Risk Management

Risk management must be an integral part of any project. Everything does not always happen as planned. Project risk management contains the processes for identifying, analyzing, and responding to project risk. Each process has a set of input and a set of output. Each process also has a set of tools and techniques that are used to turn the input into output

Risk Management Processes

Risk Management Planning

Used to decide how to approach and plan the risk management activities for a project.

Input includes: The project charter, risk management policies, and WBS all serve as input to this process

Methods used: Many planning meeting will be held in order to generate the risk management plan

Output includes: The major output is the risk management plan, which does not include the response to specific risks. However, it does include methodology to be used, budgeting, timing, and other information

Risk Identification

Determining which risks might affect the project and documenting their characteristics
Input includes: The risk management plan is used as input to this process

Methods used: Documentation reviews should be performed in this process. Diagramming techniques can also be used

Output includes: Risk and risk symptoms are identified as part of this process. There are generally two types of risks. They are business risks that are risks of gain or loss. Then there are pure risks that represent only a risk of loss. Pure risks are also known as insurable risks

Risk Analysis

A qualitative analysis of risks and conditions is done to prioritize their affects on project objectives.

Input includes: There are many items used as input into this process. They include things such as the risk management plan. The risks should already be identified as well. Use of low precision data may lead to an analysis that is not useable. Risks are rated against how they impact the projects objectives for cost, schedule, scope, and quality

Methods used: Several tools and techniques can be used for this process. Probability and Impact will have to be evaluated

Output includes: An overall project risk ranking is produced as a result of this process. The risks are also prioritized. Trends should be observed. Risks calculated as high or moderate are prime candidates for further analysis

Risk Monitoring and Control

Used to monitor risks, identify new risks, execute risk reduction plans, and evaluate their effectiveness throughout the project life cycle.

Input includes: Input to this process includes the risk management plan, risk identification and analysis, and scope changes

Methods used: Audits should be used in this process to ensure that risks are still risks as well as discover other conditions that may arise.

Output includes: Output includes work-around plans, corrective action, project change requests, as well as other items

Risk Management Concepts

Expected Monetary Value (EMV)
· A Risk Quantification Tool
· EMV is the product of the risk event probability and the risk event value
· Risk Event Probability: An estimate of the probability that a given risk event will occur

Decision Trees

A diagram that depicts key interactions among decisions and associated chance events as understood by the decision maker. Can be used in conjunction with EMV since risk events can occur individually or in groups and in parallel or in sequence.