DHY01 0807
No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of ESI International. ESI grants federal government users "Restricted Rights" (as the term is defined in FAR 52.227-14 and DFARS 252.227-7013). Use, reproduction, or disclosure of these materials is subject to the restrictions set forth in the MOBIS, FSS, or contract under which the materials were provided. All material from A Guide to the Project Management Body of Knowledge (PMBOK Guide) is reprinted with permission of the Project Management Institute, Four Campus Boulevard, Newtown Square, Pennsylvania 19073-3299, USA, a worldwide organization of advancing the state-of-the-art in project management. Phone: (610)356-4600, Fax: (610)356-4647. PMI did not participate in the development of this publication and has not reviewed the content for accuracy. PMI does not endorse or otherwise sponsor this publication and makes no warranty, guarantee, or representation, expressed or implied, as to its accuracy or content. PMI does not have any financial interest in this publication and has not contributed any financial resources. The names of all companies and characters used in these materials are purely fictional. Any resemblance to any existing or no longer existing company or living or dead person is not intended, and is purely coincidental. PMI is a service and trademark of the Project Management Institute, Inc., which is registered in the United States and other nations. PMBOK is a trademark of the Project Management Institute, Inc., which is registered in the United States and other nations. PMP is a certification mark of the Project Management Institute, Inc., which is registered in the United States and other nations.
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Course Objectives
By the end of this course, you will be able to Identify risks using various methods Assess the potential impact of risk factors Prioritize risks to determine the most important Develop effective risk response strategies Control risk during project execution using proven tools and techniques Use a practical 8-step process to manage project risk Integrate risk management into the overall project management process
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What Is a Project?
[A] temporary endeavor undertaken to create a unique product, service, or result* PMBOK Guide, p. 5
Program X
Project A Project B Project C
Project D
Project E
Cancelled
Program Y
*Source: Project Management Institute. A Guide to the Project Management Body of Knowledge. 3d ed. Newtown Square, Pa.: Project Management Institute, 2004. PMBOK is a trademark of the Project Management Institute, Inc., which is registered in the United States and other nations.
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Project Management
[T]he application of knowledge, skills, tools and techniques to project activities to meet project requirements [A]ccomplished through the application and integration of the project management processes of initiating, planning, executing, monitoring and controlling, and closing PMBOK Guide, p. 8 Sound project management helps ensure success.
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I Initiation
P Planning
I Implementation
C Closeout
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Initiating Processes
Closing Processes
Life Cycle
Executing Processes
Phase
Phase
Phase
Phase
Initiating Processes
Initiating Processes
Closing Processes
Initiating Processes
Closing Processes
Initiating Processes
Closing Processes
Closing Processes
Executing Processes
Executing Processes
Executing Processes
Executing Processes
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Technical Requirements
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WBS Review
The WBS should Be consistent Be task oriented and start with a verb, or be deliverable oriented and start with a noun Be decomposed to your level of control Ensure that each work package accomplishes a discrete work element Make work packages SMART
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Key Definitions
Project risk An uncertain event or condition that, if it occurs, has a positive or a negative effect on at least one project objective Risk management includes the processes concerned with conducting risk management planning, identification, analysis, responses, and monitoring and control on a project Includes increas[ing] the probability and impact of positive events, and decreas[ing] the probability and impact of events adverse to the project
Source: PMBOK Guide, pp. 237238
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Threat
Probability of occurrence Consequence of failure
Opportunity
Probability of success Benefit of success
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Uncertainty
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Elements of Risk
A definable event Probability of occurrence Impact (consequence) of occurrence
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Probability of Occurrence
Risk from snow in Georgia
Low Low High
Impact of Occurrence
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Risk Planning Processes Preliminary project plan Final project plan Project Project replanning replanning
Risk assessment and response processes are performed At regular intervals throughout the project life cycle Every time a new baseline or plan is established At major milestones or decision check points Risk Monitoring and Control Processes Risk monitoring and control processes are performed Continuously throughout the project life cycle During project status and reporting updates
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Outputs
Prioritized risks (Risk Listing) Risk response plan Project plan updates
Risk Management
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Risk Identification*
Evaluate
Execute
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Evaluate
Analyze
Execute
Prioritize
Plan
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Evaluate
Analyze
Execute
Prioritize
Plan
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Risk Identification
Inputs Work breakdown structure (WBS) Contractual requirements (statement of work) Cost and schedule estimates Staffing plan Lessons learned files Scope statement Product or deliverables description Assumptions and constraints
Tools Documentation reviews* Risk identification techniques Checklist, questionnaires, and templates Assumption analysis* Diagramming techniques*
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Exercise 1
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Evaluate
Analyze
Execute
Prioritize
Plan
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Risk Analysis
Inputs Categorized list of identified risks WBS Contractual requirements (statement of work) Cost and schedule estimates Lessons learned files Staffing plan Other project-related plans Rating system guidelines Tools Data-gathering and Representation Techniques Interviewing Probability distributions Expert judgment Quantitative Risk Analysis and Modeling Techniques Sensitivity analysis Expected monetary value analysis Decision tree analysis Modeling and simulation PERT
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Presenting Risk
Risk information is typically expressed in 1 of 3 forms: Qualitative: Categorizes the risk using a rating system of adjectives or colors to rank probability and/or impact Quantitative: Quantifies risk using a percentage to indicate probability of occurrence and a dollar value to indicate impact Descriptive: Uses text to explain the risk in some depth, including what might happen, why, and ideas for controlling it; used when neither qualitative or quantitative are available
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Comparison of Approaches
Qualitative Fast and easy to administer and understand Difficult to enforce uniformly across organization and projects Requires definitions, rules, standards, and processes Quantitative Preferred methodology, often mandated by management More time-consuming; requires estimation Misleading in that numbers may give appearance of precision and specificity, unless the precision of the estimate is given Difficult if team resists deriving the numbers Easier to forecast Able to use trends Substantially more valuable in developing risk response strategies and reserves Descriptive Difficult to quantify Usually based on experience Used when quantitative and/or qualitative are not readily apparent or available
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Probability Analysis
Purpose To understand the likelihood of the occurrence of a risk event Sources of probability data Theoretical distributions Subjective judgment Simulations Historical data
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Impact Analysis
Purpose: Understand how the project is affected if a risk event occurs Project cost Project schedule Sources of impact data Historical data Estimates Expert judgment Simulations Impact assessment is basically an estimation process
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Start
End
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Exercise 2
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Evaluate
Analyze
Execute
Prioritize
Plan
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Risk Prioritization
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Exercise 3
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Evaluate
Analyze
Execute
Prioritize
Plan
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Exercise 4
Conduct a Threat Response for Your Top-5 Risks You Identified in Exercise 3
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Definition of Reserves
Reserves: A provision in the project management plan to mitigate cost and/or schedule risk Management reserves: A separately planned quantity used to allow for future situations that are impossible to predict, unknown unknowns Contingency reserves: The amount of funds, budget, or time needed above the estimate to reduce the risk of overruns of project objectives to a level acceptable to the organization, known unknowns Reserves are intended only for in scope risks
Source: PMBOK Guide, pp. 372, 169, 355
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Risk reassessment
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Evaluate
Analyze
Execute
Prioritize
Plan
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Evaluate
Analyze
Execute
Prioritize
Plan
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Risk Evaluation
Inputs Risk management plan and project plan Cost and schedule performance All relevant event information Corrective actions Change requests Tools Risk reassessment Risk audits Variance and trend analysis Assumptions analysis Technical performance measurement Reserve and contingency analysis Status meetings
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Evaluation Guidelines
Identify opportunities to refine the risk management plan Identify any additional action required Reassess risks and response strategies Determine whether the consequences of the strategy were the same as envisioned
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Evaluate
Analyze
Execute
Prioritize
Plan
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Workshop Review
By now you should be able to Define risk and risk management Identify risks using various methods Assess the potential impact of risk factors Prioritize risks to determine the most important Develop effective risk response strategies Control risk during project execution using proven tools and techniques Use a practical 8-step process to manage project risk Integrate Risk Management into the overall Project Management process
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