Assessing Risk

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Assessing Risk

• byBob Larson

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Learning Objectives

• Identifying Risks
• Risk Analysis Techniques
• Planning for Risks
• Responding to Risks
• Contingency Planning
• Risk Management Plan

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What is Risk?

• Event that poses a potential threat or
  opportunity to the project in some way
• Doesnt really matter if it is a threat or
  opportunity if you dont identify before it
  passes
• Worst case cause the project to fail
• Can mean rework or rethinking

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What is Risk Management?

• Multi-step process
• Identify risks
• Analyze risk and assess the impact if it happens
• Determine the probability
• Combine the impact and probability analysis
• Develop a risk response plan
• Occurs throughout project life
• Good skills help ensure project success
• Greatest project risk is early in the project

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Advantages of Risk Management

• Helps to identify showstoppers early
• Can develop contingency plans
• Helps to identify potential opportunities
• Can create new projects or phases
• Can reduce rework and related costs
• Allows you to be proactive not reactive
• Increases credibility and reputation
• Increases likelihood of project success

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Identifying Risks

• Types of Project Risks
• Common Project Risks
• Identification Techniques

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Types of Project Risks

• Known risks with predictable outcomes
• Bad weather canceling an event
• Known risks with uncertain outcomes
• Low turnout will the event breakeven
• Unknown risks
• No way to predict food-born illness

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Common Project Risks

• Constraint-related risks
• Limit the project team
• Know early on in the process
• Use the WBS (task list) to help define
• Business risks
• Marketability
• Timing
• Management issues
• Vendor delays
• External project risks
• Political, legal, environmental (weather) and
  social issues
• Other risks
• Lack of team project experience

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Business risks

• Marketability
• Will customers come (or pay)
• What if the target audience doesnt see the value
• Timing
• Hitting the market at the right time
• What about regulatory delays (FDA, etc)
• Management issues
• Management turnover changes in strategies
• Business cutbacks, layoffs, budget restrictions
• Vendor delays
• Contract negotiation delays and issues
• Vendor failure or project abandonment

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Identification Techniques

• Historical information (past projects)
• Brainstorming
• Delphi technique
• Questionnaire to identify risks (iterative)
• Removes bias and relational influences (sucking
  up)
• Nominal group technique
• Brainstorming with post-its (iterative)
• Interviews
• Multiple levels
• Checklist of common project risks

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Risk Analysis Techniques

• Risk Probability and Impact
• Probability high, medium, low
• Express as a percent (25 yes 75 no 1)
• Assigning risk impacts
• Express as a numeric value
• Probability impact matrix
• Combining probability times risk (next slide)
• Risk Tolerance
• Amount of risk one is willing to (or can) tolerate

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Probability Impact Matrix
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Planning for Risks

• Risk is highest early in the project cycle and
  diminishes as the cycle progresses
• Impact of unidentified risk grows as the project
  cycle progresses
• Planning for risk typically reduces the impact
• Risk Response Plan
• Detailed plans to detail with risk if they occur

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Responding to Risks

• Accepting
• Dont make contingency plans
• Accept the result if the worst occurs
• Avoiding
• Take steps to eliminate the cause of the risk
• Transferring
• Assign handling risk to 3rd party - insurance
• Mitigating
• Reduce the risk and thereby the impact

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Contingency Planning

• Process of planning for known risks to ensure
  project success
• Residual and Secondary Risks
• Residual risk Leftover impacts from primary
  risks after any resulting mitigation
• Move event indoors to mitigate weather risk
• Bad weather still causes parking issues
• Secondary risk Risk that occurs as a result of
  implementing a risk response plan
• Hiring limos to get people to and from to avoid
  DUI
• Limo drivers going on strike the day of the event

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Risk Management Plan

• Identify the risks
• Analyze the risks to determine the probability of
  the event occurring
• Analyze the risks to determine the impact on the
  project if a risk event occurs
• Calculate an overall risk score and determine
  which risk events need detailed response plan
• Create a detailed response plan and assign
  resources
• Create a contingency plan
• Document in Risk Management Plan section of the
  Project Notebook

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fin