Project Management

Certificate Program
Spring 2015
PMCP II

Instructor: Ray Frohnhoefer

Dilberts Risk Analysis

Risk Components

Risk Components - Uncertainty, Likelihood, or Probability vs.

Consequences, Impacts, Costs

Risk or Opportunity?
Depends on the Consequences
Risks have negative consequences and should be avoided
Opportunities have positive consequences (benefits)and should
be welcomed

Risk or Issue?
Depends on the Timing
A Risk/Opportunity has not yet occurred may need preventive
action (negative) or encouragement (positive/opportunity)
An issue has already occurred (probability = 100%) may need
corrective action (negative) or celebration (positive/opportunity)

Universal Risks - may occur in any project, operation, or system

regardless of the type, organization, or industry

Benefits
Why bother trying?

A proactive rather than reactive

approach.

Reduces surprises and negative

consequences.

Prepares the project manager to take

advantage of opportunities.

Provides better control over the

future.

Improves chances of reaching project

objectives.

Step 1: Change the Culture

Success leaders react ++ to bad news & encourage it to

surface. Bernard Marr: Why Successful People Love Bad
News http://t.co/JagAme1sRa (LinkedIn Influencer)

NYU psychology research shows mental contrasting or

if-then-else thinking is necessary to self-regulate and
meet our goals (see http://zenaidalorenzo.com)

Calculated risks are acceptable use the data of the risk

assessment framework to guide you. Dont bet the ranch!

Sell the opportunity side!

Step 2: Show How Easy it Can

Be

Risk Assessment Framework

Scalable, robust, tool which can be used to

perform a better risk analysis

Optimize benefits

What is Risk Management?

the art and science of identifying, assessing and

responding to project risk throughout the life of a
project and in the best interests of its objectives.

Identifies factors of time, cost, performance, or

scope that can negatively impact a project

Quantifies the results

Identifies strategies to minimize risks and recognize

things which are out of the control of the project
team

Risk Management is ProActive

Mitigation: early actions are taken to reduce the

probability or impact of a risk (proactive).

Four key strategies:

o
o
o
o

Accept: the team has accepted the risk and decided

not to alter plans. (need to repair damage)
Avoid: plans are changed to eliminate a risk. (dodge
the bullet)
Transfer: the risk is not eliminated, but the
consequences of the risk are shifted to a third party.
(deflect or find a stand-in to take the bullet)
Share: the cost of the risk, risk event, or mitigation is
shared

Risk Tolerance

Commonly focuses on investments, but is

an issue for general risk management

How much risk can you tolerate?

o A lot? Nothing at stake
o Very little? 99.999% goals and your income depends
on it

Every stakeholder and/or stakeholder group

should have their risk tolerances understood

When Should we Avoid

Risk?

Cant afford the loss/exposure too great

Odds are not in your favor or just a fair bet

Benefits not identified

Too many alternatives

Insufficient data to determine

Contingency/mitigation strategy is not in place

Doesnt support a strategic objective

Risk Assessment
Framework

Risk Planning

Input
o Contracts, SOW, Project Charter
o Risk Tolerance Assessment
o Risk Policies
o Assumptions and Limitations, Critical Success Factors

Process
o Review Documentation
o Interview Participants
o Start a Risk Log

Output
o Initial Risk Log with Identified Risks
o Customer Expectations
o Risk Management Plan

Risk Identification

Input
o Candidate Risks
o Customer Expectations

Process
o Review Documentation
o Use Tools:

Brainstorming/Delphi Method
Checklists
Risk Radar
Other

Output
o Completed List of Candidate Risks

Risk Analysis

Input
o Risk Management Plan
o Risk log containing candidate risks and opportunities

Process
o Apply tools such as:
Probability Impact Rating Matrix
Delphi Facilitation Technique
See Frohnhoefer, R., Risk Assessment Framework Implementation
Guide for a more complete list

Output
o Completed Assessment of Probability and Impact for Each Risk
o Trends
o Updated Risk Log
o Meeting Minutes/Reports

Risk Response Planning

Input
o Risk Management Plan
o Risk Management Log
o Completed Analysis Documents

Process
o Determine Strategy (Avoid, Share, Transfer, Accept
[Reduce impact or probability])
o Mitigation Strategies + Cost-Benefit Analysis for
significant items

Output
o Revised Log & Analysis
o Risk Responses

Guide to Selecting a
Strategy

*From Selecting Appropriate

Risk Response Strategy by
Crispin Kik Piney, PMI Europe
2002

Risk Monitoring

Input
o Risk Log
o Risk Management Plan
o Project Documentation (budget, status reports,
schedules, etc.)

Process
o Periodic reviews
o Track as part of status reporting
o Manual or automated review of project metrics

Output
o Updated plans, risk log, status reports, etc.

Risk Response
Implementation

Input

o Risk Management Plan

o Risk Log
o Risk Mitigation Plans

Process

o Implement Mitigation Plans

o Anything high in the upper right corner of graph
may already be underway

Output

o Revised Log, Plans

Scale the Framework

Accordingly

Think about how the rigor of your process

changes as the cost of purchases increases:

Latte - $4
Household Furniture - $4,000
BMW - $40,000
Home - $400,000

We review costs, consequences, context

and choices

Risk Assessment Workshop

Facilitated meeting(s) to

Identify risks and opportunities

Analyze for probability and impact
Prioritize
Plan responses

Supporting Tools
Agenda Template
Process Overview Template
Workshop Report Template

Interview Worksheet

Use to collect and assess initial attitudes

toward risks and opportunities:
What risks and opportunities are there within the
team?
What risks and opportunities are there within the
project?
What are the top risks and opportunities?

RAID Log

Risk Breakdown Structure

A risk breakdown structure (RBS) organizes

potential sources of risk to the project.

Functioning much like a work breakdown

structure, an RBS arranges categories into a
hierarchy.

This approach allows the project team to

define risk at very detailed levels.

Brainstorming
Facilitated meeting
Free flow of ideas recorded
No bad ideas, but facilitator should keep the
group on track
May require more than one session
Sift through the ideas for viable
requirements or solutions
Best ideas move forward

Brainswarming Revisited

Focuses on improved thinking

Ideas represented in annotated picture

form

Hundreds of solutions can be evaluated

quickly

http://d1jbvhpem1c36a.cloudfront.net/wp
-content/uploads/IdeaPaint-The-New-Artof-Brainswarming%E2%84%A2-2013.pdf?_ga=
1.180207597.857799402.1398726966

Delphi Technique
Anonymous poll of experts
Moderator creates questionnaire, sends
out, and collects results
Analyze results statistically and
summarize
Send out results and analysis with
additional questions (may branch on
result)
Continue until consensus is reached

Six Hats Thinking

Black Hat

Look at things pessimistically and cautiously; see why ideas

wont work
Spots fatal flaws, weak points, and prepares contingency
plans
White
White Hat
Hat
Focus on data and facts; look for gaps in knowledge
Analyze and extrapolate from historical data
Yellow
Yellow Hat
Hat
Positive and optimistic
See benefits and value of decision, and the opportunities
created
Green
Green Hat
Hat
Creative solutions
Freewheeling thinking
Blue
Blue Hat
Hat
Process control or meeting chair
Direct wearing of hats (e.g. Green Hat when ideas run dry,
Black Hat for contingency planning)
Red
Red Hat
Hat
Emotional thinking
Use intuition and gut reaction,

Risk Surveys and

Questionnaires
Data collection instrument
Determine sources and identification of
risks
Collect opinion on mitigation strategies
Stakeholder involvement
Statistical significance of surveys
Need to validate results

Risk Assessment Matrix

Decision Tree
Takes into account future events by decision today
Calculates expected value in complex cases
Involves mutual exclusivity
Low Demand (.5) -$90K

Medium Demand (.3) $40K

Node 1a
High Demand (.2) $300K

Don't Automate
Node 1

$0

Checklists
Compensates for memory weakness
Ensures definitive completion of tasks
Check against process compliance and
standards
Minimize risks associated with error

Risk Radar
Database of risks
Help to identify, prioritize and communicate
risks
Can be used to watch for risk events

2014 Ray W. Frohnhoefer, MBA, PMP, CCP

Monte Carlo Simulation

Evaluates the project, not the tasks
Used to assess cost and schedule impacts
Done with a computer program
Provides probabilities regarding critical path
Results in a probability distribution

Use Cases
Captures intended usage of the product or
project
Describes usage in customer terms
Include photos, diagrams, screenshots,
story boards, or other models for clarity
Essentially the start of a user manual
Use cases can be in place before project
execution

Control Charts
Graphic displays of results over time
Monitors production and other processes
Features

Upper and lower control limits

Mean to show center of range of acceptable
variations
Specification limits

Control Charts (continued)

Thank You!
As a Thank You for being a part of the class, you can
download the PPC Group, LLC Risk Assessment Implementation
Guide Templates and Tools at: http://bit.ly/1yrF2uC
There is a Change and Risk Management Quiz (NOW)
Stay tuned for more of class!
Q&A