Chapter 5

Question 1

Risk Management

Answer 1

identifying, analysing, and responding to risk factors throughout the project and in the best interest of its objectives

Question 2

Risk

Answer 2

an uncertain event or condition that, if it occurs, has a positive or negative effect on project objectives

Question 3

Project risk (impact) or Event risk

Answer 3

all risks must be evaluated in terms of two distinct elements:
- likelihood that the event occurs
- consequences of its occurrence

Question 4

Event risk formula

Answer 4

Event risk= Probability of Event x Consequences of Event

Question 5

Opportunity

Answer 5

Favorable uncertainties

Question 6

Amount at stake

Answer 6

the investment made

Question 7

Combined risk impact

Answer 7

Project risk

Question 8

Project life span

Answer 8

• Phase 1: Conceive (highest opportunity and risk, lowest amount at stake and combined risk impact)
• Phase 2: Develop
• Phase 3: Execute (highest risk impact)
• Phase 4: Finish (highest risk impact and amount at stake, lowest risk)

Question 9

Project life span explanation

Answer 9

• Early life: risk and opportunity are high, severity of negative consequences is low, exposure level is also low
• Middle: potential for negative consequences increases, risk is dropping and exposure increases
• Final: uncertainty is still high, amount at stake is rapidly increasing

Question 10

Goal of risk management strategy

Answer 10

to minimize the company’s exposure to uncertainty and potential for negative consequences

Question 11

Four Stages of Risk Management

Answer 11

1. Risk identification: process of identifying risks that could affect your project
2. Analysis of probability and consequences: determine how likely they are to occur, and the effect they would have on the project
3. Risk mitigation strategies: steps taken in order to minimize the potential impact
4. Control and documentation: learn lesson and document for future projects

Question 12

Risk identification: Financial

Answer 12

financial exposure a firm opens itself to when developing a project (development of a new airplane could represent as a serious financial risk)

Question 13

Risk identification - Technical

Answer 13

when new project contain unique technical elements/ technology, they are being developed under technical risk

Question 14

Risk identification - commercial

Answer 14

for projects that have been developed for commercial intent (profitability), there’s always uncertainty about how successful they will be once in the market

Question 15

Risk identification - Execution

Answer 15

what are the specific unknowns related to the execution of the project?

Question 16

Risk identification - Contractual or legal risk

Answer 16

risks from the terms and conditions that are set in the contract in advance

Question 17

Risk identification: common risks

Answer 17

• Absenteeism
• Resignation
• Staff pulled away by management
• Additional staff/skills not available
• Training not as effective as desired
• Initial specifications poor or incomplete
• Work or change order multiplying due to various problems
• Enhancements taking longer than expected

Question 18

Conducting risk factor identification: Brainstorming meetings

Answer 18

bringing members from the project team for a brainstorm meeting can generate a good list of potential factors

Question 19

Conducting risk factor identification: expert opinion

Answer 19

• Delphi approach collects judgement from anonymous experts
• simpler method consists of consulting people within the organization that have ran similar projects in the past

Question 20

Conducting risk factor identification: Past history

Answer 20

experience can be used to identify risk factors and leading indicators

Question 21

Conducting risk factor identification: multiple (or team-based) assessments

Answer 21

involving a group of people to identify the risks, using one person might be risky because they may overlook things or have a biased perspective

Question 22

Risk Breakdown Structure (RBS)

Answer 22

• tool used to organise and categorise all risks in a project
• Level 1: External or Internal
• Level 2: Which area? (technical, market…)
• Level 3: more specific (performance, customer acceptance…)

Question 23

Risk Breakdown Structure (RBS)

Answer 23

• tool used to organise and categorise all risks in a project
• Level 1: External or Internal
• Level 2: Which area? (technical, market…)
• Level 3: more specific (performance, customer acceptance…)

Question 24

Risk Impact Matrix

Answer 24

• tool used to prioritize risk by looking at the probability of the risk to happen, and the consequence
• Bottom left: low probability low risk
• Top right: High risk High probability

Question 25

Risk mitigation strategies: Accept risks

Answer 25

because the consequences are so minor, they may be accepted and ignored

Question 26

Risk mitigation strategies: Minimize risk

Answer 26

strategies to minimize risk

Question 27

Risk Mitigation strategies: Share risk

Answer 27

risk can be shared among multiple group members

Question 28

Risk mitigation strategies: transfer risk

Answer 28

- when it is impossible to change the nature of the risk (through elimination or minimization), it could be possible to shift the risks to another party (insurance, fixed-price contracts…)

Question 29

Contingency reserves

Answer 29

funds set aside within a project to cover unforeseen costs

Question 30

Task contingency

Answer 30

extra time or money set aside just in case something happens, helps cover budget cuts or schedule overruns

Question 31

Managerial contingency

Answer 31

“safety net” meant to protect the project from larger risks

Question 32

Insurance

Answer 32

protects against financial losses

Question 33

Workaround

Answer 33

dealing with a problem after it occurs (the problem was unplanned)

Question 34

Mentoring

Answer 34

pairing less experienced team members with more experienced managers

Question 35

Cross training

Answer 35

training members to do each other’s job, if someone is absent, another member can fill in

Question 36

Control and documentation

Answer 36

help managers classify risks and responses using a risk report form: - What - identify source of risk - Who - assign a team member to take responsibility - When - establish a time frame - Why - identify most likely reasons for the risk - How - create a risk deduction plan

Question 37

PRAM (Project Risk Analysis and Management): key features

Answer 37

1. Risk management follows a life cycle 2. Risk management strategy changes over the project life cycle 3. Synthesized coherent approach (using relevant risk management tools)

Question 38

PRAM Phases

Answer 38

1. Define (make sure project is well defined) 2. Focus (start planning how to manage risks) 3. Identify (look for specific sources of risk) 4. Structure (develop a system to classify risks) 5. Clarify ownership of risks (determine which risks the project team will manage, and which the clients will take on) 6. Estimate (estimate how risks will impact the project) 7. Evaluate (evaluate results of estimate phase to determine plan for mitigating risks) 8. Plan (develop a risk management plan) 9. Manage (monitor the project’s progress and the effectiveness of the risk management plan)