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Project Risk Management Knowledge Area

by

Lisa Forbes

An assignment submitted in partial fulfillment of the requirements for the course CS4035EB- Project Management

Instructor: Mr. Rohan Simpson

Date: October 6, 2013

Department of Communication and Information Technology Bethlehem Moravian College

Table of Contents Literature Review.............................................................................................................................4 Findings............................................................................................................................................5 Conclusion.......................................................................................................................................8 References........................................................................................................................................9

Abstract

Project Management has nine knowledge areas, which are: project integration, scope, time, cost, quality, human resource, communication, risk, and
procurement management. By putting these nine areas to the task, the result

would be a successful project being launched. This research will be focusing on the Risk Management Knowledge Area which consists of six processes, some of which may be combined into one step. The researcher will seek to find out how Risk Management Knowledge Area may be employed in the life of a project to increase the probability of the project success.

Literature Review

Fuller 2008 defines a project as a planned undertaking of related activities to reach an objective that has a beginning and an end. Successful organizations create projects that produce desired results in established time frames with assigned resources. As a result, businesses are increasingly driven to find individuals who can excel in this project oriented environment. (Portney, 3rd Edition p. 9), There are nine project knowledge areas each of which are strategically coordinated to bring about the successful completion of projects. This research will focus on the area of Risk Management as the researcher believes that even though all the knowledge areas are important, Risk Management is essential because every project will encounter some amount of risk during its life cycle, because there are no guarantees on any project. Consequently knowledge on how to mitigate these risks when they occur is of utmost importance. According to the Project Management Body of Knowledge Guide (PMBOK), a risk is an uncertain event or condition that, if occurs, has positive or negative impact on a projects objectives. Risks are inevitable in a projects life cycle and as such every project has some level of uncertainty. Risk Management planning is therefore inevitable for the success of projects. Risk Management is therefore the practice of deciding and documenting how to conduct risk management activities.

Findings

Project risk management encompasses the processes for conducting risk management planning, identification, analysis, responses, and monitoring and control of a project. The

objectives of risk management are to increase the probability and impact of positive events and decrease the probability and impact of events adverse to project objectives. The subsequent paragraph that follows will briefly explain each components of project risk management. Risk identification is an iterative process that is done throughout the entire projects life cycle. PMI PMBOK defines risk identification as the process of determining which risk might affect the project and then documenting characteristics of those risks. Risk are usually categorized into two broad categories; known risk and unknown risks. Known risk is the risk that has been identified and can be analyzed; such risk includes but are not limited to the aspect of the project environment for example poor management practices, lack of resources, and external dependencies. An unknown risk is risk that has not yet been identified. Such risk includes: unexpected legal changes, natural disasters, and resources losses. Both type of risks, should be managed proactively. Risk analysis is mainly concerned with prioritizing and classifying risks and then deciphering which risks require the development of mitigation strategies and or contingency plans. Risk analysis like risk identification should not be done once but continuously throughout the life of the project. The PMI PMBOK identifies a number of approaches to risk analysis. Two high level approaches applies best to most projects, are qualitative risk analysis and quantitative risk analysis.

According to PMI PMBOK Qualitative Risk Analysis is a method used for prioritizing the identified risks for further action. Qualitative risk analysis assesses the priority of identified risks using their probability of occurrence, the corresponding impact on project objectives if the risks do occur as well as other factor such as the time frame and risk tolerance of the projects constraints cost, schedule, scope and quality. Qualitative Risk Analysis is performed on risk that have been first prioritized by the Quantitative Risk Analysis process as potentially and substantially impacting the projects competing demands. It analyses the effect of those risk events and assigns a numerical rating to them. At completion it also presents a quantitative approach to decision making when

uncertainty arises. There are other risk management analysis tool/techniques that can be used such as Process Assessment, Probability and Impact Analysis, Probability Distribution, Sensitivity Analysis, Decision Tree and Modeling and Simulation. Risk Response planning includes the identification and assignment of one or more persons to take responsibility for each assigned risk and defines the actions to be taken against the risk through the development of measures and actions plan to respond to risk should it occur. (Kerzer pg. 782) defines Risk Response planning as the process of developing options and actions to enhance opportunities and to reduce threats to project objectives. Risk Response actions may include: Mitigation: risk mitigation involves taking early action to prevent or reduce the likelihood of risk.

Contingency: contingency plans define actions to be taken in response to identified risk triggers in hopes of reducing potential project impact from identified risk.

Transfer: risk transfer involves shifting the responsibility/ownership of the risk to another party. This can be achieved by purchasing insurance against that type of risk

Avoidance: risk avoidance involves changing the project to eliminate the threat from identified risk.

Acceptance: risk acceptance involves acknowledging the risk as part of the project and accepting the consequences of its occurrence.

The project manager is ultimately responsible for managing risks and should regularly review and update the status of each identified risk and ensure that risks are under control. Risk monitoring and control according to (Kerzer pg. 788) is the process of analyzing, and planning for risk, keeping track of identified risks, and analyzing existing risks, monitoring risk symptoms and triggers, and reviewing the execution of risk responses strategies while evaluating their effectiveness. Risk Reporting is the process of regularly reviewing and providing status about identified risk. Project work should be continuously monitored for updates and changes, this practice should also include review and update of risk. When reporting or reviewing project progress, risk management status should be included.

Conclusion Project risk management is an iterative process that begins in the early phases of a projects life and is conducted throughout the projects life cycle. It is the practice of

systematically thinking about all possible outcomes before they happen and defining procedures to accept, avoid, or minimize the impact of risk on the project. It must be noted that not all risks can be eliminated; however, mitigation and contingency plans can be developed to lessen their impact if they occur. There is no single answer on how to manage risks, therefore a one size fits all approach cannot be used for all project circumstances. The project manager must rely upon sound judgment and the use of appropriate tools in dealing with risk. Proper risk management should be proactive rather than reactive; positive rather than negative and should seek to enhance the best probability of the project success. Risk management should not be treated as a separate project office assigned to the risk management department but rather as a sound aspect of project management.

References

A Guide to the Project Management Body of Knowledge 4th Edition, Project Management Institute Inc., 2009

Fuller, N.G. (2008). Project Management: A Process and Team Approach 1st Ed. Prentice Hall Kerzer, H (2009). 10th Edition Project Management: A System Approach to Planning Scheduling and Control. New Jersey: John Wiley & Sons Inc. Portney, S E Project Management for Dummies 3rd Edition. Wiley Publishing, Inc . http://my.safaribooksonline.com/book/certification/pmp/9780470479582/initiating/introducing_t he_project_management_knowl Web Site
. (n.d)

from http://www.wikihow.com/Develop-a-Risk-Management-Plan Web Site:

http://my.safaribooksonline.com/book/certification/pmp/9780470479582/initiating/introducing_t he_project_management_knowl Web Site

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