|Complete Risk ManagementAnything that can affect the performance of the product would constitute a risk.
Risk management tries to cover the identification and management of risk.
It provides examples that are fully explained.
|What is risk?RISK represents uncertainty.
The more uncertainty there is in an activity the greater the difficult in managing towards a successful completion.
|Key areas of concernAll risks within a project will impact on one of cost, schedule timing or revenue.
|Assess the risksHow a risk is assessed (e.g. high, medium or low) may indicate who needs to be consulted in terms of any decision making. HIGH risk does not necessarily equate with HIGH impact upon the project. Conversely, a LOW risk activity may be extremely unlikely to happen, but if it does, it could be devastating for the project and hence have a HIGH impact.
|AccountabilityOne of the key aspects of project management is that ACCOUNTABILITY can not be delegated, whereas, RESPONSIBILITY can be delegated. It is very important to make sure that when the plan
to manage risk for a particular task is agreed that someone is assigned to make it happen.
|Simple process outlineThis might involve identifying the risks and assessing them in terms of impact and likelihood.
Then a decision on how the risk is managed with a response.
Then the proactive responses followed by the reactive responses.
|StakeholdersHow the risk is managed will depend upon the potential affect on the project. Who will make the final decision?
A risk may need to be presented to the appropriate stakeholder. The project team will have to be sure who that is.
Is it the steering committee, the board or will it be the direct customer?
|Project lifecycleIt is easy to confuse the management of the ‘risk assessment process’ with that of the project itself.
It is quite common to represent the lifetime of a project as a number of phases.
Risk does not exist in any one phase of the Project Life Cycle but throughout.
|Clarification of termsUnderstanding the significance of these terms and how they are derived is central to the risk management process.
|Risk Management ProcessThe Project Life Cycle, project management purposes, can be divided into:
Concept, Design, Plan, Allocate, Execute, Deliver, Review and Support.
|Simple estimatingThis is a process you could use as part of the Evaluation phase.
For example, you may consider a range of possibilities in terms of
maximum, likely and minimum time periods for a task.
|Cumulative probabilityThe use of cumulative probability graphs is covered using many examples.
|CorrelationThe interaction of two events affords a correlation between them.
The use of independent, positive and conditional correlation is covered.
|Statistical termsIn order to better understand some of the areas definitions and examples are provided for:
Mean or average, Median, Mode, Variance and Standard deviation.
|Modify plansIf you have more then one critical path you will need to eliminate one of them.
The critical path contains all of the tasks, which can affect the completion date of the project should they alter.
The time that a task can be delayed before it affects another is called ‘float or slack’. There are two basic types.
|Types of plansThere are different types of plans. The following are covered:
Initial plan, Reference plan, Base plan, Contingency plan, Horizon plan and Action plan.
|Identify risk issuesRisks can be identified up front. This is true but it does not mean they will be accurate or valid when the task in question is carried out or a particular milestone is reached. There is no easy scientific method that
will guarantee all risks will be identified. Especially, if the mechanism is flawed leading to many minor risks.
|Assessing riskThe following syatems are covered to assess identified risks:
Issue based, Checklist, Qualitative and Quantitative.
|Cost modelsCreating models for risk assessment is not as tricky as you might think.
The mathematics is quite straight forward (for the simpler models) and, for the most part,
many businesses can carry this out to some degree using spreadsheets etc.
|Monte Carlo simulationWe clearly can not run a project several thousand times in order to assess the true variability
of the total cost and duration. What we can do is mimic this by running computer based simulations
where each simulation chooses a random value for each activity.
|Probability density functionThe problem with risk assessment is precisely that, we are assessing the risk we are not able to measure
it accurately for each of the activities. Many statistical analyses rely on measuring values for many items
and plotting their frequency against the value. This graph is known as a probability density function.
|Uncertain eventsActivities often have more than one pathway i.e. they may depend on more than one event or outcome.
These have a correlation.
|Correlated eventsWhen looking at correlation you should not get this confused with task relationships in a project schedule.
Correlation is the relationship between the activities that are driven by a common underlying uncertainty.
If one is HIGH others in the group will be HIGH, if MEDIUM or LOW the others will be MEDIUM or LOW.
|Human relationsRisk management is not everyone’s cup of tea. There will almost certainly be resistance to using it.
There will be many reasons for this, lying not only within a project team but also senior management.
Negative effects and benefits can be identified.
|Budget v contingencyIf a project plan is put together without the use of any risk management techniques then the total cost will be the sum of all of the individual assumed work package values. The risk management process forces you to consider the correlation between tasks and the potential spread of values. This will aid in setting a contingency and total budget.
|Simple networkThis area provides examples of simple activity networks between the completion of a task via two pathways. Intermediate tasks may have a lag or no lag. They can be simple, complex or multiple branching.
|Markov chainA dictionary definition of the Markov chain is:
‘A sequence of events, the probability for each of which is dependent on the event immediately preceding it.’
The product is a PowerPoint presentation with full accompanying notes.
It contains 120 plus slides and over 58,000 words.
Any mathematics used is simplified by the use of full and clear explanations.
Statistical and risk management terminology are clearly provided.
Shows how statistical techniques can be applied to any project.
Supported by Excel and Word files.
Risk management begins with definitions, the key areas of concern and what risk management should provide.
This is followed by coverage of planning and the process of risk assessment.
The project life cycle phases of concept, plan, execute and termination are identified in terms of the need for risk assessment.
The risk management process is then covered in more detail. That is, Concept, Design, Plan, Allocate, Execute, Deliver, Review and Support as part of the project lifecycle.
In addition, risk management covers proactive and reactive planning, triggers, monitoring and control.
Estimation begins to introduce some of the mathematics of risk assessment.
Simple three point etimation is introduced with the cumulative probability graph.
Cumulative probability graphs are introduced in various examples.
Some of the problems with estimating are included as well as how to obtain estimates.
This process is helped by the introduction of statistical terms and their explanation.
Issue based, checklist, qualitative and quantitative methods are covered as common ways for the assessment of risk.
Simple cost model
Applying the statistical methods for simple cost models is introduced with the addition of uncertainty.
This leads to the application of the Monte Carlo simulation.
A full explanation is provided in the use of the Monte Carlo simulation technique and its output leading to the probability density function.
This area covers the idea that events may not lie on a single path.
Pathways may be two or more.
One pathway may be more likely to occur than another
Events can have an effect on other events.
This correlation may be based upon a common underlying uncertainty
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