide
11.4 Perform Quantitative Risk Analysis
By: Anand Bobade (nmbobade@gmail.com)
11.4 Perform Quantitative Risk Analysis->ITTO
Inputs (6)
• Risk management
plan
• Cost management
plan
• Schedule
management plan
• Risk register
• EEF
• OPA
Tools &
Techniques(3)
• Data gathering and
representation
techniques
• Quantitative risk
analysis & modeling
techniques
• Expert judgment
Outputs
• Project
document
updates
By: Anand Bobade (nmbobade@gmail.com)
By: Anand Bobade (nmbobade@gmail.com)
Risk
Management
Plan
Cost
Management
Plan
Schedule
Management
Plan
Risk Register EEF OPA
11.4 Perform Quantitative Risk Analysis->Inputs
By: Anand Bobade (nmbobade@gmail.com)
Risk
Management
Plan
Defines projects Risk Management Roadmap
Proposed processes & Methods
Resource, Schedule & Budget requirements
Stakeholder - Roles & Responsibilities
Risk Categorization
11.4 Perform Quantitative RA->Inputs->RMP
By: Anand Bobade (nmbobade@gmail.com)
Risk Register
List of Identified Risks
Potential Response
Root Cause
Risk Ranking (from Qualitative analysis)
11.4 Perform Quantitative RA->Inputs->Risk Register
By: Anand Bobade (nmbobade@gmail.com)
Cost
Management
Plan
Both plans are crucial part of
Project Management Plan.
It contains direction on Cost &
schedule, and how to manage it.
They are crucial inputs to
perform numerical analysis .}}
Schedule
Management
Plan
11.4 Perform Quantitative RA->Inputs->CMP & SMP
By: Anand Bobade (nmbobade@gmail.com)
EEF
Commercial
Databases
Academic
studies
Published
checklists
Benchmarking
Industry
studies
Risk attitudes
11.4 Perform Quantitative RA->Inputs->EEF
By: Anand Bobade (nmbobade@gmail.com)
OPA
Categories
Common
Definitions &
terms
Risk statement
format
Templates Lesson learned
11.4 Perform Quantitative RA->Inputs->EEF & OPA
By: Anand Bobade (nmbobade@gmail.com)
Data gathering &
Representation
Techniques
Quantitative Risk
analysis &
Modeling
Techniques
Expert
Judgment
11.4 Perform Quantitative Risk Analysis->T&T
By: Anand Bobade (nmbobade@gmail.com)
Data gathering &
Representation
Techniques
Key Techniques:
Interviewing Probability Distribution
Sensitivity analysis Expected Monetary Value
(EMV):
11.4 Perform Quantitative Risk Analysis->T&T->DG&RT
By: Anand Bobade (nmbobade@gmail.com)
Data gathering &
Representation
Techniques
Interviewing:
• Experience & Historical data
• Quantify probability & impact of Risk
Data based
on Expert
Opinion
Likelihood of completing the project
11.4 Perform Quantitative Risk Analysis->T&T->DG&RT
By: Anand Bobade (nmbobade@gmail.com)
Data gathering &
Representation
Techniques
What is Probability?
• Probability is measurement of
likelihood of occurrence of any event.
Example:
• If you toss a coin, it will either show
heads or the tails.
• 50% chance of showing heads & 50%
chance of showing tails.
What is probability?
• The probability of showing heads or
tails is 50% (or 1/2).
11.4 Perform Quantitative Risk Analysis->T&T->DG&RT
By: Anand Bobade (nmbobade@gmail.com)
Data gathering &
Representation
Techniques
Probability Formula & Example:
• = “Number of favourable events that can
occur” / “Total number of events”
Probability of an
event happening
• = 2 [Coin can either show heads or tail ]
Total number of
events
• = 1
Total number of
favourable events
• = (Number of favourable events)/(Total
number of events)
Probability of
showing heads
• = ½ = 50%
Probability of
showing heads
11.4 Perform Quantitative Risk Analysis->T&T->DG&RT
By: Anand Bobade (nmbobade@gmail.com)
Data gathering &
Representation
Techniques
Probability Example2:
If you throw a dice, what is the probability of the number
3 coming up.
• = “Number of favourable events
that can occur” / “Total number of
events”
Probability of an
event happening
• = 6
[dice can show 1 or 2 or 3 or 4 or 5
or 6]
Total number of
events
• = 1 [You want dice to show no 3]
Total number of
favourable events
• = 1/6 = 16.67%
Probability of
showing heads
11.4 Perform Quantitative Risk Analysis->T&T->DG&RT
By: Anand Bobade (nmbobade@gmail.com)
Data gathering &
Representation
Techniques
Probability Example3:
For given project, Probability of completing one Task
on time is 90%. What is probability of completing all
scheduled task on time?
11.4 Perform Quantitative Risk Analysis->T&T->DG&RT
=100*0.90
= 90%
=90*0.90
=81%
=81*0.90
=72%
=72*0.90
=65%
Task 1 Task 2 Task 3 Task 4
Probability of
Individual Tasks
90% 90% 90% 90%
One Task
(90%)
Two Tasks
(90% of prev.)
Three tasks
(90% of prev.)
All tasks
(90% of prev.)
By: Anand Bobade (nmbobade@gmail.com)
Data gathering &
Representation
Techniques
What is Impact?
• The amount that will have to spend if
any identified risk occurs.
Example:
• During execution, PM identified
Software licenses cost are increased &
will need additional 100 thousand.
• The impact of risk = 100 thousand.
11.4 Perform Quantitative Risk Analysis->T&T->DG&RT
By: Anand Bobade (nmbobade@gmail.com)
Data gathering &
Representation
Techniques
Probability distribution
• Used to plot range of cost & schedule
associated with a risk.
• Used extensively in
modelling & simulations
• Represent uncertainty in
values such as duration of
schedule activities & cost
of project components
Continuous Distribution:
• Used to represent
uncertain event, such as a
outcome of a test or a
possible scenarios in the
decision tree.
• E.g., Flipping a coin
Discrete Distribution:
11.4 Perform Quantitative Risk Analysis->T&T->DG&RT
By: Anand Bobade (nmbobade@gmail.com)
Data gathering &
Representation
Techniques
Continuos distribution
Beta Triangular Normal Uniform
Beta distribution
• Describe uncertainty about probability of occurrence
of an event
• Is based on two shaped parameters
• Range from 0 to 1 & can take several types of shapes.
Triangular distribution:
• Uses estimate values based on the 3 point estimates
• Use only 3 values
• Is used to quantify risks for each of the WBS elements
11.4 Perform Quantitative Risk Analysis->T&T->DG&RT
By: Anand Bobade (nmbobade@gmail.com)
Data gathering &
Representation
Techniques
Normal distribution:
• Is shaped like a bell curve
• The peak of the bell is the Mean/Average
• Used for variables that cluster around
Mean
• Used to show confidence level & variations
11.4 Perform Quantitative Risk Analysis->T&T->DG&RT
By: Anand Bobade (nmbobade@gmail.com)
Data gathering &
Representation
Techniques
Uniform distribution:
• Simplest form of distributions
• All values of same length (equal
probability)
• Need to know upper & lower limits (range)
• Show scenarios where no obvious value is
more likely to happen than the other
11.4 Perform Quantitative Risk Analysis->T&T->DG&RT
By: Anand Bobade (nmbobade@gmail.com)
Data gathering &
Representation
Techniques
Discrete distribution
Discrete
Uniform
Binomial Hypergeometric Etc…
Show uncertain events such as outcome of decisions or
tests (Used in Decision Tree analysis)
They represent several possible outcomes
Each outcome is assigned a probability & each bar
represents an outcome
The sum of all these probabilities works out to 1 or 100%
11.4 Perform Quantitative Risk Analysis->T&T->DG&RT
By: Anand Bobade (nmbobade@gmail.com)
Quantitative Risk
analysis &
Modeling
Techniques
Sensitivity analysis
(Tornado Diagram )
Expected monetary
value (EMV):
11.4 Perform Quantitative Risk Analysis->T&T->QRA&MT
By: Anand Bobade (nmbobade@gmail.com)
Quantitative Risk
analysis &
Modeling
Techniques
Tornado Diagram (Sensitivity Analysis)
Determine impact of risk on just one of
project objectives, while assuming there
is no impact on rest of them.
Determine which risks have most potential impact to project. E.g., Risk1
Provide +ve & -ve impact of each risk & let you choose which risk to take.
Positive
Impact
Negative
Impact
11.4 Perform Quantitative Risk Analysis->T&T->QRA&MT
By: Anand Bobade (nmbobade@gmail.com)
Quantitative Risk
analysis &
Modeling
Techniques
Expected Monetary Value:
It calculates average outcomes when the
future includes scenarios that may or
may not happen.
It is used to convert the risk into a number
Assists PM calculate the contingency reserve
Helps compare a risk with other risks
It helps in selecting the choice which involves less
money to manage the risks. In general, it can be used to
select profitable business scenario or solution.
11.4 Perform Quantitative Risk Analysis->T&T->QRA&MT
By: Anand Bobade (nmbobade@gmail.com)
11.4 Perform Quantitative Risk Analysis->T&T->QRA&MT
Quantitative Risk
analysis &
Modeling
Techniques
Below are 3 risks with Probabilities & Impact. What is the total
cost of managing these risks?
Risk Probability (P) Impact (I) EMV (P * I)
Hardware may cost more 10 % - 10,000 - 1,000
Licenses cost may increase 20 % - 6,000 - 1,200
Resource cost may reduce 90 % + 2,000 + 1,800
Total Cost of all Risks: = (-1000)+(-1200)+(1800) - 400
Expected Monetary Value:
= Probability X Impact
By: Anand Bobade (nmbobade@gmail.com)
11.4 Perform Quantitative Risk Analysis->T&T->QRA&MT
Quantitative Risk
analysis &
Modeling
Techniques
Expected monetary value:
Calculate amount based on percentage
Calculate the Net node value
Calculate value of each options by adding all chances
Select the better value as preferred option: EMV
For example, you have a risk and you
have identified two risk response
strategies to manage this risk.
How will you select the best strategy?
By: Anand Bobade (nmbobade@gmail.com)
11.4 Perform Quantitative Risk Analysis->T&T->QRA&MT
Quantitative Risk
analysis &
Modeling
Techniques
Decision Tree & EMV Example 2:
Decide weather to build new CAR manufacturing plant or
upgrade existing based on demand.
1 Cost of Building a new plant 120 M
2 Cost of Upgrading plant 50 M
Chance of Strong Demand: 60%
# Demand scenario Possible Profit
A New plant - Strong Demand 200 M
B New plant - Week Demand 90 M
C Upgrade – Strong Demand 120 M
D Upgrade – Week Demand 60 M
Note: In first example Project costs are not given.
By: Anand Bobade (nmbobade@gmail.com)
Build /
Upgrade
New Plant
Strong Demand
Week Demand
Upgrade
plant
Strong Demand
Week Demand
11.4 Perform Quantitative Risk Analysis->T&T->QRA&MT
Quantitative Risk
analysis &
Modeling
Techniques
60%
40%
Decision Tree example
60%
40%
Investment= 120M
Investment= 50M
By: Anand Bobade (nmbobade@gmail.com)
Build /
Upgrade
New Plant
Strong Demand
Profit: 200M
Week Demand
Profit: 90M
Upgrade
plant
Strong Demand
Profit: 120M
Week Demand
Profit: 60M
11.4 Perform Quantitative Risk Analysis->T&T->QRA&MT
Quantitative Risk
analysis &
Modeling
Techniques
60%
40%
Decision Tree example
60%
40%
Investment= 120M
Investment= 50M
By: Anand Bobade (nmbobade@gmail.com)
Build /
Upgrade
New Plant
Strong Demand
Profit: 200M
Week Demand
Profit: 90M
Upgrade
plant
Strong Demand
Profit: 120M
Week Demand
Profit: 60M
11.4 Perform Quantitative Risk Analysis->T&T->QRA&MT
Quantitative Risk
analysis &
Modeling
Techniques
60%
40%
Decision Tree example
60%
40%
Investment= 120M
Investment= 50M
Net path value
= -120+200 = 80M
Net path value
= -120+90 = -30M
Net path value
= -50+120 = 70M
Net path value
= -50+60 = 10M
By: Anand Bobade (nmbobade@gmail.com)
Build /
Upgrade
New Plant
Strong Demand
Profit: 200M
Week Demand
Profit: 90M
Upgrade
plant
Strong Demand
Profit: 120M
Week Demand
Profit: 60M
11.4 Perform Quantitative Risk Analysis->T&T->QRA&MT
Quantitative Risk
analysis &
Modeling
Techniques
60%
40%
Decision Tree example
60%
40%
Investment= 120M
Investment= 50M
Net path value
= -120+200 = 80M
Net path value
= -120+90 = -30M
Net path value
= -50+120 = 70M
Net path value
= -50+60 = 10M
EMV=0.60 ($80M)
+0.40(-$30) = $36M
EMV =0.60 ($70M)
+0.40($10) =$46M
Upgrade
By: Anand Bobade (nmbobade@gmail.com)
Quantitative Risk
analysis &
Modeling
Techniques
Decision Tree Benefits
Simple to understand & interpret
Can be combined with other techniques
Can include EMV information
11.4 Perform Quantitative Risk Analysis->T&T->QRA&MT
By: Anand Bobade (nmbobade@gmail.com)
Quantitative Risk
analysis &
Modeling
Techniques
Modeling & simulation:
Uses model that translates specified detailed
uncertainties into their potential impact on
project objectives. Performed using Monte carlo
technique.
A project model is computed many times with input values chosen at random for each iteration.
12% chance - project will complete in 41 million 75% chance - project will complete in 50 million
11.4 Perform Quantitative Risk Analysis->T&T->QRA&MT
By: Anand Bobade (nmbobade@gmail.com)
Quantitative Risk
analysis &
Modeling
Techniques
Sensitivity analysis
• Impact of risk on just one project objectives
• Assume, there is no impact on rest of
objectives.
Expected monetary value (EMV):
• Identify scenario to deal with a risk
• Calculate how much each paths will cost.
Modeling & simulation:
• Developing a model that translates
uncertainties into potential impact on project
objectives. (E.g., Monte carlo technique)
Review
11.4 Perform Quantitative Risk Analysis->T&T->QRA&MT
By: Anand Bobade (nmbobade@gmail.com)
Project
Document
Update
11.4 Perform Quantitative RA->Outputs
By: Anand Bobade (nmbobade@gmail.com)
Project
Document
Update
Probabilistic analysis of the Project
Probability of Achieving cost & time objectives
Prioritized list of Quantified Risks
Trends in Quantified Risks analysis results
11.4 Perform Quantitative RA->Output->Project Doc. updates
By: Anand Bobade (nmbobade@gmail.com)
11.4 Perform Quantitative Risk Analysis- > Process Flow
By: Anand Bobade (nmbobade@gmail.com)
By: Anand Bobade (nmbobade@gmail.com)
By: Anand Bobade (nmbobade@gmail.com)
Introduction – Risk Management Processes
11.1 Plan Risk Management
• Define how to conduct risk management
activities
11.2 Identify Risks
• Determine & document which risks may
affect the project
11.3 Perform Qualitative Risk Analysis
• Prioritize risks by analyzing their probability
& impact.
By: Anand Bobade (nmbobade@gmail.com)
Introduction – Risk Management Processes
11.4 Perform Quantitative Risk Analysis
• Numerically analyze the effect of identified
risks.
11.5 Plan Risk Responses
• How to respond to enhance opportunities &
to reduce threats
11.6 Control Risk
• Track risk, monitor residual risks, identify new
risks, & evaluate effectiveness of risk planning.
By: Anand Bobade (nmbobade@gmail.com)
Process of developing options & actions to enhance
opportunities & to reduce threats to project
objectives.
It addresses the risks by their priority by updating
budget, schedule & PMP as needed.
11.5 Plan Risk Responses -> Definition
By: Anand Bobade (nmbobade@gmail.com)
Plan what to do about identified risks.
Document individual plans. Assign risk Owner.
Keep risk response appropriate
based on the importance &
significance of the risk.
Minimize
negative risks.
Enhance
positive risks.
Negative Risk
response
Avoid
Transfer
Mitigate
Accept
Positive Risk
response
Exploit
Enhance
Share
Accept
11.5 Plan Risk Responses -> Introduction
By: Anand Bobade (nmbobade@gmail.com)
Inputs (2)
• Risk management
plan
• Risk register
Tools &
Techniques(4)
• Strategies for
negative risks or
threats
• Strategies for
positive risks or
opportunities
• Contingent response
strategies
• Expert judgment
Outputs (2)
• PMP update
• Project
document
updates
By: Anand Bobade (nmbobade@gmail.com)
11.5 Plan Risk Responses->ITTO
By: Anand Bobade (nmbobade@gmail.com)
Risk
Management
Plan
Risk Register
11.5 Plan Risk Responses->Inputs
By: Anand Bobade (nmbobade@gmail.com)
Risk
Management
Plan
Defines projects Risk Management Roadmap
Proposed processes & Methods
Resource, Schedule & Budget requirements
Stakeholder - Roles & Responsibilities
Risk Categorization
11.5 Plan Risk Responses->Inputs-> RMP
By: Anand Bobade (nmbobade@gmail.com)
Risk Register
All identified risks
Root causes
Potential Response
Risk Owners
Risk Categories
Risk Ratings
Risk with near-term response
Trends in qualitative Risk analysis
11.5 Plan Risk Responses->Inputs->Risk Register
By: Anand Bobade (nmbobade@gmail.com)
Strategies for
Negative Risks or
Threats
Strategies for
Positive Risk or
Opportunities
Contingent
Response
Strategies
Expert Judgment
11.5 Plan Risk Responses->T&T
By: Anand Bobade (nmbobade@gmail.com)
Strategies for
Negative Risks or
Threats
Mitigate Transfer Avoid Accept
Strategy to manage each Risk should be unique
It should match Risk’s probability & overall impact on
the project objectives
It helps to manage Negative impact on Project
Objectives:
11.5 Plan Risk Responses->T&T->Strategies for NR or Threats
To deal with High Risks To deal with low Risks
By: Anand Bobade (nmbobade@gmail.com)
Strategies for
Negative Risks or
Threats
Mitigate
• Reduce impact or probability of risk to an
acceptable threshold
• Take early actions to reduce
impact/probability
Project Staging More testing Prototyping
Redundancy
planning
Use more qualified
resources
11.5 Plan Risk Responses->T&T->Strategies for NR or Threats
Examples:
By: Anand Bobade (nmbobade@gmail.com)
Strategies for
Negative Risks or
Threats
Transfer
• Shift responsibility of risk consequence to
another party. Does NOT eliminate risk.
• Effective in dealing with financial exposure
Buy/subcontract: move liabilities
Selecting type of Procurement contracts: Fixed Price
Insurance: liabilities + bonds + Warranties
11.5 Plan Risk Responses->T&T->Strategies for NR or Threats
By: Anand Bobade (nmbobade@gmail.com)
Strategies for
Negative Risks or
Threats
Avoid:
• Changing the plan to eliminate a risk by
avoiding the cause/source of risk
• Protect project from impact of risk
Change the implementation strategy
In-house development (no subcontracting)
Reduce scope to avoid high risk deliverables
Clarify requirement
Improve communication
Acquiring expertise
Examples:
11.5 Plan Risk Responses->T&T->Strategies for NR or Threats
By: Anand Bobade (nmbobade@gmail.com)
Examples:
Strategies for
Negative Risks or
Threats
Accept:
• Risk is acknowledged, response is
planned
• No action taken unless Risk occurs
11.5 Plan Risk Responses->T&T->Strategies for NR or Threats
Commonly used - Contingency allowance/ reserve
Established amount of reserve (time, money)
Amount is decided based on probability & impact
Active Acceptance - Develop a contingency plan to
execute if the risk occur.
Passive Acceptance - Deal with the risks as they
occur (No Plan B prepared)
By: Anand Bobade (nmbobade@gmail.com)
Strategies for
Positive Risk or
Opportunities
Exploit Enhance Share Accept
PM will seek ways to make positive risks or
opportunities more likely to occur:
11.5 Plan Risk Responses->T&T->Strategies for PR or Oppor.
By: Anand Bobade (nmbobade@gmail.com)
Strategies for
Positive Risk or
Opportunities
Exploit:
• Ensure opportunity is realized.
• You do not try, but work hard & ensure
opportunity is 100% realized.
Example:
Using new technology may result
in saving 50% of the development
leading organization to complete
another initiative.
To exploit:
Staff will be trained on technology
& relevant technology expert will
be hired.
11.5 Plan Risk Responses->T&T->Strategies for PR or Oppor.
By: Anand Bobade (nmbobade@gmail.com)
Strategies for
Positive Risk or
Opportunities
Enhance
• Increase chances of opportunity occurring.
• Take proactive action to enhance
opportunity.
Example:
Using new technology may result
in saving 50% of the development
leading organization to complete
another initiative.
To Enhance:
PM will monitor work closely,
Compress schedule by adding
resources & doing parallel work
etc.
11.5 Plan Risk Responses->T&T->Strategies for PR or Oppor.
By: Anand Bobade (nmbobade@gmail.com)
Strategies for
Positive Risk or
Opportunities
Share:
• Not capable of realizing opportunity on your
own.
• Work with other parties to share Benefits
Example:
Lack of technical capability is
not allowing you to bid for a
contract, and you want to
realize this opportunity.
To Enhance:
You will team up with other
company expert in technology
to apply for contract.
11.5 Plan Risk Responses->T&T->Strategies for PR or Oppor.
By: Anand Bobade (nmbobade@gmail.com)
Strategies for
Positive Risk or
Opportunities
Accept
• Willing to take advantage of opportunity if it
comes, but not actively pursuing it.
11.5 Plan Risk Responses->T&T->Strategies for PR or Oppor.
By: Anand Bobade (nmbobade@gmail.com)
Contingent
Response
Strategies
Reponses plans to the Risk occurrence.
Plan that deals with
events that may or
may not occur.
This is Risk response
plan.
Contingency plans
Plan that gets
Implemented when
the contingency plan
fails or is not fully
effective.
Fall back plans:
11.5 Plan Risk Responses->T&T->Contingent Response Strat.
By: Anand Bobade (nmbobade@gmail.com)
Contingent
Response
Strategies
Contingency plans:
• Plan that deals with events that may
or may not occur.
Construction project Risk:
There is a risk that rain may
fall, which will damage your
materials lying in the open.
Plan:
If there is an indication of
rain, all materials will be
covered with a plastic sheet.
Also, after rain, you will bring
a blower/vacuum pump to
clean & dry wet materials.
11.5 Plan Risk Responses->T&T->Contingent Response Strat.
By: Anand Bobade (nmbobade@gmail.com)
Contingent
Response
Strategies
Fallback plan:
• Plan that gets Implemented when the
contingency plan fails or is not fully
effective.
Construction project Risk:
There is a risk that rain may
fall, which will damage your
materials lying in the open.
Suppose rain continued for a
long time than anticipated,
leading material to be useless.
Plan B:
If material is useless, you will
reorder them from a pre-
identified supplier & start the
work immediately.
11.5 Plan Risk Responses->T&T->Contingent Response Strat.
By: Anand Bobade (nmbobade@gmail.com)
Contingent
Response
Strategies
Risk triggers:
• These are indications that a risk has occurred
or is about to occur.
• Also, called as warning signs or risk symptoms
• Engage your Legal team to monitor
the status of this regulation. Inform
PM is change happens.
Risk: Change in
government
regulation
• Establish monitoring mechanism for
CPU & disk usage. Inform PM if limit
is reached.
Risk: Server
capacity is
insufficient to meet
peak demand
Events that trigger the response should be documented & tracked.
11.5 Plan Risk Responses->T&T->Contingent Response Strat.
By: Anand Bobade (nmbobade@gmail.com)
Contingent
Response
Strategies
Assigned the
responsibility of
ensuring that risk
response is effective.
Also, he may Plan
additional risk
response if required
Risk Owner
Risk owner depute a
risk action owner in
very large project
where it will be
difficult for risk
owner to manage all
risk on its own.
Risk Action Owner
11.5 Plan Risk Responses->T&T->Contingent Response Strat.
By: Anand Bobade (nmbobade@gmail.com)
Expert Judgment
Input from knowledgeable parties
Expertise can be provided by individual or groups
Based on specialized education, knowledge, skills,
experience or training
11.5 Plan Risk Responses->T&T->Expert Judgement
By: Anand Bobade (nmbobade@gmail.com)
11.5 Plan Risk Responses->Outputs
PMP update
Project
Documents
Updates
By: Anand Bobade (nmbobade@gmail.com)
Following Plans may get updated:
Schedule Management Plan
Cost Management Plan
Quality Management Plan
Procurement Management Plan
HR management Plan
Scope Baseline
Schedule Baseline
Cost Baseline
PMP update
11.5 Plan Risk Responses->Outputs->PMP update
By: Anand Bobade (nmbobade@gmail.com)
Project
Documents
Updates
Risk Register
Assumptions log
updates
Technical
Documentation Updates
Change Requests
Project document
Updates
Risk
Register
Updates:
Risk Owner &
responsibiliti
es
Agreed
Response
strategy
Budge &
schedule
activities
Trigger
conditions
Residual Risks
Secondary
Risks
Contingency
plans &
Triggers
Contingency
reserves
11.5 Plan Risk Responses->Outputs->Proj. doc. updates
By: Anand Bobade (nmbobade@gmail.com)
11.5 Plan Risk Responses-> Process Flow
By: Anand Bobade (nmbobade@gmail.com)
By: Anand Bobade (nmbobade@gmail.com)
Definition
Controlling Risk
Control Risk: ITTO
Summary
Guidelines for exam questions
Learning Objectives – 11.6 Control Risk
By: Anand Bobade (nmbobade@gmail.com)
Introduction – Risk Management Processes
11.1 Plan Risk Management
• Define how to conduct risk management
activities
11.2 Identify Risks
• Determine & document which risks may
affect the project
11.3 Perform Qualitative Risk Analysis
• Prioritize risks by analyzing their probability
& impact.
By: Anand Bobade (nmbobade@gmail.com)
Introduction – Risk Management Processes
11.4 Perform Quantitative Risk Analysis
• Numerically analyze the effect of identified
risks.
11.5 Plan Risk Responses
• How to respond to enhance opportunities &
to reduce threats
11.6 Control Risk
• Track risk, monitor residual risks, identify new
risks, & evaluate effectiveness of risk planning.
By: Anand Bobade (nmbobade@gmail.com)
Implementing risk response plans, tracking identified risks,
monitoring residual risks, identifying new risks, & evaluating
risk process effectiveness throughout the project.
It improves efficiency of risk approach & continuously
optimize risk responses.
Risk Response Plans
Tracking identified
risks
Monitoring residual
risks
Identifying new risks
Implementing
11.6 Control Risks -> Definition
By: Anand Bobade (nmbobade@gmail.com)
Identify Analyze
Plan Monitor
Key Activities
Triggers Residuals Risk
Secondary Risks
Risk
Effectiveness
Other activities
- Monitoring
11.6 Control Risks -> Introduction
By: Anand Bobade (nmbobade@gmail.com)
Perform Variance & Trend analysis using performance
information
This process is not about managing or responding to
risks. So, do nothing about the Risk.
Determine
If project assumptions are still valid
If assessed risk has changed or can be retired
If Risk management plan is followed
Alignment of contingency reserves
Choose alternative strategies
(workarounds)
Execute contingency or fallback
plan
Update PMP, OPA (Lesson
learned)
11.6 Control Risks -> Introduction
By: Anand Bobade (nmbobade@gmail.com)
Inputs (4)
• Risk Management
Plan
• Risk register
• Work
Performance Data
• Work
Performance
Reports
Tools &
Techniques(6)
• Risk Reassessment
• Risk Audits
• Variance & Trend
Analysis
• Technical
Performance
Measurement
• Reserve Analysis
• Meetings
Outputs (5)
• Work
Performance
Information
• Change
Requests
• PMP updates
• Project
Documents
Updates
• OPA updates
By: Anand Bobade (nmbobade@gmail.com)
11.6 Control Risks->ITTO
By: Anand Bobade (nmbobade@gmail.com)
Risk
Management
Plan
Risk Register
Work
Performance data
Work
Performance
reports
11.6 Control Risks->Inputs
By: Anand Bobade (nmbobade@gmail.com)
Risk
Re-assessment Risk Audits
Variance & Trend
Analysis
Technical
Performance
Measurement Reserve Analysis Meetings
11.6 Control Risks->T&T
By: Anand Bobade (nmbobade@gmail.com)
Risk
Re-assessment
Review Risk Register
Add, Re-assess or close Risks
Identify new
Risks
Register
Risks
Re-assess
current Risks
Close Risks
11.6 Control Risks->T&T->Risk Re-assessment & Audit
By: Anand Bobade (nmbobade@gmail.com)
Risk Audits
Examine & Document the effectiveness of Risk
Response
Ensure effectiveness of risk management process
Focus is on Risk response & overall Risk Management
11.6 Control Risks->T&T->Risk Re-assessment & Audit
By: Anand Bobade (nmbobade@gmail.com)
Review project execution trends using performance
information
Trend analysis (e.g., EVM) used for monitoring
overall performance
Analyzed outcome may forecast potential deviation
Performance
Data
Baseline
Variance & Trend
Analysis
11.6 Control Risks->T&T->Variance & Trend Analysis
By: Anand Bobade (nmbobade@gmail.com)
Reserve Analysis
11.6 Control Risks->T&T-> Reserve Analysis
Planned
Reserves
Actual used
reserves
By: Anand Bobade (nmbobade@gmail.com)
Technical
Performance
Measurement
Compare technical accomplishments of project milestones to
technical milestones as per the project plan. (Trend analysis using
run charts)
To use this technique, we must have quantifiable objectives that
can be measured on a technical level.
If deviations are identified, they are documented & Risk
Management team could suggest corrective actions.
11.6 Control Risks->T&T->Technical Perf. Measurement
Q1 Q2 Q3
Design
Build - Prototype
Prototype Demo to
Client
Project
Milestone
Technical
Milestone
Technical
Milestone
By: Anand Bobade (nmbobade@gmail.com)
Work
Performance
Information
Change
Requests
PMP Updates
Project
Documents
Updates
OPA Updates
11.6 Control Risks->Outputs
By: Anand Bobade (nmbobade@gmail.com)
Work
Performance
Information
Provide mechanism to communicate &
support project decision making.
11.6 Control Risks->Outputs-> WPI
By: Anand Bobade (nmbobade@gmail.com)
11.6 Control Risks->Outputs->CR
Change
Requests
Implementing contingency plan or
workarounds sometime results in CR.
• Recommended Corrective actions
• Recommended preventive actions
By: Anand Bobade (nmbobade@gmail.com)
Project
Documents
Updates
Update Risk Register:
Risk assessment
Risk audit
Periodic risk reviews
Risk Response
11.6 Control Risks->Outputs->PDU
By: Anand Bobade (nmbobade@gmail.com)
OPA Updates
Template for Risk Management plan
RBS
Risk Categories
Lesson Learned
11.6 Control Risks->Outputs->OPA
By: Anand Bobade (nmbobade@gmail.com)
11.6 Control Risks-> Miscellaneous
Unplanned response (workaround):
• It is a response to a threat that has occurred, for
which a prior response had not been planned or was
not effective.
By: Anand Bobade (nmbobade@gmail.com)
11.6 Control Risks-> Process Flow
By: Anand Bobade (nmbobade@gmail.com)
By: Anand Bobade (nmbobade@gmail.com)
Thank You!!
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Pmp chap 11 - project risk management - Part 2

  • 1. By: Anand Bobade (nmbobade@gmail.com) Learn Project Management & prepare for PMP exam: • Learn visually • Detailed coverage of all PMP concepts • Sample Questions PMBOK Chapter 11 : Project Risk Management (Part 2) Monitor & Control Risk Monitoring & Control Planning Plan Risk management Identify Risk Perform Qualitative Risk Analysis Perform Quantitative Risk Analysis Plan Risk Response
  • 2. By: Anand Bobade (nmbobade@gmail.com) Learning Objectives – 11.4 Perform Quantitative Risk Analysis Definition Diff. between Qualitative & Quantitative risk Analysis Why Quantitative Risk Analysis? Perform Quantitative Risk Analysis: ITTO Summary Guidelines for exam questions
  • 3. By: Anand Bobade (nmbobade@gmail.com) Introduction – Risk Management Processes 11.1 Plan Risk Management • Define how to conduct risk management activities 11.2 Identify Risks • Determine & document which risks may affect the project 11.3 Perform Qualitative Risk Analysis • Prioritize risks by analyzing their probability & impact.
  • 4. By: Anand Bobade (nmbobade@gmail.com) Introduction – Risk Management Processes 11.4 Perform Quantitative Risk Analysis • Numerically analyze the effect of identified risks. 11.5 Plan Risk Responses • How to respond to enhance opportunities & to reduce threats 11.6 Control Risk • Track risk, monitor residual risks, identify new risks, & evaluate effectiveness of risk planning.
  • 5. By: Anand Bobade (nmbobade@gmail.com) Numerically analyzing the effect of identified risks on overall project objectives. It produces quantitative risk information to support decision making. Prioritized Risk (Qualitative Analysis) Quantitative Analysis Impact on project objectives 11.4 Perform Quantitative Risk Analysis
  • 6. By: Anand Bobade (nmbobade@gmail.com) Purpose of this process: Determine which risk events warrant a response. Determine overall project risk (risk exposure). Determine quantified probability of meeting proj. objectives. Determine cost and schedule reserves. Identify risks requiring the most attention. Create realistic & achievable cost, schedule, or scope targets. 11.4 Perform Quantitative Risk Analysis
  • 7. By: Anand Bobade (nmbobade@gmail.com) This process can be skipped if Risks doesn’t require this approach PM may not consider this process due to insufficient data to develop analysis models There is no need to perform in depth Risk analysis for every project. PM should exercise expert judgment to decide on the need. Availability of Time & budget should be consider to decide 11.4 Perform Quantitative Risk Analysis
  • 8. By: Anand Bobade (nmbobade@gmail.com) 11.4 Perform Quantitative Risk Analysis->ITTO Inputs (6) • Risk management plan • Cost management plan • Schedule management plan • Risk register • EEF • OPA Tools & Techniques(3) • Data gathering and representation techniques • Quantitative risk analysis & modeling techniques • Expert judgment Outputs • Project document updates By: Anand Bobade (nmbobade@gmail.com)
  • 9. By: Anand Bobade (nmbobade@gmail.com) Risk Management Plan Cost Management Plan Schedule Management Plan Risk Register EEF OPA 11.4 Perform Quantitative Risk Analysis->Inputs
  • 10. By: Anand Bobade (nmbobade@gmail.com) Risk Management Plan Defines projects Risk Management Roadmap Proposed processes & Methods Resource, Schedule & Budget requirements Stakeholder - Roles & Responsibilities Risk Categorization 11.4 Perform Quantitative RA->Inputs->RMP
  • 11. By: Anand Bobade (nmbobade@gmail.com) Risk Register List of Identified Risks Potential Response Root Cause Risk Ranking (from Qualitative analysis) 11.4 Perform Quantitative RA->Inputs->Risk Register
  • 12. By: Anand Bobade (nmbobade@gmail.com) Cost Management Plan Both plans are crucial part of Project Management Plan. It contains direction on Cost & schedule, and how to manage it. They are crucial inputs to perform numerical analysis .}} Schedule Management Plan 11.4 Perform Quantitative RA->Inputs->CMP & SMP
  • 13. By: Anand Bobade (nmbobade@gmail.com) EEF Commercial Databases Academic studies Published checklists Benchmarking Industry studies Risk attitudes 11.4 Perform Quantitative RA->Inputs->EEF
  • 14. By: Anand Bobade (nmbobade@gmail.com) OPA Categories Common Definitions & terms Risk statement format Templates Lesson learned 11.4 Perform Quantitative RA->Inputs->EEF & OPA
  • 15. By: Anand Bobade (nmbobade@gmail.com) Data gathering & Representation Techniques Quantitative Risk analysis & Modeling Techniques Expert Judgment 11.4 Perform Quantitative Risk Analysis->T&T
  • 16. By: Anand Bobade (nmbobade@gmail.com) Data gathering & Representation Techniques Key Techniques: Interviewing Probability Distribution Sensitivity analysis Expected Monetary Value (EMV): 11.4 Perform Quantitative Risk Analysis->T&T->DG&RT
  • 17. By: Anand Bobade (nmbobade@gmail.com) Data gathering & Representation Techniques Interviewing: • Experience & Historical data • Quantify probability & impact of Risk Data based on Expert Opinion Likelihood of completing the project 11.4 Perform Quantitative Risk Analysis->T&T->DG&RT
  • 18. By: Anand Bobade (nmbobade@gmail.com) Data gathering & Representation Techniques What is Probability? • Probability is measurement of likelihood of occurrence of any event. Example: • If you toss a coin, it will either show heads or the tails. • 50% chance of showing heads & 50% chance of showing tails. What is probability? • The probability of showing heads or tails is 50% (or 1/2). 11.4 Perform Quantitative Risk Analysis->T&T->DG&RT
  • 19. By: Anand Bobade (nmbobade@gmail.com) Data gathering & Representation Techniques Probability Formula & Example: • = “Number of favourable events that can occur” / “Total number of events” Probability of an event happening • = 2 [Coin can either show heads or tail ] Total number of events • = 1 Total number of favourable events • = (Number of favourable events)/(Total number of events) Probability of showing heads • = ½ = 50% Probability of showing heads 11.4 Perform Quantitative Risk Analysis->T&T->DG&RT
  • 20. By: Anand Bobade (nmbobade@gmail.com) Data gathering & Representation Techniques Probability Example2: If you throw a dice, what is the probability of the number 3 coming up. • = “Number of favourable events that can occur” / “Total number of events” Probability of an event happening • = 6 [dice can show 1 or 2 or 3 or 4 or 5 or 6] Total number of events • = 1 [You want dice to show no 3] Total number of favourable events • = 1/6 = 16.67% Probability of showing heads 11.4 Perform Quantitative Risk Analysis->T&T->DG&RT
  • 21. By: Anand Bobade (nmbobade@gmail.com) Data gathering & Representation Techniques Probability Example3: For given project, Probability of completing one Task on time is 90%. What is probability of completing all scheduled task on time? 11.4 Perform Quantitative Risk Analysis->T&T->DG&RT =100*0.90 = 90% =90*0.90 =81% =81*0.90 =72% =72*0.90 =65% Task 1 Task 2 Task 3 Task 4 Probability of Individual Tasks 90% 90% 90% 90% One Task (90%) Two Tasks (90% of prev.) Three tasks (90% of prev.) All tasks (90% of prev.)
  • 22. By: Anand Bobade (nmbobade@gmail.com) Data gathering & Representation Techniques What is Impact? • The amount that will have to spend if any identified risk occurs. Example: • During execution, PM identified Software licenses cost are increased & will need additional 100 thousand. • The impact of risk = 100 thousand. 11.4 Perform Quantitative Risk Analysis->T&T->DG&RT
  • 23. By: Anand Bobade (nmbobade@gmail.com) Data gathering & Representation Techniques Probability distribution • Used to plot range of cost & schedule associated with a risk. • Used extensively in modelling & simulations • Represent uncertainty in values such as duration of schedule activities & cost of project components Continuous Distribution: • Used to represent uncertain event, such as a outcome of a test or a possible scenarios in the decision tree. • E.g., Flipping a coin Discrete Distribution: 11.4 Perform Quantitative Risk Analysis->T&T->DG&RT
  • 24. By: Anand Bobade (nmbobade@gmail.com) Data gathering & Representation Techniques Continuos distribution Beta Triangular Normal Uniform Beta distribution • Describe uncertainty about probability of occurrence of an event • Is based on two shaped parameters • Range from 0 to 1 & can take several types of shapes. Triangular distribution: • Uses estimate values based on the 3 point estimates • Use only 3 values • Is used to quantify risks for each of the WBS elements 11.4 Perform Quantitative Risk Analysis->T&T->DG&RT
  • 25. By: Anand Bobade (nmbobade@gmail.com) Data gathering & Representation Techniques Normal distribution: • Is shaped like a bell curve • The peak of the bell is the Mean/Average • Used for variables that cluster around Mean • Used to show confidence level & variations 11.4 Perform Quantitative Risk Analysis->T&T->DG&RT
  • 26. By: Anand Bobade (nmbobade@gmail.com) Data gathering & Representation Techniques Uniform distribution: • Simplest form of distributions • All values of same length (equal probability) • Need to know upper & lower limits (range) • Show scenarios where no obvious value is more likely to happen than the other 11.4 Perform Quantitative Risk Analysis->T&T->DG&RT
  • 27. By: Anand Bobade (nmbobade@gmail.com) Data gathering & Representation Techniques Discrete distribution Discrete Uniform Binomial Hypergeometric Etc… Show uncertain events such as outcome of decisions or tests (Used in Decision Tree analysis) They represent several possible outcomes Each outcome is assigned a probability & each bar represents an outcome The sum of all these probabilities works out to 1 or 100% 11.4 Perform Quantitative Risk Analysis->T&T->DG&RT
  • 28. By: Anand Bobade (nmbobade@gmail.com) Quantitative Risk analysis & Modeling Techniques Sensitivity analysis (Tornado Diagram ) Expected monetary value (EMV): 11.4 Perform Quantitative Risk Analysis->T&T->QRA&MT
  • 29. By: Anand Bobade (nmbobade@gmail.com) Quantitative Risk analysis & Modeling Techniques Tornado Diagram (Sensitivity Analysis) Determine impact of risk on just one of project objectives, while assuming there is no impact on rest of them. Determine which risks have most potential impact to project. E.g., Risk1 Provide +ve & -ve impact of each risk & let you choose which risk to take. Positive Impact Negative Impact 11.4 Perform Quantitative Risk Analysis->T&T->QRA&MT
  • 30. By: Anand Bobade (nmbobade@gmail.com) Quantitative Risk analysis & Modeling Techniques Expected Monetary Value: It calculates average outcomes when the future includes scenarios that may or may not happen. It is used to convert the risk into a number Assists PM calculate the contingency reserve Helps compare a risk with other risks It helps in selecting the choice which involves less money to manage the risks. In general, it can be used to select profitable business scenario or solution. 11.4 Perform Quantitative Risk Analysis->T&T->QRA&MT
  • 31. By: Anand Bobade (nmbobade@gmail.com) 11.4 Perform Quantitative Risk Analysis->T&T->QRA&MT Quantitative Risk analysis & Modeling Techniques Below are 3 risks with Probabilities & Impact. What is the total cost of managing these risks? Risk Probability (P) Impact (I) EMV (P * I) Hardware may cost more 10 % - 10,000 - 1,000 Licenses cost may increase 20 % - 6,000 - 1,200 Resource cost may reduce 90 % + 2,000 + 1,800 Total Cost of all Risks: = (-1000)+(-1200)+(1800) - 400 Expected Monetary Value: = Probability X Impact
  • 32. By: Anand Bobade (nmbobade@gmail.com) 11.4 Perform Quantitative Risk Analysis->T&T->QRA&MT Quantitative Risk analysis & Modeling Techniques Expected monetary value: Calculate amount based on percentage Calculate the Net node value Calculate value of each options by adding all chances Select the better value as preferred option: EMV For example, you have a risk and you have identified two risk response strategies to manage this risk. How will you select the best strategy?
  • 33. By: Anand Bobade (nmbobade@gmail.com) 11.4 Perform Quantitative Risk Analysis->T&T->QRA&MT Quantitative Risk analysis & Modeling Techniques Decision Tree & EMV Example 2: Decide weather to build new CAR manufacturing plant or upgrade existing based on demand. 1 Cost of Building a new plant 120 M 2 Cost of Upgrading plant 50 M Chance of Strong Demand: 60% # Demand scenario Possible Profit A New plant - Strong Demand 200 M B New plant - Week Demand 90 M C Upgrade – Strong Demand 120 M D Upgrade – Week Demand 60 M Note: In first example Project costs are not given.
  • 34. By: Anand Bobade (nmbobade@gmail.com) Build / Upgrade New Plant Strong Demand Week Demand Upgrade plant Strong Demand Week Demand 11.4 Perform Quantitative Risk Analysis->T&T->QRA&MT Quantitative Risk analysis & Modeling Techniques 60% 40% Decision Tree example 60% 40% Investment= 120M Investment= 50M
  • 35. By: Anand Bobade (nmbobade@gmail.com) Build / Upgrade New Plant Strong Demand Profit: 200M Week Demand Profit: 90M Upgrade plant Strong Demand Profit: 120M Week Demand Profit: 60M 11.4 Perform Quantitative Risk Analysis->T&T->QRA&MT Quantitative Risk analysis & Modeling Techniques 60% 40% Decision Tree example 60% 40% Investment= 120M Investment= 50M
  • 36. By: Anand Bobade (nmbobade@gmail.com) Build / Upgrade New Plant Strong Demand Profit: 200M Week Demand Profit: 90M Upgrade plant Strong Demand Profit: 120M Week Demand Profit: 60M 11.4 Perform Quantitative Risk Analysis->T&T->QRA&MT Quantitative Risk analysis & Modeling Techniques 60% 40% Decision Tree example 60% 40% Investment= 120M Investment= 50M Net path value = -120+200 = 80M Net path value = -120+90 = -30M Net path value = -50+120 = 70M Net path value = -50+60 = 10M
  • 37. By: Anand Bobade (nmbobade@gmail.com) Build / Upgrade New Plant Strong Demand Profit: 200M Week Demand Profit: 90M Upgrade plant Strong Demand Profit: 120M Week Demand Profit: 60M 11.4 Perform Quantitative Risk Analysis->T&T->QRA&MT Quantitative Risk analysis & Modeling Techniques 60% 40% Decision Tree example 60% 40% Investment= 120M Investment= 50M Net path value = -120+200 = 80M Net path value = -120+90 = -30M Net path value = -50+120 = 70M Net path value = -50+60 = 10M EMV=0.60 ($80M) +0.40(-$30) = $36M EMV =0.60 ($70M) +0.40($10) =$46M Upgrade
  • 38. By: Anand Bobade (nmbobade@gmail.com) Quantitative Risk analysis & Modeling Techniques Decision Tree Benefits Simple to understand & interpret Can be combined with other techniques Can include EMV information 11.4 Perform Quantitative Risk Analysis->T&T->QRA&MT
  • 39. By: Anand Bobade (nmbobade@gmail.com) Quantitative Risk analysis & Modeling Techniques Modeling & simulation: Uses model that translates specified detailed uncertainties into their potential impact on project objectives. Performed using Monte carlo technique. A project model is computed many times with input values chosen at random for each iteration. 12% chance - project will complete in 41 million 75% chance - project will complete in 50 million 11.4 Perform Quantitative Risk Analysis->T&T->QRA&MT
  • 40. By: Anand Bobade (nmbobade@gmail.com) Quantitative Risk analysis & Modeling Techniques Sensitivity analysis • Impact of risk on just one project objectives • Assume, there is no impact on rest of objectives. Expected monetary value (EMV): • Identify scenario to deal with a risk • Calculate how much each paths will cost. Modeling & simulation: • Developing a model that translates uncertainties into potential impact on project objectives. (E.g., Monte carlo technique) Review 11.4 Perform Quantitative Risk Analysis->T&T->QRA&MT
  • 41. By: Anand Bobade (nmbobade@gmail.com) Project Document Update 11.4 Perform Quantitative RA->Outputs
  • 42. By: Anand Bobade (nmbobade@gmail.com) Project Document Update Probabilistic analysis of the Project Probability of Achieving cost & time objectives Prioritized list of Quantified Risks Trends in Quantified Risks analysis results 11.4 Perform Quantitative RA->Output->Project Doc. updates
  • 43. By: Anand Bobade (nmbobade@gmail.com) 11.4 Perform Quantitative Risk Analysis- > Process Flow
  • 44. By: Anand Bobade (nmbobade@gmail.com) By: Anand Bobade (nmbobade@gmail.com)
  • 45. By: Anand Bobade (nmbobade@gmail.com) Introduction – Risk Management Processes 11.1 Plan Risk Management • Define how to conduct risk management activities 11.2 Identify Risks • Determine & document which risks may affect the project 11.3 Perform Qualitative Risk Analysis • Prioritize risks by analyzing their probability & impact.
  • 46. By: Anand Bobade (nmbobade@gmail.com) Introduction – Risk Management Processes 11.4 Perform Quantitative Risk Analysis • Numerically analyze the effect of identified risks. 11.5 Plan Risk Responses • How to respond to enhance opportunities & to reduce threats 11.6 Control Risk • Track risk, monitor residual risks, identify new risks, & evaluate effectiveness of risk planning.
  • 47. By: Anand Bobade (nmbobade@gmail.com) Process of developing options & actions to enhance opportunities & to reduce threats to project objectives. It addresses the risks by their priority by updating budget, schedule & PMP as needed. 11.5 Plan Risk Responses -> Definition
  • 48. By: Anand Bobade (nmbobade@gmail.com) Plan what to do about identified risks. Document individual plans. Assign risk Owner. Keep risk response appropriate based on the importance & significance of the risk. Minimize negative risks. Enhance positive risks. Negative Risk response Avoid Transfer Mitigate Accept Positive Risk response Exploit Enhance Share Accept 11.5 Plan Risk Responses -> Introduction
  • 49. By: Anand Bobade (nmbobade@gmail.com) Inputs (2) • Risk management plan • Risk register Tools & Techniques(4) • Strategies for negative risks or threats • Strategies for positive risks or opportunities • Contingent response strategies • Expert judgment Outputs (2) • PMP update • Project document updates By: Anand Bobade (nmbobade@gmail.com) 11.5 Plan Risk Responses->ITTO
  • 50. By: Anand Bobade (nmbobade@gmail.com) Risk Management Plan Risk Register 11.5 Plan Risk Responses->Inputs
  • 51. By: Anand Bobade (nmbobade@gmail.com) Risk Management Plan Defines projects Risk Management Roadmap Proposed processes & Methods Resource, Schedule & Budget requirements Stakeholder - Roles & Responsibilities Risk Categorization 11.5 Plan Risk Responses->Inputs-> RMP
  • 52. By: Anand Bobade (nmbobade@gmail.com) Risk Register All identified risks Root causes Potential Response Risk Owners Risk Categories Risk Ratings Risk with near-term response Trends in qualitative Risk analysis 11.5 Plan Risk Responses->Inputs->Risk Register
  • 53. By: Anand Bobade (nmbobade@gmail.com) Strategies for Negative Risks or Threats Strategies for Positive Risk or Opportunities Contingent Response Strategies Expert Judgment 11.5 Plan Risk Responses->T&T
  • 54. By: Anand Bobade (nmbobade@gmail.com) Strategies for Negative Risks or Threats Mitigate Transfer Avoid Accept Strategy to manage each Risk should be unique It should match Risk’s probability & overall impact on the project objectives It helps to manage Negative impact on Project Objectives: 11.5 Plan Risk Responses->T&T->Strategies for NR or Threats To deal with High Risks To deal with low Risks
  • 55. By: Anand Bobade (nmbobade@gmail.com) Strategies for Negative Risks or Threats Mitigate • Reduce impact or probability of risk to an acceptable threshold • Take early actions to reduce impact/probability Project Staging More testing Prototyping Redundancy planning Use more qualified resources 11.5 Plan Risk Responses->T&T->Strategies for NR or Threats Examples:
  • 56. By: Anand Bobade (nmbobade@gmail.com) Strategies for Negative Risks or Threats Transfer • Shift responsibility of risk consequence to another party. Does NOT eliminate risk. • Effective in dealing with financial exposure Buy/subcontract: move liabilities Selecting type of Procurement contracts: Fixed Price Insurance: liabilities + bonds + Warranties 11.5 Plan Risk Responses->T&T->Strategies for NR or Threats
  • 57. By: Anand Bobade (nmbobade@gmail.com) Strategies for Negative Risks or Threats Avoid: • Changing the plan to eliminate a risk by avoiding the cause/source of risk • Protect project from impact of risk Change the implementation strategy In-house development (no subcontracting) Reduce scope to avoid high risk deliverables Clarify requirement Improve communication Acquiring expertise Examples: 11.5 Plan Risk Responses->T&T->Strategies for NR or Threats
  • 58. By: Anand Bobade (nmbobade@gmail.com) Examples: Strategies for Negative Risks or Threats Accept: • Risk is acknowledged, response is planned • No action taken unless Risk occurs 11.5 Plan Risk Responses->T&T->Strategies for NR or Threats Commonly used - Contingency allowance/ reserve Established amount of reserve (time, money) Amount is decided based on probability & impact Active Acceptance - Develop a contingency plan to execute if the risk occur. Passive Acceptance - Deal with the risks as they occur (No Plan B prepared)
  • 59. By: Anand Bobade (nmbobade@gmail.com) Strategies for Positive Risk or Opportunities Exploit Enhance Share Accept PM will seek ways to make positive risks or opportunities more likely to occur: 11.5 Plan Risk Responses->T&T->Strategies for PR or Oppor.
  • 60. By: Anand Bobade (nmbobade@gmail.com) Strategies for Positive Risk or Opportunities Exploit: • Ensure opportunity is realized. • You do not try, but work hard & ensure opportunity is 100% realized. Example: Using new technology may result in saving 50% of the development leading organization to complete another initiative. To exploit: Staff will be trained on technology & relevant technology expert will be hired. 11.5 Plan Risk Responses->T&T->Strategies for PR or Oppor.
  • 61. By: Anand Bobade (nmbobade@gmail.com) Strategies for Positive Risk or Opportunities Enhance • Increase chances of opportunity occurring. • Take proactive action to enhance opportunity. Example: Using new technology may result in saving 50% of the development leading organization to complete another initiative. To Enhance: PM will monitor work closely, Compress schedule by adding resources & doing parallel work etc. 11.5 Plan Risk Responses->T&T->Strategies for PR or Oppor.
  • 62. By: Anand Bobade (nmbobade@gmail.com) Strategies for Positive Risk or Opportunities Share: • Not capable of realizing opportunity on your own. • Work with other parties to share Benefits Example: Lack of technical capability is not allowing you to bid for a contract, and you want to realize this opportunity. To Enhance: You will team up with other company expert in technology to apply for contract. 11.5 Plan Risk Responses->T&T->Strategies for PR or Oppor.
  • 63. By: Anand Bobade (nmbobade@gmail.com) Strategies for Positive Risk or Opportunities Accept • Willing to take advantage of opportunity if it comes, but not actively pursuing it. 11.5 Plan Risk Responses->T&T->Strategies for PR or Oppor.
  • 64. By: Anand Bobade (nmbobade@gmail.com) Contingent Response Strategies Reponses plans to the Risk occurrence. Plan that deals with events that may or may not occur. This is Risk response plan. Contingency plans Plan that gets Implemented when the contingency plan fails or is not fully effective. Fall back plans: 11.5 Plan Risk Responses->T&T->Contingent Response Strat.
  • 65. By: Anand Bobade (nmbobade@gmail.com) Contingent Response Strategies Contingency plans: • Plan that deals with events that may or may not occur. Construction project Risk: There is a risk that rain may fall, which will damage your materials lying in the open. Plan: If there is an indication of rain, all materials will be covered with a plastic sheet. Also, after rain, you will bring a blower/vacuum pump to clean & dry wet materials. 11.5 Plan Risk Responses->T&T->Contingent Response Strat.
  • 66. By: Anand Bobade (nmbobade@gmail.com) Contingent Response Strategies Fallback plan: • Plan that gets Implemented when the contingency plan fails or is not fully effective. Construction project Risk: There is a risk that rain may fall, which will damage your materials lying in the open. Suppose rain continued for a long time than anticipated, leading material to be useless. Plan B: If material is useless, you will reorder them from a pre- identified supplier & start the work immediately. 11.5 Plan Risk Responses->T&T->Contingent Response Strat.
  • 67. By: Anand Bobade (nmbobade@gmail.com) Contingent Response Strategies Risk triggers: • These are indications that a risk has occurred or is about to occur. • Also, called as warning signs or risk symptoms • Engage your Legal team to monitor the status of this regulation. Inform PM is change happens. Risk: Change in government regulation • Establish monitoring mechanism for CPU & disk usage. Inform PM if limit is reached. Risk: Server capacity is insufficient to meet peak demand Events that trigger the response should be documented & tracked. 11.5 Plan Risk Responses->T&T->Contingent Response Strat.
  • 68. By: Anand Bobade (nmbobade@gmail.com) Contingent Response Strategies Assigned the responsibility of ensuring that risk response is effective. Also, he may Plan additional risk response if required Risk Owner Risk owner depute a risk action owner in very large project where it will be difficult for risk owner to manage all risk on its own. Risk Action Owner 11.5 Plan Risk Responses->T&T->Contingent Response Strat.
  • 69. By: Anand Bobade (nmbobade@gmail.com) Expert Judgment Input from knowledgeable parties Expertise can be provided by individual or groups Based on specialized education, knowledge, skills, experience or training 11.5 Plan Risk Responses->T&T->Expert Judgement
  • 70. By: Anand Bobade (nmbobade@gmail.com) 11.5 Plan Risk Responses->Outputs PMP update Project Documents Updates
  • 71. By: Anand Bobade (nmbobade@gmail.com) Following Plans may get updated: Schedule Management Plan Cost Management Plan Quality Management Plan Procurement Management Plan HR management Plan Scope Baseline Schedule Baseline Cost Baseline PMP update 11.5 Plan Risk Responses->Outputs->PMP update
  • 72. By: Anand Bobade (nmbobade@gmail.com) Project Documents Updates Risk Register Assumptions log updates Technical Documentation Updates Change Requests Project document Updates Risk Register Updates: Risk Owner & responsibiliti es Agreed Response strategy Budge & schedule activities Trigger conditions Residual Risks Secondary Risks Contingency plans & Triggers Contingency reserves 11.5 Plan Risk Responses->Outputs->Proj. doc. updates
  • 73. By: Anand Bobade (nmbobade@gmail.com) 11.5 Plan Risk Responses-> Process Flow
  • 74. By: Anand Bobade (nmbobade@gmail.com)
  • 75. By: Anand Bobade (nmbobade@gmail.com) Definition Controlling Risk Control Risk: ITTO Summary Guidelines for exam questions Learning Objectives – 11.6 Control Risk
  • 76. By: Anand Bobade (nmbobade@gmail.com) Introduction – Risk Management Processes 11.1 Plan Risk Management • Define how to conduct risk management activities 11.2 Identify Risks • Determine & document which risks may affect the project 11.3 Perform Qualitative Risk Analysis • Prioritize risks by analyzing their probability & impact.
  • 77. By: Anand Bobade (nmbobade@gmail.com) Introduction – Risk Management Processes 11.4 Perform Quantitative Risk Analysis • Numerically analyze the effect of identified risks. 11.5 Plan Risk Responses • How to respond to enhance opportunities & to reduce threats 11.6 Control Risk • Track risk, monitor residual risks, identify new risks, & evaluate effectiveness of risk planning.
  • 78. By: Anand Bobade (nmbobade@gmail.com) Implementing risk response plans, tracking identified risks, monitoring residual risks, identifying new risks, & evaluating risk process effectiveness throughout the project. It improves efficiency of risk approach & continuously optimize risk responses. Risk Response Plans Tracking identified risks Monitoring residual risks Identifying new risks Implementing 11.6 Control Risks -> Definition
  • 79. By: Anand Bobade (nmbobade@gmail.com) Identify Analyze Plan Monitor Key Activities Triggers Residuals Risk Secondary Risks Risk Effectiveness Other activities - Monitoring 11.6 Control Risks -> Introduction
  • 80. By: Anand Bobade (nmbobade@gmail.com) Perform Variance & Trend analysis using performance information This process is not about managing or responding to risks. So, do nothing about the Risk. Determine If project assumptions are still valid If assessed risk has changed or can be retired If Risk management plan is followed Alignment of contingency reserves Choose alternative strategies (workarounds) Execute contingency or fallback plan Update PMP, OPA (Lesson learned) 11.6 Control Risks -> Introduction
  • 81. By: Anand Bobade (nmbobade@gmail.com) Inputs (4) • Risk Management Plan • Risk register • Work Performance Data • Work Performance Reports Tools & Techniques(6) • Risk Reassessment • Risk Audits • Variance & Trend Analysis • Technical Performance Measurement • Reserve Analysis • Meetings Outputs (5) • Work Performance Information • Change Requests • PMP updates • Project Documents Updates • OPA updates By: Anand Bobade (nmbobade@gmail.com) 11.6 Control Risks->ITTO
  • 82. By: Anand Bobade (nmbobade@gmail.com) Risk Management Plan Risk Register Work Performance data Work Performance reports 11.6 Control Risks->Inputs
  • 83. By: Anand Bobade (nmbobade@gmail.com) Risk Re-assessment Risk Audits Variance & Trend Analysis Technical Performance Measurement Reserve Analysis Meetings 11.6 Control Risks->T&T
  • 84. By: Anand Bobade (nmbobade@gmail.com) Risk Re-assessment Review Risk Register Add, Re-assess or close Risks Identify new Risks Register Risks Re-assess current Risks Close Risks 11.6 Control Risks->T&T->Risk Re-assessment & Audit
  • 85. By: Anand Bobade (nmbobade@gmail.com) Risk Audits Examine & Document the effectiveness of Risk Response Ensure effectiveness of risk management process Focus is on Risk response & overall Risk Management 11.6 Control Risks->T&T->Risk Re-assessment & Audit
  • 86. By: Anand Bobade (nmbobade@gmail.com) Review project execution trends using performance information Trend analysis (e.g., EVM) used for monitoring overall performance Analyzed outcome may forecast potential deviation Performance Data Baseline Variance & Trend Analysis 11.6 Control Risks->T&T->Variance & Trend Analysis
  • 87. By: Anand Bobade (nmbobade@gmail.com) Reserve Analysis 11.6 Control Risks->T&T-> Reserve Analysis Planned Reserves Actual used reserves
  • 88. By: Anand Bobade (nmbobade@gmail.com) Technical Performance Measurement Compare technical accomplishments of project milestones to technical milestones as per the project plan. (Trend analysis using run charts) To use this technique, we must have quantifiable objectives that can be measured on a technical level. If deviations are identified, they are documented & Risk Management team could suggest corrective actions. 11.6 Control Risks->T&T->Technical Perf. Measurement Q1 Q2 Q3 Design Build - Prototype Prototype Demo to Client Project Milestone Technical Milestone Technical Milestone
  • 89. By: Anand Bobade (nmbobade@gmail.com) Work Performance Information Change Requests PMP Updates Project Documents Updates OPA Updates 11.6 Control Risks->Outputs
  • 90. By: Anand Bobade (nmbobade@gmail.com) Work Performance Information Provide mechanism to communicate & support project decision making. 11.6 Control Risks->Outputs-> WPI
  • 91. By: Anand Bobade (nmbobade@gmail.com) 11.6 Control Risks->Outputs->CR Change Requests Implementing contingency plan or workarounds sometime results in CR. • Recommended Corrective actions • Recommended preventive actions
  • 92. By: Anand Bobade (nmbobade@gmail.com) Project Documents Updates Update Risk Register: Risk assessment Risk audit Periodic risk reviews Risk Response 11.6 Control Risks->Outputs->PDU
  • 93. By: Anand Bobade (nmbobade@gmail.com) OPA Updates Template for Risk Management plan RBS Risk Categories Lesson Learned 11.6 Control Risks->Outputs->OPA
  • 94. By: Anand Bobade (nmbobade@gmail.com) 11.6 Control Risks-> Miscellaneous Unplanned response (workaround): • It is a response to a threat that has occurred, for which a prior response had not been planned or was not effective.
  • 95. By: Anand Bobade (nmbobade@gmail.com) 11.6 Control Risks-> Process Flow
  • 96. By: Anand Bobade (nmbobade@gmail.com)
  • 97. By: Anand Bobade (nmbobade@gmail.com) Thank You!! Visit Slide Share website & you will find other Knowledge area presentation… Please share!!