project_risk_mgmt_final.ppt

Project Risk Management:
An Overview
Andrew Westdorp
Program Manger, IV&V
Lockheed Martin
(301)402-3924
Westdorpa@mail.nih.gov

3
Goals and Objectives
 Project Risk
 Risk Management
 Why Risk Management
 Risk Management Planning
 Identifying & Quantifying Risks
 Response Planning
 Risk Monitoring & Control
 Tools, Tricks and Helpful Links

4
What is Project Risk?
 An event that, if it occurs, causes either a
positive or negative impact on a project
 Keys attributes of Risk
– Uncertainty
– Positive and Negative
– Cause and Consequence

5
Risk Management
 Risk management is concerned with
identifying risks and drawing up plans to
minimise their effect on a project.
 A risk is a probability that some adverse (or
positive) circumstance will occur
– Project risks affect schedule or resources;
– Product risks affect the quality or performance of
the software being developed;
– Business risks affect the organization developing
or procuring the software.

6
Risk Management Process
 PMBOK ® Definition
– “The systematic process of identifying, analyzing,
and responding to project risk”
 Steps
 Risk Management Planning
 Risk Identification
 Qualitative/Quantitative Risk Analysis
 Risk Response Planning
 Risk Monitoring & Control

7
Value From Managing Risks
 Opportunity to move from “fire-fighting” to proactive
decision making on the project.
 Better chance of project success.
 Improved project schedule and cost performance.
 Stakeholders and team members better understand
the nature of the project.
 Helps define the strengths and weaknesses of the
project.

8
Why Not Risk Management?
 With so much benefit to managing risk, why is it
often overlooked? :
1. The organization is too busy with real problems to worry
about potential ones,
2. There is a perception that there is not too much that can go
wrong, or
3. They have a fatalistic belief that not much can be done
about risks, or
4. “Shoot the messenger mentality”; fear that disclosure of
project risks will be seen as an indication of project
weakness.

9
 All projects have risks, denial does not make them
go away, it just makes you unprepared for them if
they occur.
 Risk in itself is not bad, it is how well the project
plans for and reacts to risks that counts.
 Formal risk management is a cornerstone of good
project management. Stakeholder visibility into
project risks makes it easier to get additional
resources and organizational support when risks do
occur.
Won’t identified risks make the project
look bad?

10
Risk Management Planning
 Plan for the Planning
– Risk planning should be appropriate for the
project
– Question you should ask:
1. How risky is the project?
2. Is it a new technology or something your organization
is familiar with?
3. Do you have past projects to reference?
4. What is the visibility of the project?
5. How big is the project?
6. How important is the project?

11
The Risk Management Plan
 What should it include?
– How you will identify, quantify or qualify risk
 Methods and tools
– Budget…yes budget
– Who is doing what
– How often
– Risk categories, levels, and thresholds for action.
– Reporting requirements
– Monitoring, tracking and documenting strategies

12
The Risk Management Process
 Risk identification
– Identify project, product and business risks;
 Risk analysis
– Assess the likelihood and consequences of these
risks;
 Risk response planning
– Draw up plans to avoid or minimize the effects of
the risk;
 Risk monitoring
– Monitor the risks throughout the project;

13
The Risk Management Process

14
Identifying Risk
 Continuous, Iterative Process
 What is it and what does it look like
 The sooner the better
 The more the merrier
 A fact is not a risk (it’s an issue).
 Be specific
 Don’t try to do everything at once

15
Identification Techniques
 Brainstorming
 Checklists
 Interviewing
 SWOT Analysis (strengths, weaknesses opportunities, threats)
 Delphi Technique (anonymous consensus building)
 Diagramming Techniques
– Cause & effect
– Flow Charts
– Influence Diagrams

16
Risks and Risk Types
Risk type Possible risks
Technology The database used in the system cannot process as many transactions
per second as expected.
Software components that should be reused contain defects that limit
their functionality.
People It is impossible to recruit staff with the skills required.
Key staff are ill and unavailable at critical times.
Required training for staff is not available.
Organizational The organization is restructured so that different management are
responsible for the project.
Organizational financial problems force reductions in the project budget.
Tools The code generated by CASE tools is inefficient.
CASE tools cannot be integrated.
Requirements Changes to requirements that require major design rework are proposed.
Customers fail to understand the impact of requirements changes.
Estimation The time required to develop the software is underestimated.
The rate of defect repair is underestimated.
The size of the software is underestimated.

17
Software Risks
Risk Affects Description
Staff turnover Project Experienced staff will leave the project before it is
finished.
Management change Project There will be a change of organizational management
with different priorities.
Hardware unavailability Project Hardware that is essential for the project will not be
delivered on schedule.
Requirements change Project and
product
There will be a larger number of changes to the
requirements than anticipated.
Specification delays Project and
product
Specifications of essential interfaces are not available
on schedule
Size underestimate Project and
product
The size of the system has been underestimated.
CASE tool under-
performance
Product CASE tools which support the project do not perform
as anticipated
Technology change Business The underlying technology on which the system is
built is superseded by new technology.
Product competition Business A competitive product is marketed before the system
is completed.

18
Risk Analysis
 Assess probability, seriousness, and urgency
of each risk.
 Probability may be very low, low, moderate,
high or very high.
 Risk effects might be catastrophic, serious,
tolerable or insignificant.
 Urgency might be immediate, short term, or
long term.

19
Analyzing Risk - Qualitative
 Subjective
 Educated Guess
 High, Medium, Low
 Red, Yellow, Green
 1-10
 Prioritized/Ranked list of ALL identified risks
 First step in risk analysis!

20
Risk Analysis - Quantitative
 Numerical/Statistical Analysis
 Determines probability of occurrence and
consequences of risks
 Should be focused to highest risks as determined by
Qualitative Risk Analysis and Risk Threshold

21
Risk Analysis (i)
Risk Probability Effects
Organizational financial problems force reductions in
the project budget.
Low Catastrophic
It is impossible to recruit staff with the skills required
for the project.
High Catastrophic
Key staff are ill at critical times in the project. Moderate Serious
Software components that should be reused contain
defects which limit their functionality.
Moderate Serious
Changes to requirements that require major design
rework are proposed.
Moderate Serious
The organization is restructured so that different
management are responsible for the project.
High Serious

22
Risk Analysis (ii)
Risk Probability Effects
The database used in the system cannot process as
many transactions per second as expected.
Moderate Serious
The time required to develop the software is
underestimated.
High Serious
CASE tools cannot be integrated. High Tolerable
Customers fail to understand the impact of
requirements changes.
Moderate Tolerable
Required training for staff is not available. Moderate Tolerable
The rate of defect repair is underestimated. Moderate Tolerable
The size of the software is underestimated. High Tolerable
The code generated by CASE tools is inefficient. Moderate Insignificant

23
Probability & Impact Analysis
Risk Probability Impact Expected Value
1 25% $45,000 $11,250
2 50% $2,000 $1,000
3 30% $100,000 $30,000

24
Risk Response Planning
 “What are we going to do about it?”
 Techniques/Strategies:
– Avoidance – Eliminate it
– Transference – Pawn it off
– Mitigation – Reduce probability or impact of it
– Acceptance – Do nothing
 Strategy should be commensurate with risk
– Hint: Don’t spend more money preventing the risk than the
impact of the risk would be if it occurs 
 The Risk Response Plan/Risk Response Register

25
Risk Management Strategies (i)
Risk Strategy
Organizational
financial problems
Prepare a briefing document for senior management
showing how the project is making a very important
contribution to the goals of the business.
Recruitment
problems
Alert customer of potential difficulties and the
possibility of delays, investigate outsourcing work.
Staff illness Reorganize team so that there is more overlap of work
and people therefore understand each other’s jobs.

26
Risk Management Strategies (ii)
Risk Strategy
Requirements
changes
Derive traceability information to assess requirements
change impact, and maximise information hiding in the
design.
Organizational
restructuring
Prepare a briefing document for senior management
showing how the project is making a very important
contribution to the goals of the business.
Database
performance
Investigate the possibility of buying a higher-
performance database.
Underestimated
development time
Investigate outsourcing components, investigate use of
a program generator

27
Risk Monitoring
 Assess each identified risk regularly to
decide whether or not it is becoming less or
more probable.
 Also assess whether the effects of the risk
have changed.
 Each key risk should be discussed at
management progress meetings.

28
Risk Monitoring & Control
 Continuous, Iterative Process
 Done right the risk impact will be minimized:
– Someone IS responsible
– Watch for risk triggers
– Communicate…Communicate…Communicate
– Take corrective action - Execute
– Re-evaluate and look for new risk constantly
 Tools:
– Risk Reviews
– Risk Audits

29
Risk indicators
Risk type Potential indicators
Technology Late delivery of hardware or support software, many
reported technology problems
People Poor staff morale, poor relationships amongst team
member, job availability
Organizational Organizational gossip, lack of action by senior
management
Tools Reluctance by team members to use tools, complaints
about CASE tools, demands for higher-powered
workstations
Requirements Many requirements change requests, customer
complaints
Estimation Failure to meet agreed schedule, failure to fix reported
defects

30
Tools & Tricks
 Risk Identification Spreadsheet
 Risk log Spreadsheet
 Templates
 Make your own

31
Helpful Links
 Project Management Institute (PMI)
– www.pmi.org
 CMMI
– www.sei.cmu.edu/cmmi/
 PMI Government SIG
– www.pmi-govsig.org
 NIH Project Management Center of Excellence
– http://irm.cit.nih.gov/cio/PMExcellence/

32
Questions???
Thank You
for the opportunity
to present to you today!

project_risk_mgmt_final.ppt

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