The document discusses project risk management. It defines risk and outlines the key processes involved in risk management including risk identification, qualitative and quantitative risk analysis, risk response planning, and risk monitoring and control. It also discusses risk factors like probability, impact, and timing. Risk identification involves systematically documenting potential risks. Qualitative risk analysis uses a subjective approach to assess probability and impact while quantitative analysis uses numerical methods. Risk response planning determines actions to reduce threats and maximize opportunities. The overall goal is to identify and proactively address risks that could affect a project's objectives.

1. PM DeepDive
Project Risk Management
- Niraj Agarwal
May 2011
Slide 1

2. Project Risk Management
Definition of Risk
• Risk is an uncertain event or condition that, if it occurs, has a
positive or negative effect on a project objective.
• Risk has a cause and, if it occurs has a consequence.
• Project environment may contribute to project risk such as poor
project management practices, or external dependencies which can
not be controlled.
• Project risk includes both threats to the project’s objectives and
opportunities to improve on those objectives.
May 2011
Slide 2

3. Project Risk Management
Risk Factors
• Risk Event - “A discrete occurrence that may effect the project”—for
A project for
better or worse
• Risk Probability - The likelihood of occurrence. The ratio of the
number of chances by which an event may happen (or not happen)
to the sum of the chances of both happening and not happening.
• Amount at Stake - “The extent of adverse consequences which could
q
occur to the project”. It equals amount wasted plus amount required
to rebuild
• Risk Timing - When Is the risk event expected to occur in the Project
Lifecycle
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Slide 3

4. Project Risk Management
Processes
• Risk Management planning
• Risk Identification
• Qualitative Risk Analysis
• Quantitative Risk Analysis
• Risk Response Planning
• Risk Monitoring and Control
May 2011
Slide 4

5. Risk Management planning
Definition & ITTO
Deciding how to approach and plan risk management activities.
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Slide 5

6. Risk Management planning
ITTO
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Slide 6

7. Risk Management planning
Impact Analysis
May 2011
Slide 7

8. Risk Identification
Definition
• The process of systematically identifying all possible risk events
which may impact on a project.
• They may be conveniently classified according to their cause or
source and ranked roughly according to ability to manage effective
responses.
• Not all risk events will impact all projects, but the cumulative effect
of several risk events occurring i conjunction may well b more severe
f l i k t i in j ti ll be
than examination of individual risk events might suggest.
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Slide 8

9. Risk Identification
ITTO
May 2011
Slide 9

10. Risk Identification
May 2011
Slide 10

11. Risk Identification
Risk Register
• List of risks that includes an identification number risk name risk
number, name,
description, and risk owner i.e. the person responsible for monitoring
the project to determine whether the potential for this risk event is high
and then implementing the risk response p
p g p plan should it occur.
May 2011
Slide 11

12. Qualitative Risk Analysis
Definition & ITTO
• Qualitative Risk Analysis uses a subjective approach to determine the
likelihood that a risk will actually occur and the impact to the project if
it does occur. This process also involves prioritizing the risks according
to their effect on the project.
p j
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Slide 12

13. Qualitative Risk Analysis
ITTO
May 2011
Slide 13

14. Qualitative Risk Analysis
Probability/Impact
• Risk Probability is the likelihood that a risk event will occur For
occur.
example, if you a flip a coin, there ’ s a .50 probability the coin will come
up heads. Probability is expressed as a number from 0.0 to 1.0, with 1.0
being an absolute certainty the risk event will occur.
g y
• Risk possibility and consequences may be described in qualitative
terms such as very high, high, moderate, low and very low.
• I
Impact is the amount of damage ( opportunity) th risk poses t
t i th t fd (or t it ) the i k to
the project if it occurs. Simple rating like the following to rate risk
impact: High, Medium, Low
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Slide 14

15. Qualitative Risk Analysis
Probability/Impact Matrix
• A matrix can be constructed on probability and impact
impact.
• A risk with high probability and high impact needs further analysis.
• Also called Risk Rating Matrix
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Slide 15

16. Quantitative Risk Analysis
Definition & ITTO
Aims to analyze numerically, the probability of each risk and its
consequence on project objective, as well as the extent of overall project
risk.
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Slide 16

17. Quantitative Risk Analysis
ITTO
May 2011
Slide 17

18. Risk Response Planning
Definition & ITTO
Risk Response Planning is the process of reviewing the risk analysis and
determining what, if any, action should be taken to reduce negative
impacts and take advantage of opportunities as a result of a risk event
occurring.
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Slide 18

19. Risk Response Planning
ITTO
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Slide 19

20. Risk Response Planning
Strategies for Risk
• Avoid : Avoiding the risk altogether or eliminating the cause of the
risk event
• Transfer : Moving the liability for the risk to a third party by
p
purchasing insurance, p
g , performance bonds, and so on
,
• Mitigate : Reducing the impact or the probability of the risk
• Accept : Choosing to accept the consequences of the risk
May 2011
Slide 20

21. Risk Response Planning
Strategies for opportunities
• Exploit : Looking for opportunities to take advantage of positive
impacts
• Share : Assigning the risk to a third party who is best able to bring
about the opportunity
pp y
• Enhance : Monitoring the probability or impact of the risk event to
assure benefits are realized
May 2011
Slide 21

22. Risk Monitoring and Control
Definition & ITTO
Is the process of keeping track of the identified risks, monitoring
residual risks and identifying new risks, ensuring the execution of risk
plans, and evaluating their effectiveness in reducing risks.
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Slide 22

23. Risk Monitoring and Control
ITTO
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Slide 23

24. Pop Quiz
Question 1
Risk Identification is the process of which of the following?
A. Quantifying the impact to the project of a potential risk event
B. Determining and documenting potential risk events on the project
C. Assigning a probability that a particular risk event will occur
D. Defining the action to take in response to a risk event
May 2011
Slide 24

25. Pop Quiz
Question 2
This risk analysis technique uses a complex mathematical
approach to numerically analyze the probability and impact
of risks.
A. Quantitative Risk Analysis
Q y
B. Risk impact analysis
C. Risk probability analysis
D. Qualitative Risk Analysis
D Q lit ti Ri k A l i
May 2011
Slide 25

26. Pop Quiz
Question 3
All of the following are strategies for dealing with negative risks, except
for which one?
A. Accept
B.
B Transfer
C. Share
D. Mitigate
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Slide 26

27. Pop Quiz
Question 4
Once risks have been identified and analyzed, this tool helps you
determine an overall risk score.
A. Probability impact matrix
B.
B Risk list
C. Risk register
D. Risk template
May 2011
Slide 27

28. Thank You!