Part 51: Project Risk Management Processes

Project Risk Management

  • Plan Risk Management
    • KEY BENEFIT: Ensures that the degree, type, and visibility of risk management activities are proportional to the risks and proportional to the importance of the project to the organization
    • In this process, we
      • Develop a plan for managing risks, known as the Risk Management Plan
      • This is completed early in the project
    • Planning increases the probability of success, and provides enough resources for risk management

  • Identify Risks
    • KEY BENEFIT: Documentation of existing risks, which gives the project team the knowledge and ability to anticipate events
    • In this process, we
      • Determine which risks could affect our project, and document those risks
      • Consider individual project risks and overall project risk
    • Identify Risks is iterative because new risks (or additional information about risks) continue to appear during the project
    • Each risk should be described in a risk statement
    • The format of all risk statements should be consistent so that
      • Each risk is clearly understood
      • Risks can be compared
      • Risk responses cab be developed
    • It should be easy to compare the relative effect of risks by reading the risk statements

  • Perform Qualitative Risk Analysis
    • KEY BENEFIT: Enables project managers to reduce uncertainty and focus on high-priority risks
    • In this process, we
      • Prioritize risks for further analysis by assessing the probability of each risk and the impact it would have should it occur
    • Assessments are subjective
      • Each stakeholder is deciding based on their own experiences and biases
      • What one stakeholder considers “high impact” or “high probability” may be “medium” to another stakeholder
      • We can reduce bias
        • Define “probability” and “impact”, perhaps on a sliding scale
        • Evaluate the quality of information available
        • Use a facilitator to identify and reduce bias
    • Results from the Perform Qualitative Risk Analysis process are used in the Perform Quantitative Risk Analysis process.  We may not have enough resources to perform a Quantitative Risk Analysis on every single risk, so we prioritize the risks that are most likely to occur, or which would cause the greatest damage.

  • Perform Quantitative Risk Analysis
    • KEY BENEFIT: Produces quantitative risk information to support decision making, which reduces project uncertainty
    • In this process, we
      • Numerically analyse the effects of risks on the project’s objectives
      • Evaluate the aggregate effect of all risks and sources of uncertainty
    • This process requires the Perform Qualitative Risk Analysis process to occur first
    • This process is optional, and used in
      • Large, complex, or strategic projects
      • Projects where a contract or stakeholder requires it
    • We perform this process throughout the project
    • To perform this process, we need
      • High-quality data
      • A high-quality scope, schedule and cost baseline
      • Special software & expertise to develop and interpret risk models
      • Additional time and cost

  • Plan Risk Responses
    • KEY BENEFIT: Determines ways to address each risk and overall project risk
    • In this process, we
      • Have already determined the risks, their probability, and their impact on our project, and its objectives (in previous processes)
      • We now develop options or actions to reduce the impact a risk will have on our project’s objectives
      • To plan an action, we must understand how our response will address a risk
      • Each risk response should be proportional to the significance of the risk, cost-effective, realistic, owned by one person, and agreed upon by the parties involved.  Giving people ownership is important because it ensures that somebody is accountable for each risk.  If nobody is accountable for a risk, then that risk won’t be monitored or responded to!
      • For each risk, there may be several possible risk responses, and the best one should be selected

  • Implement Risk Responses
    • KEY BENEFIT: Ensure that the planned risk responses are executed
    • In this process, we
      • Implement risk responses that were planned in the previous process
    • This process is performed throughout the project
  • Monitor Risks
    • KEY BENEFIT: Allows us to base our project decisions on up-to-date risk information
    • In this process, we
      • Monitor project work to identify new risks, changes to existing risks, and outdated risks
      • Determine if the existing risk responses are effective
      • Identify if our risk management models, contingency reserves, and assumptions are still valid