ISPM Chpt 11

art, science
Project risk management is the ____ and _______ of identifying, analyzing, and responding to risk throughout the life of a project and in the best interests of meeting project objectives
project success
Risk management is often overlooked in projects, but it can help improve ____________ by helping select good projects, determining project scope, and developing realistic estimates.
lowest
Risk has the _______ maturity rating of all knowledge areas.
risk
the possibility of loss or injury
negative risk
involves understanding potential problems that might occur in the project and how they might impede project success; like a form of insurance, it is an investment
positive risks
risks that result in good things happening; sometimes called opportunities
project risk
an uncertainty that can have a negative or positive effect on meeting project objectives
minimize
The goal of project risk management is to ___________ potential negative risks while maximizing potential positive risks.
risk appetite
the degree of uncertainty an entity is willing to take on, in anticipation of a reward
risk utility/risk tolerance
the amount of satisfaction or pleasure received from a potential payoff
rises
Utility ________ at a decreasing rate for people who are risk-averse.
risk-seeking
those who have a higher tolerance for risk, and their satisfaction increases when more payoff is at stake
risk-neutral
achieves a balance betweens risk and payoff
known risks
sometimes used to describe risks that the project team has identified and analyzed
unknown risks
risks that have not been identified and analyzed
planning risk management
Deciding how to approach and plan the risk management activities for the project
identifying risks
Determining which risks are likely to affect a project and documenting the characteristics of each
performing qualitative risk analysis
Prioritizing risks based on their probability and impact of occurrence
performing quantitative risk analysis
Numerically estimating the effects of risks on project objectives
planning risk responses
Taking steps to enhance opportunities and reduce threats to meeting project objectives
controlling risk
Monitoring identified and residual risks, identifying new risks, carrying out risk response plans, and evaluating the effectiveness of risk strategies throughout the life of the project
risk management plan
a plan that documents the procedures for managing risk throughout a project
project team
The __________ should review project documents and understand the organization’s and the sponsor’s approaches to risk.
varies with the needs of the project
The level of detail of the risk management plan ____________.
Topics addressed in a risk management plan
-Methodology
-Roles and responsibilities
-Budget and schedule
-Risk categories
-Risk probability and impact
-Revised stakeholders’ tolerances
-Tracking
-Risk documentation
contingency plans
predefined actions that the project team will take if an identified risk event occurs
fallback plans
developed for risks that have a high impact on meeting project objectives, and are put into effect if attempts to reduce the risk are not effective
contingency reserves (allowances)
provisions held by the project sponsor or organization to reduce the risk of cost or schedule overruns to an acceptable level
management reserves
funds held for unknown risks
broad categories of risk
-Market risk
-Financial risk
-Technology risk
-People risk
-Structure/process risk
runaway projects
projects that have significant cost or schedule overruns
risk breakdown structure
a hierarchy of potential risk categories for a project; similar to work breakdown structure but used to identify and categorize risks
identifying risks
the process of understanding what potential events might hurt or enhance a particular project
brainstorming
a technique by which a group attempts to generate ideas or find a solution for a specific problem by amassing ideas spontaneously and without judgment
delphi technique
used to derive a consensus among a panel of experts who make predictions about future developments
repeated rounds of questioning
The delphi technique uses ______________ and written responses and avoids the biasing effects possible in oral methods, such as brainstorming.
interviewing
a fact-finding technique for collecting information in face-to-face, phone, e-mail, or instant-messaging discussions
flowcharts
diagrams that show how different parts of a system interrelate
influence diagram
represents decision problems by displaying essential elements, including decisions, uncertainties, causality, and objectives and how they influence each other
SWOT analysis
helps identify the broad negative and positive risks that apply to a project
main output
The ____________ of the risk identification process is a list of identified risks and other information needed to begin creating a risk register.
risk register
A document that contains the results of various risk management processes and that is often displayed in a table or spreadsheet format; A tool for documenting potential risk events and related information
risk events
refer to specific, uncertain events that may occur to the detriment or enhancement of the project
risk register contents
-An identification number for each risk event
-A rank for each risk event
-The name of each risk event
-A description of each risk event
-The category under which each risk event falls
-The root cause of each risk
– Triggers for each risk
-Potential responses to each risk
-The risk owner or person who will own or take responsibility for each risk
-The probability and impact of each risk occurring.
-The status of each risk
triggers
indicators or symptoms of actual risk events
risk owner
person who will own or take responsibility for each risk
performing qualitative risk analysis
Assess the likelihood and impact of identified risks to determine their magnitude and priority
risk quantification tools and techniques
– probability/impact matrixes
– the top ten risk item tracking
– expert judgment
probability/impact matrix or chart
lists the relative probability of a risk occurring on one side of a matrix or axis on a chart and the relative impact of the risk occurring on the other; List the risks and then label each one as high, medium, or low in terms of its probability of occurrence and its impact if it did occur
risk factors
Numbers that represent the overall risk of specific events based on their probability of occurring and the consequences to the project if they do occur
top ten risk item tracking
a qualitative risk analysis tool that helps to identify risks and maintain an awareness of risks throughout the life of a project; Establish a periodic review of the top ten project risk items; List the current ranking, previous ranking, number of times the risk appears on the list over a period of time, and a summary of progress made in resolving the risk item
watch list
a list of risks that are low priority, but are still identified as potential risks
performing quantitative risk analysis
Often follows qualitative risk analysis, but both can be done together; Large, complex projects involving leading edge technologies often require extensive quantitative risk analysis
main techniques of quantitative risk analysis
– Decision tree analysis
– Simulation
– Sensitive analysis
decision tree
a diagramming analysis technique used to help select the best course of action in situations in which future outcomes are uncertain
estimated monetary value (EMV)
the product of a risk event probability and the risk event’s monetary value
simulation
uses a representation or model of a system to analyze the expected behavior or performance of the system
monte carlo analysis
simulates a model’s outcome many times to provide a statistical distribution of the calculated results
three estiamtes
To use a Monte Carlo simulation, you must have __________ (most likely, pessimistic, and optimistic) plus an estimate of the likelihood of the estimate being between the most likely and optimistic values.
steps of a monte carlo analysis
1. Assess the range for the variables being considered
2. Determine the probability distribution of each variable
3. For each variable, select a random value based on the probability distribution
4. Run a deterministic analysis or one pass through the model
5. Repeat steps 3 and 4 many times to obtain the probability distribution of the model’s results
sensitivity analysis
a technique used to show the effects of changing one or more variables on an outcome
how to respond to them
After identifying and quantifying risks, you must decide __________.
four main response strategies for negative risks
– Risk avoidance
– Risk acceptance
– Risk transference
– Risk mitigation
risk avoidance
eliminating a specific threat, usually by eliminating its causes
risk acceptance
accepting the consequences if a risk occurs
risk transference
shifting the consequence of a risk and responsibility for its management to a third party
risk mitigation
reducing the impact of a risk event by reducing the probability of its occurence
response strategies for positive risks
– Risk exploitation
– Risk sharing
– Risk enhancement
– Risk acceptance
risk exploitation
doing whatever you can to make sure the positive risk happens
risk sharing
allocating ownership of the risk to another party
risk enhancement
changing the size of the opportunity by identifying and maximizing key drivers of the positive risk
risk acceptance
also applies to positive risks when the project team does not take any actions toward a risk
residual risks
risks that remain after all of the response strategies have been implemented
secondary risks
a direct result of implementing a risk response
controlling risks
Involves executing the risk management process to respond to risk events and ensuring that risk awareness is an ongoing activity performed by the entire project team throughout the entire project
workarounds
unplanned responses to risk events that must be done when there are no contingency plans
main outputs of risk control
– Work performance information
– change requests
– updates to the project management plan, other project documents, and organizational process assets