11. Project Risk Management

Question 1

Define Project Risk Management.

Answer 1

Includes the processes of conducting risk management planning, identification, analysis, response planning, response implementation, and monitoring risk on a project.

11. 1 Plan Risk Management
12. 2 Identify Risks
13. 3 Perform Qualitative Risk Analysis
14. 4 Perform Quantitative Risk Analysis
15. 5 Plan Risk Responses
16. 6 Implement Risk Responses
17. 7 Monitor Risks

Question 2

11.1 Plan Risk Management.

Answer 2

(P) - The process of defining how to conduct risk management activities for a project.

• Benefit: Ensures degree, type, and visibility of risk management are proportionate to both risk and importance of the project to stakeholders
• Performed once or when needed

Question 3

11.2 Identify Risks.

Answer 3

(P) - The process of identifying individual project risks as well as sources of overall project risk, and documenting their characteristics.

• Benefit: Documents individual project risks and sources of overall project risk
• performed throughout the project

Question 4

11.3 Perform Qualitative Risk Analysis.

Answer 4

(P) - The process of prioritizing individual project risks for further analysis or action by assessing their probability of occurrence and impact as well as other characteristics.

• Risk owners for each risk - plans response (risk analysis) and implements response

Benefit: focuses efforts on high-risk priority

• Process performed throughout

Question 5

11.5 Plan Risk Responses.

Answer 5

(P) - The process of developing options, selecting strategies, and agreeing on actions to address overall project risk exposure, as well as to treat individual project risks.

Benefit: identifies appropriate ways to address overall project risk and individual project risk

• Performed throughout

Question 6

11.6 Implement Risk Responses.

Answer 6

(E) - The process of implementing risk response plans.

Benefit: ensures agreed-upon risk responses are executed as planned in order to address overall project risk exposure, minimize individual project threats, and maximize individual opportunities

• Performed throughout the project

Question 7

11.4 Perform Quantitative Risk Analysis.

Answer 7

(P) - The process of numerically analyzing the combined effect of identified individual project risks and other sources of uncertainty on overall project objectives.

Benefit: quantifies overall project risk exposure, supports risk response planning with additional information

• Performed throughout (not required for every project)
• Outputs are inputs for plan risk repsonses
• specialized software

Question 8

11.7 Monitor Risks.

Answer 8

(MC) - The process of monitoring the implementation of agreed-upon risk response plans, tracking identified risks, identifying and analyzing new risks, and evaluating risk process effectiveness throughout the project.

Benefit: Enables project decisions to be based on current information about overall project risk exposure and individual project risks

• Performed throughout

Question 9

Plan Risk Management - ITTO

Answer 9

O - Risk Management Plan

Question 10

Identify Risks. - ITTO

Answer 10

I - Procurement Docs

I - Agreements

TT - Prompt Lists

TT - Data Analysis

TT - Team skills

O - Risk Register

O - Risk Report

Question 11

Perform Qualitative Risk Analysis. - ITTO

Answer 11

O - Project Doc Updates

Question 12

Perform Quantitative Risk Analysis - ITTO

Answer 12

TT - Representations of uncertainty: quantitative risk analysis model

O - Project Doc updates

• Risk Report

Question 13

Plan Risk Responses - ITTO

Answer 13

O - PM plan updates

O - Project Doc Updates

O - Change Requests

Question 14

11.6 Implement Risk Responses. - ITTO

Answer 14

O - Change Requests

O - Project Document Updates

Question 15

11.7 Monitor Risks.

Answer 15

O - Change Requests

O - PM Plan Updates

O - Project Document Updates

O - Work Performance Information

O - OPAs Updates

Question 16

Identify the key documents in project risk management.

11.3 Identify the key documents in project risk management

Answer 16

• Risk management plan (a component of the project management plan that describes how risk management activities will be structured and performed)
  
  • Risk strategy
  • Methodology
  • Roles and responsibilities
  • Funding
  • Timing
  • Risk categories - can be in RBS
  • Stakeholder risk appetite
  • Definitions of risk probability and impacts
  • Probability and impact matrix
  • Reporting formats
  • Tracking
• Risk register (captures details of identified individual project risks)
  
  • List of identified risks
  • Potential risk owners
  • List of potential risk responses
• Risk report (presents information on sources of overall project risk, together with summary information on identified individual project risks)
  
  • Sources of overall project risk
  • Summary information on identified individual project risks

PMBOK Guide, Sixth Edition,

• 11.1.3.1 - Risk Management Plan, p. 405
• 11.2.3.1 - Risk Register, p. 417
• 11.2.3.2 - Risk Report, p. 418

Question 17

Identify tailoring considerations for Project Risk Management.

11.5 Recognize when and how to adjust risk based on the project environment

Answer 17

• Project size. Does the project’s size in terms of budget, duration, scope, or team size require a more detailed approch to risk management? Or is it small enough to justify a simplified risk process?
• Project complexity. Is a robust risk approach demanded by high levels of innovation, new technology, commerical arrangements, interfaces, or external dependencies that increase project complexity? Or is the project simple enough that a reduced risk process will suffice?
• Project importance. How strategically important is the project? Is the level of risk increased for this project because it aims to produce breakthrough opportunities, addresses significant blocks to organizational performance, or involves major product innovation?
• Development approach. Is this a waterfall project, where risk processes can be followed sequentially and iteratively, or does the project follow an agile approach where risk is addressed at the start of each iteration as well as during its execution?

PMBOK Guide, Sixth Edition, 11 - Project Risk Management, p. 400

Question 18

Identify special considerations for Project Risk Management for agile/adaptive environments.

11.5 Recognize when and how to adjust risk based on the project environment

Answer 18

• Projects managed using adaptive approaches make use of frequent reviews of incremental work products and cross-functional project teams to accelerate knowledge sharing and ensure that risk is understood and managed.
• Risk is considered when selecting content of each iteration, and risks will also be identified, analyzed, and managed during each iteration
• The requirements are kept as a living document that is updated regularly, and work may be reprioritized as the project progresses, based on an improved understanding of current risk exposure.

PMBOK Guide, Sixth Edition, 11 - Project Risk Management, p. 400

Question 19

Identify the concepts for Project Risk Management.

Not an objective from the study guide.

Answer 19

tl;dr

• [risk v. reward]
• [identify and manage]
• [individual v. project risk]
• [positive or negative]
• [iterative process]
• [define thresholds to prioritize]

quotes

• [risk v. reward] All projects are risky. Organizations choose to take project risk in order to create value, while balancing risk and reward.
• [identify and manage] Project Risk Management aims to identify and manage risks that are not covered by other project management process.
• [individual v. project risk] Risk exists at two levels within every project. Individual project risk is an uncertain event or condition that, if it occurs, has a positive or negative effect on one or more project objectives. Overall project risk is the effect of uncertainty on the project as a whole, arising from all sources of uncertainty including individual risks, representing the exposure of stakeholders to the implications of variations in project outcome, both positive and negative. Project Risk Management processes address both levels of risk in projects.
• [positive or negative] Individual project risks can have a positive or negative effect on project objectives if they occur. Overall project risk can also be positive or negative.
• [iterative process] Risks will continue to emerge during the lifetime of the project, so Project Risk Management processes should be conducted iteratively.
• [define thresholds to prioritize] In order to manage risk effectively on a particular project, the project team needs to know what level of risk exposure is acceptable in pursuit of project objectives. This is defined by measureable risk thresholds that reflect the risk appetite of the organization and project stakeholders.

PMBOK Guide, Sixth Edition, Appendix X4 - X4.8 – Key Concepts for Project Risk Management, p. 677

Question 20

Trends and emerging practices for Risk Management

Answer 20

1. Non-event Risks need to be managed
   
   1. Variability Risk - uncertainty exists around key characteristics of a plan
      
      1. Addressed through Monte Carlo Analysis
   2. Ambiguity risk - uncertainty exists around what might happen in the future (inherent systematic complexity)
      
      • Addressed through expert judgment or benchmarking, also incremental development, prototyping
2. Project Resilience - backup plans and strategies for emergent risks (the unknown unknowns)
   
   1. right level of budge and schedule contingency for emergent risks
   2. Flexible project processes that can cope with emergent risks
   3. Empowered team with clear objectives
   4. Frequent review of early warning signs to identify emergent risks early
   5. Clear input from stakeholders to clarify adjustable areas in response to emergent risks
3. Integrated Risk Management - managing organizational risks from a strategic perspective, portfolio/program level

Question 21

Monte Carlo Analysis

Answer 21

Type of Simulation. A model is created to simulate conditions. The range of variation is illustrated in probability distributions. Actions are suggested to reduce the spread of possible outcomes.

Question 22

Data analysis: SWOT Analysis

Answer 22

TT for Identify risk

• Examines the project from each of the strengths, weaknesses, opportunities, and threats perspectives
• increases the breadth of identified risks by including internally generated risks
  *

Question 23

Data Analysis for Quantitative risk Analysis

Answer 23

• Simulations: Usually uses Monte Carlo. Outputs:
  
  • Histogram: shows frequency of a particular simulation outcome
  • Cumulative Probability Distribution (S-Curve): shows probability of achieving any particular outcome
• Criticality Analysis: determines which elements of risk model have greatest effect on critical path. focuses team on highest potential effect
• Sensitivity Analysis: helps determine which individual project risks could have most impact on project outcomes.
  
  • Tornado Diagram:
• Decision Tree Analysis: diagramming/calculation technique for evaluating the implications of a chain of multiple options in the presence of uncertainty
  
  • support selection of best alternative course of action
  • Evaluated by calculating expected monetary value of each branch, optimal path selected
• Influence Diagram: represents a project as a set of entities, outcomes, and influences, with their relationships and effects

Question 24

Risk Report

Answer 24

Project Document updated to reflect results of quantitative risk analysis. Includes:

1. Assessment of overal project risk exposure, reflected by:
   
   1. Chances of project success
   2. Degree of variability remaining in the project
2. Detailed probabilistic analysis of project. Presents key outputs from quantitative risk analysis
   
   1. S-curves, tornado diagram, criticality analysis
   2. Interpretation of results
3. Prioritized list of individual project risks, indicated by sensitivity analysis

Trends in quantitative risk analysis results may become apparent, repeated process

Question 25

Treat, Opportunities, Overall Project Risk

Answer 25

Threats - negative uncertainty

opportunity - positive uncertainty

Question 26

Strategies for Threats

Answer 26

1. Escalate - Excalated Risks not managed on project level since they exceed PM’s authority
   
   1. Communicated to those in program, protfolio, etc
2. Avoid - Avoidance takes place when project team acts to eliminate threat or protect the project from its impact
3. Transfer - shift ownership of threat to third party to mange risk and bear impact if threat occurs
4. Mitigate - Action taken to reduce probability of occurrence and/or impact of threat
5. Accept - Acknowledge existence of threat, but no proactive action is taken
   
   1. appropriate for low-priority threats or where it is not possible/cost-effective to address threat

Question 27

Strategies for Opportunities

Answer 27

1. Escalate - not managed at project level
2. Exploit - strategy for high-priority opportunities
3. Share - Transfer ownership of opportunity to third party to share some of benefits
4. Enhance - used to increase probability of opportunity
5. Accept - opporunity acknowledged by no proactive action taken

Question 28

Strategies for Overall Project Risk

Answer 28

1. Avoid - When level of overall project risk is significantly negative and outside agreed-upon risk thresholds for project
   
   1. Takes focused action to reduce negative effect of uncertainty on project and bring project back within thresholds
2. Exploit - When level of overall project risk is significantly positive and outside agreed-upon risk thresholds for project
   
   1. Takes focused action to capture positive effect of uncertainty on project
3. Transfer/share - Level of overall risk is high but organization is unable to address effectively, third party may be involved to address risk
4. Mitigate/Enhance - involve changing level of overall project risk to optimize the chances of achieving projects objectives
5. Accept - no proactive risk response is possible to address overall project risk

Question 29

Contingent Response Strategies

Answer 29

Some risks, appropriate for project team to make response plan that will only be executed under certain predefined conditions

Question 30

Risk Audits

Answer 30

Type of audit that may be used to consider effectiveness of risk management process