Identifying and Managing Project Risks

Top 10 Mistakes Made in Managing Project Risks
Top Ten Mistakes Made in

Managing
g g Project
j
Risks
Joe Lukas, PMP, PM, CCE
Chapter Dinner / Lunch Meetings

March 19 & 20, 2012
Consulting and Training (online, public and private)
project management
business analysis
Agile projects
Interpersonal skills
Free Educational Webinars

Earn ~10 PDUs per year
http://www.pmcentersusa.com
Webinars on Demand
Tips & Techniques
White Papers
March 19 & 20, 2012
Joseph A. Lukas
PMP, PE, CCE

Presentation Objectives
Are you making any of the common errors in
risk management?
This talk will cover the top ten mistakes Project
Managers make in dealing with project risks
This presentation will also discuss how to avoid
these mistakes, along with effective risk
techniques that should be used on projects
Joe Lukas-March 19 & 20, 2012
Top 10 Risk Mistakes

1. Not considering opportunities just threats
2 C
2.
Confusing
f i risk
i k causes, risk
i k events
t & iimpacts
t
3. Using checklists and not scanning the
horizon for other risks
4. Understating risk impacts, and not scaling the
impacts based on project drivers
5. Not using 100% probability during planning
March 19 & 20, 2012
Joseph A. Lukas
PMP, PE, CCE

Top 10 Risk Mistakes
6. Not considering sensitivity with Risk Analysis
7 Calling
7.
C lli risk
i k response planning
l
i mitigation
iti ti
8. Not considering contingency plans when
doing risk response planning
g specific
p
p
project
j
team members
9. Not making
responsible for specific risk events
10. Not making risk management an on-going
process
Mistake #1
Not Considering Opportunities Just Threats
Risk Management is the process of identifying,
analyzing, and responding to all project risks
Risks typically related to highly chancy or
hazardous activities, but need to consider the
probability and impacts with a goal to:
maximize for positive events
minimize for adverse events
RISK = OPPORTUNITIES & THREATS
March 19 & 20, 2012
Joseph A. Lukas
PMP, PE, CCE

Mistake #1
Not Considering Opportunities Just Threats
Client example of risk management procedure
b i used
being
d tto manage projects
j t
Examples of Opportunities
Special pricing offered by a supplier
Competitive market conditions for a specific
service
Sudden availability of a key resource for a short
time period due to their project being postponed
Availability of some needed equipment (such as
servers or desktop computers) from another
company downsizing their operations
Availability of an government investment tax
credit for work done before a specified date
March 19 & 20, 2012
Joseph A. Lukas
PMP, PE, CCE

Mistake #2
Confusing risk causes, risk events & impacts
Common error during risk identification: failing
to distinguish among the causes of risk,
genuine risk events, and the impacts of risks
Result:
Dilutes the value of the risk process
Introduces distractions at early stages
Can obscure genuine risks
Causes-Risk Events-Impacts
Causes: Definite events or sets of
circumstances that exist in the project or its
environment and which give rise to uncertainty
Examples:
Doing a project in a developing country
Using unproven technology
Lacking skilled personnel
March 19 & 20, 2012
10
Joseph A. Lukas
PMP, PE, CCE

Risk Events: Uncertain activities that, if they
occur,, will effect the project
p j
objectives.
j
Examples:
Exchange rate fluctuations
Contractor delivery
Client expectations misunderstood
11
Impacts: Unplanned variations from project
objectives (positive or negative) which are a
result of risks occurring.
Examples:
Milestone date missed
Budget under-run
Failure to meet performance target
March 19 & 20, 2012
12
Joseph A. Lukas
PMP, PE, CCE

Risks events have one unique dimension:
uncertainty (described as probability or
likelihood
off occurrence)
)
Need to maintain a clear separation between
Causes, Risk Events, and Impacts
Format: (1) Due to <cause>,
< i k event>
<risk
t> could
ld occur,
resulting in <impact>
(1)
Project Risks, Identifying Causes, Risks and Effects, Dave Hillson, PMP, PM
Network, September, 2000
13
Identified Risk Example

Due to <the many job opportunities for top-notch
programmers>, <the
th lloss off key
k project
j t personnel>
l
could occur, resulting in <higher costs and a
longer schedule>
March 19 & 20, 2012
14
Joseph A. Lukas
PMP, PE, CCE

Due to <other systems projects underway>, <a
lack of space to support the new application on
existing servers> could occur, resulting in <the
need to purchase a new server>
15

Due to <a lack of training resources>, <system
launch without the necessary training materials>
materials
could occur, resulting in <poor data quality
because untrained users enter incomplete data>
March 19 & 20, 2012
16
Joseph A. Lukas
PMP, PE, CCE

Identified Risks Example
IMPACT
CAUSE
Need to purchase
equipment from
foreign supplier
RISK EVENT
Exchange
E
h
rate fluctuation
Doing a project in
a foreign country
Equipment held
up in customs
Lack of skilled
equipment
mechanics
Problems
installing hi-tech
manufacturing
equipment
17
Identified Risks Example:

IMPACT
CAUSE
RISK EVENT
Sharing senior software Work overload

programmer
Occurs
between two projects
Using new software

technology
Unanticipated
integration errors
March 19 & 20, 2012
18
Joseph A. Lukas
PMP, PE, CCE

Risk Identification Tools
Risk Causes
Causes
1
4
Category = Legal Risks
a lawsuit against the

Department of Health
and/or the Homeowners
Association
Impacts
Cost
Time
Quality
P = 20%
I = 10
RF = 2.0
1.
2
2.
3.
4.
5.
6.
7.
Function
Keep Risk Causes on

separate sheet
Use Post-It notes set-up as shown

to capture and analyze risks
19
Mistake #3
Using checklists and not scanning the horizon
for other risks
Checklists listings of risk events
typically encountered on a specific
type of project, but the team doesnt
consider whats not on the list!
Use Brainstorming free flow of ideas

used to generate a listing of other
potential risk events that may occur
March 19 & 20, 2012
20
Joseph A. Lukas
PMP, PE, CCE

Mistake #4
Understating risk impacts, and not scaling the
impacts based on project drivers
Four possible consequences to any risk event:
Cost
Schedule
Functionality
Quality
Need to look at largest impact in the four areas

21
Prioritize the Project Drivers
Time
Scope:
Cost
Needs and
Expectations
of
Stakeholders
Quality
March 19 & 20, 2012
22
Joseph A. Lukas
PMP, PE, CCE

Sample Project Impact Scale
Impact
Value
Cost
Schedule
10
5% variance
5% variance
4% variance
4% variance
3% variance
3% variance
2% variance
2% variance
1% variance
1% variance
Functionality
Major Issue
Quality
Major Issue
Medium Issue Medium Issue

Minor Issue
Minor Issue
Very Small
Issue
-
Very Small
Issue
-
Need to consider relative importance of project impacts

(are all impacts weighted equal?)
23
Weighted Project Impact Scale

Impact
Value
Cost
Schedule
Functionality
10
Very high
Impact
High Impact
Major Issue
8
6
Medium
Impact
Low Impact
Medium
Impact
Low Impact
Major Issue
Medium Issue Medium Issue
Major Impact
Minor Issue
Minor Issue
Very Small
Issue
-
Very Small
Issue
-
March 19 & 20, 2012
Quality
24
Joseph A. Lukas
PMP, PE, CCE

Mistake #5
Not using 100% probability during planning
Probability Description
1.0
Certain to occur (100%)
0.9
Almost certain to occur (>90%)
0.7
Highly likely (>70%)
0.5
Likely (>50%)
Low likelihood (<30%)
0.3
0.1
Very unlikely (<10%)
0.0
No chance
25
Mistake #5
Not using 100% probability during planning
Can have 100% probability during planning
phase
h
but
b t th
the P
Project
j tT
Team needs
d tto ttake
k
actions to reduce it below 100% or somehow
incorporate the item into the Project Plan
Example: due to the very heavy workload in the
client area making key personnel unavailable,
k requirements
key
i
t may b
be missed,
i
d resulting
lti iin
What actions can be taken to reduce this risk
event to <100% probability?
March 19 & 20, 2012
26
Joseph A. Lukas
PMP, PE, CCE

Mistake #6
Not Considering Sensitivity with Risk Analysis
Risk Simulation
Improves project risk management by determining
the biggest risks for risk response planning
Education tool for management to
help them understand project
Also improves estimate (cost & schedule)
accuracy and determine a contingency
amount for an acceptable risk level
27
Risk Simulation Software

Risk analysis software provides:
Frequency of
probable cost or
schedule outcomes
Time or $s
Cumulative
C
l ti costt or
schedule with
overrun probabilities
Time or $s
March 19 & 20, 2012
28
Joseph A. Lukas
PMP, PE, CCE

Risk Simulation Problem
Project team needs to assign most likely,
optimistic and pessimistic values to each risk:
There is a
BIG tendency to understate risk impact!
One option: define standards for risk ranges to
minimize debate
Low = -5% to +10%
Medium = -10%
10% to +50%
High = -20% to +100%
Very High = -30% to +300%
29
Mistake #7
Calling risk response planning mitigation
Client example
p of risk management
g
tool being
g
used to manage projects
This tool mistakes mitigation as

being the only risk response action!
March 19 & 20, 2012
30
Joseph A. Lukas
PMP, PE, CCE

Mistake #7
Calling risk response planning mitigation
The product
p
of risk management
g
is called the
Risk Register and it includes:
List of identified risks
Risk analysis
Risk response plans including contingency plans
Its not
A Risk Management Plan
A Mitigation Plan
A Risk Assessment
31
Risk Response Techniques

For Threats:
For Opportunities:
Avoid
E l it
Exploit
Transfer
Share
Mitigate
Enhance
For Both:
Acceptance
Contingency Plans
March 19 & 20, 2012
32
Joseph A. Lukas
PMP, PE, CCE

Avoidance & Exploit
Avoidance: eliminating specific
threats, usually by eliminating
the cause
Exploit: Seeks to provide

d fi iti causes th
definitive
thatt will
ill eliminate
li i t
uncertainty and allow the risk
realization for an opportunity
33
Transfer & Share

Contractual agreements may be used to
transfer negative risks to others
Allocating ownership to a
third party who is best able
to capture the opportunity
for the benefit of the project
is a share example
March 19 & 20, 2012
34
Joseph A. Lukas
PMP, PE, CCE

Mitigate & Enhance
Mitigate: reducing the risk factor by reducing the
probability of occurrence and/or the risk event
impact
Enhance: make the risk event more likely by
increasing the probability of occurrence and/or
the risk event impact
35
Acceptance
Applies to both opportunities and
threats since seldom possible to
eliminate all threats or take advantage
of all opportunities
Can be passive acceptance do
nothing
Can be active acceptance developing a contingency plan and/or
reserve (time, money and/or
resources)
March 19 & 20, 2012
36
Joseph A. Lukas
PMP, PE, CCE

Mistake #8
Not considering contingency plans when doing
risk response planning
Strategies for threats and opportunities are
actions taken before the risk event occurs
Contingency plans are actions taken after the
risk event occurs
Risk response planning should deal with both!
37
Example Risk Response Plan

Risk Event: Missing key project requirement
Expected Value: 9.0
Mitigation Plan: Include in resource plan
activities & hours need by key resources; get
management commitment to dedicate key
personnel to project
Contingency Plan: If key resources not
available, elevate issue to project sponsor
March 19 & 20, 2012
38
Joseph A. Lukas
PMP, PE, CCE

Example Risk Event Plan
Risk Event: System launch w/o training materials
56
Expected Value: 5.6
Mitigation Plan: Get management commitment
to dedicate personnel to project (addresses
probability)
Contingency Plan: Get proposal from vendor
training companies to prepare materials, issue
Purchase Order to vendor if personnel dont start
as promised
39
Mistake #9
Not making specific project team members
responsible for specific risk events
Th
The Project
P j tM
Manager should
h ld iinvolve
l th
the
Project Team in owning project risks!
Risk Register
Project Title: New Project Portfolio System
Joe Lukas
Completed By:
14-May-04
Date Completed:
RISK EVENT
RF
ASSIGNED
PxI
TO
Mimi
incomplete user functional

requirements
q
1
contractors being hired who

are not familiar with Sunoco
systems
lack of justification for this
project at a 20% return
Project ID:
Project Manager:
Status Date:
0.9
10
9.0
0.7
5.6
0.2
10
2.0
RISK PLANNING
(RESPONSE & CONTINGENCY PLANS)
Mitigation: Get commitment from Business
Sponsor on making key users available for
requirements definition.
Contingency: If users don't show up, send
absent list to Business Sponsor for follow-up
phone calls.
STATUS
Specific dates and times for JAD
sessions being planned. Will look
for firm commitments on
attendance.
Mimi
Mitigation: Contact preferred supplier and try Working with Purchasing and
to reserve Sunoco experienced contractors. supplier on staffing plan.
Transference: consider using a fixed price
contract on this project.
Joe
Next project estimate update

Avoidance: Do sensitivity study early in
project to ensure this is a viable project.
planned for June, will update
Mitigation: recheck business financials every business case at same time.
time the project estimate is updated.
March 19 & 20, 2012
B004
Mimi Hoke
14-May-04
40
Joseph A. Lukas
PMP, PE, CCE

Mistake #10
Not making risk management an on-going
process
41
Mistake #10
At each team meeting.
Ask if any new risks on the horizon
Check to see if any risk triggers occurred
Update status on execution of risk plans
Update probability and impact values
based on actions taken
Evaluate effectiveness of actions
taken in managing risks
March 19 & 20, 2012
42
Joseph A. Lukas
PMP, PE, CCE

Conclusion
Watch for the common risk management
g
mistakes outlined in this presentation
Establish a risk management procedure with
supporting templates for your company dont
leave it up to each Project Manager to invent a
process and/or tools
p
43
Questions???
Name: Joseph A. Lukas, PMP, PE, CCE

Email:
a joe
joe.lukas@pmcentersusa.com
u as@p ce te susa co
Phone: 609-575-9306
March 19 & 20, 2012
44
Joseph A. Lukas
PMP, PE, CCE

Identifying and Managing Project Risks

Diunggah oleh

Informasi Dokumen

Hak Cipta

Format Tersedia

Bagikan dokumen Ini

Bagikan atau Tanam Dokumen

Opsi Berbagi

Apakah menurut Anda dokumen ini bermanfaat?

Apakah konten ini tidak pantas?

Hak Cipta:

Format Tersedia

Identifying and Managing Project Risks

Diunggah oleh

Hak Cipta:

Format Tersedia

Top 10 Mistakes Made in Managing Project Risks

Top Ten Mistakes Made in

Chapter Dinner / Lunch Meetings

Consulting and Training (online, public and private)

Free Educational Webinars

March 19 & 20, 2012

Top 10 Mistakes Made in Managing Project Risks

Joe Lukas-March 19 & 20, 2012

Top 10 Risk Mistakes

Joe Lukas-March 19 & 20, 2012

March 19 & 20, 2012

Top 10 Mistakes Made in Managing Project Risks

March 19 & 20, 2012

Top 10 Mistakes Made in Managing Project Risks

Joe Lukas-March 19 & 20, 2012

March 19 & 20, 2012

Top 10 Mistakes Made in Managing Project Risks

Joe Lukas-March 19 & 20, 2012

Joe Lukas-March 19 & 20, 2012

March 19 & 20, 2012

Top 10 Mistakes Made in Managing Project Risks

Joe Lukas-March 19 & 20, 2012

Joe Lukas-March 19 & 20, 2012

March 19 & 20, 2012

Top 10 Mistakes Made in Managing Project Risks

Joe Lukas-March 19 & 20, 2012

Identified Risk Example

Joe Lukas-March 19 & 20, 2012

March 19 & 20, 2012

Top 10 Mistakes Made in Managing Project Risks

Joe Lukas-March 19 & 20, 2012

Identified Risk Example

Joe Lukas-March 19 & 20, 2012

March 19 & 20, 2012

Top 10 Mistakes Made in Managing Project Risks

Joe Lukas-March 19 & 20, 2012

Identified Risks Example:

Sharing senior software Work overload

Using new software

Joe Lukas-March 19 & 20, 2012

March 19 & 20, 2012

Top 10 Mistakes Made in Managing Project Risks

Category = Legal Risks

a lawsuit against the

Keep Risk Causes on

Use Post-It notes set-up as shown

Use Brainstorming free flow of ideas

March 19 & 20, 2012

Top 10 Mistakes Made in Managing Project Risks

Need to look at largest impact in the four areas

Prioritize the Project Drivers

Joe Lukas-March 19 & 20, 2012

March 19 & 20, 2012

Top 10 Mistakes Made in Managing Project Risks

Medium Issue Medium Issue

Need to consider relative importance of project impacts

Joe Lukas-March 19 & 20, 2012

Weighted Project Impact Scale

Medium Issue Medium Issue

Joe Lukas-March 19 & 20, 2012

March 19 & 20, 2012

Top 10 Mistakes Made in Managing Project Risks

March 19 & 20, 2012

Top 10 Mistakes Made in Managing Project Risks