Chapter 10: Risks

Question 1

What is a threat and a opportunity

Answer 1

Threat
- for uncertain events that would have a negative impact on objectives

Opportunity
- for uncertain events that would have a positive impact on objectives

Question 2

What is required for risk management to be effective

Answer 2

• risks that might affect the project achieving its objectives need to be identified, captured and described
• each risk needs to be assessed to understand impact, probability and timing
• risk responses need to be implemented, monitored and controlled

Question 3

Prince2 requires that two products are produced and maintained
- risk management approach
- risk register

What is the meaning of these two

Answer 3

Risk management approach
- describes how risk will be managed

Risk register
- provides a record of identified risks relating to project

Question 4

When should risk management approach and risk register be created

Answer 4

Both of these products should be created during the initiating a project process
- the risk management approach should be reviewed and possibly updated at the end of each management stage

Question 5

What is the responsibility of corporate, programme or the customer regarding risk

Answer 5

• Provide the corporate, programme management or customer risk management policy and risk management process guide

Question 6

What is the responsibility of corporate, programme or the customer regarding risk

Answer 6

• Provide the corporate, programme management or customer risk management policy and risk management process guide

Question 7

What is the responsibility of the executive regarding risk

Answer 7

• Ensure risk management approach is appropriate
• Ensure risks associated with business case are identified, assessed and controlled
• Escalate risks to corporate, programme management or the customer

Question 8

What is the responsibility of the senior user regarding risk

Answer 8

Ensure that risks to the users are identified, assessed and controlled

Question 9

What is the responsibility of the senior supplier regarding risk

Answer 9

• Ensure that risks relating to the supplier aspects are identified, assessed and controlled

Question 10

What is the responsibility of the PM regarding risk

Answer 10

• Create risk management plan
• Maintain risk register

Question 11

What is the responsibility of the Team manager regarding risk

Answer 11

• Participate in identification, assessment and control of risks

Question 12

What is the responsibility of the Project assurance regarding risk

Answer 12

• Ensure risk management practises are performed in line with projects risk management approach

Question 13

What is the responsibility of the project support regarding risk

Answer 13

• Prepare and assist PM in maintaining projects risk register

Question 14

Risk management and organisational policies

Answer 14

A project may need to align risk management approach with organisational, programme or portfolio policies, standards/ processes
- organisations will often require that a consistent mandated process is used across different projects, typically to ensure they can assess the overall risk exposure of the organisation

Question 15

List the steps in the recommended risk management procedure

Answer 15

1 - Identity
2 - Assess
3 - Plan
4 - Implement
5 - Communicate

Question 16

How is risk management approach affected by project size, scale

Answer 16

E.g on a less complex project, the PM would typically take most risk management activities. But on a more complex project, activities may be delegated to a dedicated risk manager

Question 17

What is a commercial consideration regarding risk registers

Answer 17

In a commercial context, there may be need for more than one risk register as some project risks could be unique to only one party, with good reason for them to not be visible to the other party

Question 18

What is a commercial consideration regarding risk registers

Answer 18

In a commercial context, there may be need for more than one risk register as some project risks could be unique to only one party, with good reason for them to not be visible to the other party

Question 19

What is a risk budget

Answer 19

This a sum of money to find specific management responses to projects threats and opportunities

It may be appropriate to identify and ring-reference an explicit risk budget within the projects budget

Question 20

What is a risk budget

Answer 20

This a sum of money to find specific management responses to projects threats and opportunities

It may be appropriate to identify and ring-reference an explicit risk budget within the projects budget

Question 21

What does the IDENTIFY step in the risk management procedure involve

Answer 21

Identify:
This step obtains info about the project to understand the specific objectives that are at risk & to formulate an appropriate risk management approach

Risks can and should be identified at any time during the management and delivery of the project

Question 22

What is a useful way of expressing risk is to consider the following aspects of each risk

Answer 22

• risk cause
• risk event (describe area of uncertainty regarding threat/opportunity)
• risk effect (describe impact risk would have on project)

Question 23

What would have an influence in the projects risk management approach

Answer 23

• customers quality expectations
• number of organisations involved & relationships between them
• needs of stakeholders involved with project
• The delivery approach being used

Question 24

What are some risk identification techniques

Answer 24

Review lessons:
- review previous similar projects to see what threats & opportunities affected them

Risk checklists:
- list of risks that have been identified or occurred on previous projects

Risk prompt lists:
- list that categorises risks into types/ areas and are normally relevant to a wide range of projects

Brainstorming

Risk breakdown structure:
- hierarchical decomposition if the potential sources of risk (LOOK AT DIAGRAM FOR EXAMPLE)

Question 25

What does the ASSESS step in the risk management procedure involve

Answer 25

Assess:
- probability of threats and opportunities (how likely they are to occur)
- the impact of each risk in terms of projects objectives
- impact of risk on the stage plan, project plan and business case
- how quickly risk is likely to materialise if no action is taken
- how impact of threats and opportunities may change over the life of the project

Question 26

What are some examples of risk estimation techniques

Answer 26

Probability impact grid
- values are determined by multiplying probability by impact

Expected value
- combines cost of risk with probability of risk occurring

Probability trees
- graphical representations of possible events resulting from given circumstances

Pareto analysis
- ranks risks after they’ve been assessed to determine the order in which they should be addressed

Question 27

What is risk appetite and tolerance

Answer 27

Risk appetite:
- an organisations attitude towards risk taking that in turn dictates the amount of risk it considers acceptable

Risk tolerance:
- threshold level of risk exposure that can be exceeded,but which when exceeded will trigger some form of response

Question 28

Info regarding evaluating

Answer 28

The combined effect of the individual risks needs to be understand to determine if the overall ‘risk exposure’ of the project remains within the risk appetite determined by the organisation and as interpreted and applied by the project board
- if risk exposure is greater then the organisations risk appetite, then control actions will need to be planned in response
- the justification of the project should be evaluated in context of risk exposure

Question 29

What are the two risk evaluation techniques

Answer 29

Risk models
- enables ‘what if’ scenarios to be run using random numbers to determine whether each risk within a given range occurs

Expected monetary value
- takes the expected values of a number of risks and sums them to arrive at an overall value

Question 30

What does the PLAN step in the risk management procedure involve

Answer 30

The plan step involves identifying and evaluating the appropriate risk response to remove/ reduce threats and to maximise opportunities
- if risk falls within the tolerances set for the project, the PM decides on the response; otherwise the decision is escalated to the project board

Question 31

What is residual risk

Answer 31

If a threat is reduced rather than removed, the remaining risk is called the ‘residual risk’. If residual risk is significant then it may be appropriate to select more than one risk response

Question 32

More information regarding plan stage

Answer 32

It’s important that risk responses balance the cost of implementing the response against probability & impact of allowing risk to occur
- this can be assessed by comparing cost of risk response with difference in the expected monetary value of the risk before and after the risk response

Question 33

Risk response needs to identify the most appropriate body to manage a risk. When may this not be the project team?

Answer 33

This may not be the project team, especially if:
- the project team don’t have within their scope of influence the ability to implement an appropriate risk response
- realisation of risk will materially impact the projects business justification

Question 34

What does the IMPLEMENT step in the risk management procedure involve

Answer 34

Planned risk responses need to be actioned, their effectiveness monitored and corrective action taken where responses don’t match expectations

Question 35

What is a risk owner and risk actionee

Answer 35

Risk owner
- individual who’s responsible for the management, monitoring and control of all aspects of a particular risk assigned to them, including the implementation of the selected responses to address the threats or to maximise opportunity

Risk actionee
- nominated owner of an action to address risk. Some actions may not be within the remit of the risk owner to control explicitly; in that situation there should be a nominated owner of the action to address the risk

In many cases the risk owner and auctioned are the same person

Question 36

What does the COMMUNICATE step in the risk management procedure involve

Answer 36

This step ensures that information related to the threats and opportunities faced by the project is communicated both within the project and externally to stakeholders

Question 37

Risks are communicated as part of the following management products

Answer 37

• checkpoint reports
• highlight reports
• end stage reports
• end project reports
• exception reports

Question 38

What other communication methods could be considered alongside the prince2 management products

Answer 38

• bulletins
• dashboards
• notice boards
• briefings

Question 39

Extra Info regarding communication and risk management

Answer 39

A projects exposure to risk is never static; effective communication is key to the identification of new risks or changes in existing risks. This depends on the maintenance of a good communication network, including relevant contacts & sources of info