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1

Key to understanding risk management

- for the most part it is done poorly on most projects
- it is usually done very poorly on technology projects

2

Risk

- impacts every area of the project management lifecycle and the nine key knowledge areas

3

Risk management includes these processes...

- planning risk management
- identifying risks
- performing qualitative analysis
- performing quantitative analysis
- planning responses
- monitoring and controlling risk

4

Risk is...

- always in the future
- involves uncertainty
- known or unknown
- negative or positive
- considered from the moment the project is conceived
- tolerated differently by different organizations (low/high tolerance)

5

Cost of risk

- like quality, there is a cost to managing risk
- failure to address risk can be much more costly

6

RBS

- Risk breakdown structure
- groups risks by basic themes

7

Risk categories

- can number into the hundreds
- are grouped into five key categories on a software project (Tom DeMarco)

8

Five key risk categories of software projects

- Scope creep
- Inherent schedule flaws
- Employee turnover
- Specification breakdown
- Poor productivity

-Tom DeMarco

9

Identifying risks

- iterative process
- new risks may become apparent as the project evolves

10

Brainstorming

- Focus on quantity
- Withhold criticism
- Welcome unusual ideas
- Combine and improve ideas

- Alex Osborn

11

Delphi Technique

- forecasting method that relies on a panel of independent experts
- participants maintain anonymity

- RAND corporation

12

Root cause analysis

- performed after an event has occured to identify 'triggers' which can be used to forecast

- Safety-based RCA (accident)
- Production-based RCA (quality control)
- Process-based RCA (business processes)
- Failure-based RCA (failure analysis)
- Systems-based RCA (amalgamation)

13

RCA techniques

- Kepner-Tregoe
- FMEA
- Pareto Analysis
- Bayesian inference (conditional probability)
- Ishikawa diagram

14

SWOT analysis

- Setup as a grid
- Organizational analysis of Strengths, Weaknesses, Opportunities, Threats

- Albert Humphrey (stanford research)

15

Risk register

- key planning tool for the project
- includes attributes for risks including probability and impact in dolars

16

Risk becomes an issue

- when it has a probability percentage of 70% or greater

17

Qualitative risk analysis

- Only output is to update the risk register

18

Qualitative risk assessment matrix

- offers a summary level of the potential impact of the risk

19

Risk register updates

- Ranking and prioritization of project risks
- Grouping risks by categories
- Risk requiring near-term response
- Risks requiring additional analysis and response
- Low priority risks to monitor
- Look for trends in results

20

Risk register updates are outputs from

- Perform qualitative risk analysis
- Perform quantitative risk analysis
- Plan risk responses
- Monitor & control risks

21

Quantitative risk analysis

- numerical quantification of the effects of identified risks on the project
- involves sophisticated mathematical modeling

22

FMEA

- Failure Modes Effects Analysis
- Severity, Probability, Detectability
- useful for manufactured product or where risk may be undetectable

23

Severity

- Numberic scale for FMEA measure
- No effect (1)
- High hazard (10)

24

Probability

- Numberic scale for FMEA measure
- less than .0007% (1)
- 20% or greater (10)

25

Detectability

- Numberic scale for FMEA measure
- highly detectable (1)
- completely undetectable (10)

26

RPN

- Risk Priority Number
- scale of 1-1000
- Multiply the three FMEA measures (Severity, Probability, Detectability)

27

EMV

- Expecte monetary value
- Multiply the probability of an event by it's impact

28

Monte Carlo Analysis

- mathematical modeling technique
- can use PERT or Triangular Distribution
- can use hundreds or thousands of data points

29

Decision Tree Analysis

- Form of EMV used for more complex decision making
- Decision branches illuminate possible paths forward
- Uncertainty branches illuminate the probability of success

30

Risk strategies - negative risks

- Avoid (eliminate)
- Transfer (shift)
- Mitigate (reduce)
- Accept