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risk analysis

The document outlines a systematic approach to project risk management, emphasizing the importance of identifying, analyzing, and mitigating risks to enhance project success. It details six key processes in risk management and discusses qualitative and quantitative analysis methods, including the use of Monte Carlo simulations. Effective risk management can significantly reduce project problems and improve decision-making throughout the project lifecycle.

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kaushambi
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7 views

risk analysis

The document outlines a systematic approach to project risk management, emphasizing the importance of identifying, analyzing, and mitigating risks to enhance project success. It details six key processes in risk management and discusses qualitative and quantitative analysis methods, including the use of Monte Carlo simulations. Effective risk management can significantly reduce project problems and improve decision-making throughout the project lifecycle.

Uploaded by

kaushambi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 26

PROJECT RISK

MANAGEMENT

BY KAUSHAMBI KAUSHAL
Risk Management is a logical and
systematic method of identifying,
analyzing, treating and monitoring the
risks involved in any activity or process.

It includes maximizing the results of


positive risks and minimizing the
consequences of negative events.
• To manage risk we use
the six risk management
processes
 Risk Management
Planning
 Risk Identification
 Qualitative Risk Analysis
 Quantitative Risk Analysis
 Risk Response Planning
 Risk Monitoring and
Control
PROJECT PROBLEMS CAN
BE REDUCED AS MUCH AS
90% BY USING RISK
ANALYSIS
POSITIVES: MORE INFO
AVAILABLE DURING
PLANNING
IMPROVED PROBABILITY
OF SUCCESS/OPTIMUM
PROJECT
NEGATIVES:
PROJECT CUT DUE TO RISK
LEVEL
+

 Risk analysis is a systematic process to estimate


the level of risk for identified and approved
risks. This involves estimating the probability of
occurrence and consequence of occurrence and
converting the results to a corresponding risk.
 The approach used depends upon the data
available and
requirements levied on the project level.
The most common form of qualitative approach is the use
of probability of occurrence and consequence of
occurrence scales together with a risk mapping matrix to
convert the values to risk levels.

Quantitative approaches include expected value, decision


tree analysis, payoff matrices, and modeling and
simulation.
Risk Document risk
management management
plan and control plan

Define Quantify Develop


Identify risk
objectives risk response
Risks have been thoroughly examined and included in
project plans, resulting in risk reduction. Information
about possible risks is available throughout the project,
resulting in a better decision-making process

Project objectives might be affected by certain risks,


allowing the objectives to be improved

Many of the project weaknesses have been identified in


advance and are incorporated into the project plan.

Decrease the number of changes made to the project plan


during project execution, resulting in higher chances of
project success
 Protects project investments

 Proactive management – early warning

 Achieve project objectives


RISK ANALYSES ARE OFTEN BASED ON DETAILED
INFORMATION THAT MAY COME FROM A VARIETY OF
TECHNIQUES, INCLUDING BUT NOT LIMITED TO:

 Analysis of plans and related documents


Experience and interviewing
 Relevant lessons-learned studies
Results from tests
When a qualitative risk analysis is performed, risk ratings can be
used as an indication of the potential importance of risks on the
program and often expressed as low, medium, and high (or possibly
low, medium low, medium, medium high, and high).
 High risk: Substantial impact on cost, technical
performance, or schedule. Substantial action required
to alleviate issue. High-priority management attention is
required.
 Medium risk: Some impact on cost, technical
performance, or schedule. Special action may
be required to alleviate issue. Additional
management attention may be needed.
 Low risk: Minimal impact on cost, technical
performance, or schedule. Normal
management oversight is sufficient.
QUANTITATIVE RISK
ANALYSIS OUTPUTS ARE

1. Prioritized risk lists,


2. Probabilistic cost estimates at completion per project
phase and probabilistic schedule estimates for key
milestones to help the project manager allocate reserve
accordingly,
3. Probabilistic estimates of meeting desired
technical performance parameters and validating
technical performance of key components
….CONT’D

4. Estimates of the probability of meeting cost, technical


performance, and schedule objectives (e.g.,
determining the probability of achieving the planned
estimate at completion).
 Updated Risk Register
 Probabilistic analysis for project success (time and cost)
 Updated priority of risk events
 Trends in risk analysis
INTERVIEWIN
G

Decision
Tree
Analysis

Monte
Carlo
Simulation
 The Monte Carlo process is an attempt to create a series of
probability distributions for potential risks, randomly sample
the
distributions, and transform the numbers into useful
information that reflects quantification of the associated cost,
technical performance or schedule risks.
USES OF MONTE CARLO
SIMULATION

 Monte Carlo simulations used to


Estimate risk in the design of service centers;
Measure time to complete key milestones in
project;
Estimate the cost of developing,
fabricating, and
maintaining an item.
 A common method/tool to determine whether a risk
is considered low, moderate, or high by
combining the two dimensions of a risk:
 Its probability of occurrence, and
 Its impact on objectives if it occurs.
2X2 IMPACT/PROBABILITY
MATRIX
Green: Low Risk (Passive Acceptance – workarounds)
Yellow: Moderate Risk (Active Acceptance –
contingency)
Red: High Risk (Risk Response Planning)
High
Probability
Low

Low High
Impact
Likelihood of Occurrence
Consequence Health and Safety Likelihood Class (events/year)
Fatality or multiple fatalities <0.01% chance of
Extreme expected Not Likely (NL) occurrence
Severe injury or disability likely; 0.01 - 0.1% chance of
High or some potential for fatality Low (L) occurrence
Lost time or injury likely; or 0.1 - 1% chance of
some potential for serious Moderate (M) occurrence
injuries; or small risk
1 - 10% chance of
Moderate of fatality
High (H) occurrence
First aid required; or small risk
Low of serious injury
>10% chance of
Negligible No concern Expected (E) occurrence
 The process of numerically analyzing the
effect of identified risks on the project’s
objectives In particular, the project schedule
and the project costs.
 Quantify possible outcomes for the project
 Assess probability of achieving specific project
objectives
 Identify risks requiring most attention

• Identify realistic and achievable cost, schedule,


or scope targets, given project risks
• Determine best management decision when
conditions or outcomes are uncertain
 Risks during the project/idea initiation phase:
– Unavailable subject matter experts
– Poor definition of problem or project
– No feasibility study
– No or unclear objectives
CONT’D
 Risks during the project planning phase:
– No risk management plan
– Spotty planning
– Underdeveloped requirements and
specifications
– Unclear statement of work
– No management or stakeholder
support
– Poor role definition
– Inexperienced team
– Definite lack of skills
….CONT’D

 Risks during the project execution phase

 Changes in schedule
 No control systems in place
 Unskilled labour
 Material availability or poor quality material
 Unreliable suppliers
 Unexpected price increase (not budget for it)
 Strikes
 Weather
 Regulatory requirements
CONT’D…
 Risks during the project close-out /
termination phase:
 Unacceptable to customer
 Poor quality product/project

 Budget problems

 Penalties to be paid for exceeding the time

parameter of the project


THANK YOU

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