Module 4: Risk Management 4 THIS PAGE LEFT INTENTIONALLY BLANK 0RGXOH#7=#5LVN#0DQDJHPHQW##7²6 2EMHFWLYHV At the end of this module, you will be able to „ Understand risk and why managing it is important „ Understand the MSF proactive risk management process „ Understand the differences between risk mitigation and risk contingency „ Demonstrate the ability to do risk assessment 7²7# # 0RGXOH#7=#5LVN#0DQDJHPHQW /HVVRQV Lessons 1. Risk Fundamentals 2. Risk Management Overview 3. Risk Identification and Analysis 4. Risk Planning 5. Risk Tracking and Control 0RGXOH#7=#5LVN#0DQDJHPHQW##7²8 /HVVRQ#4=#5LVN#)XQGDPHQWDOV Lesson 1: Risk Fundamentals The elements of risk and the presence of risk in any project 7²9# # 0RGXOH#7=#5LVN#0DQDJHPHQW 5LVN „ Definitions „ Dictionary: “Possibility of loss or injury” Webster’s Collegiate Dictionary, 10th edition „ Common: A problem waiting to happen „ Characteristics „ Inherent in every project „ Neither intrinsically good nor bad „ Not something to fear, but something to manage Risk is the possibility, not the certainty, of suffering a loss. The loss could be anything from diminished quality of a solution to increased cost, missed deadlines, or project failure. Risk is a fundamental ingredient of opportunity and so is not inherently bad, but it is inherent in every project. Successful teams deal with risk by recognizing and minimizing uncertainty. 0RGXOH#7=#5LVN#0DQDJHPHQW##7²: 5LVN#6RXUFHV Risks can come from many sources, including „ Mission and goals „ Decision drivers or organization management „ Customers or end users „ Budget, cost, schedule, and personnel „ Project characteristics „ Development process and environment „ Operational environment „ New technology The subjects listed on this slide can be sources of risks, but they are not the conditions or the consequences. 7²;# # 0RGXOH#7=#5LVN#0DQDJHPHQW 5LVN#,PSDFWV Risk can affect a project in a variety of ways „ Cost overruns and schedule slips „ Inadequate functionality „ Canceled projects „ Sudden personnel changes or demoralized staff „ Customer dissatisfaction „ Damage to company image „ Poor performance „ Legal problems Risk can affect a project in many different ways. This slide offers some typical impacts of risk. 0RGXOH#7=#5LVN#0DQDJHPHQW##7²< /HVVRQ#5=#5LVN#0DQDJHPHQW#2YHUYLHZ Lesson 2: Risk Management Overview The MSF approach to risk management 7²43# # 0RGXOH#7=#5LVN#0DQDJHPHQW $FWLYLW\=#0DQDJLQJ#5LVN ,Q#ODUJH/#LQVWUXFWRU0OHG#JURXS=# Activity Work together as if you are owners of a company that is planning to build a warehouse. You’re worried about your building catching fire. How will you deal with that possibility? [...]... 6XPPDU\ „ What is risk and why is it important? „ What is the difference between risk mitigation and risk contingency planning? „ How would you describe proactive risk management? „ What are the five steps of the MSF risk management process? Summary Now is the time to ask any further questions you may have about the material presented in this module Although this concludes the risk management module, the... &RQWUROOLQJ#5LVN To effectively control risks „ Adapt to changes in risk priority „ React to variations from the plan „ Respond to triggering events „ Assess the risk management process Example: Retiring a risk that has been successfully mitigated The combination of tracking and controlling risk moves risk management from a planning activity to a project management activity Controlling risk is the step that enables... decisions „ Highlight dependencies „ Determine schedule „ Educate management The risk assessment document should contain: „ Risk statements „ Risk probability calculations „ Risk severity calculations „ Risk exposure calculations „ Mitigation plans „ Contingency plans and triggers „ Risk ownership assignment Consolidating the team’s risk management output into a single document # 7²64 7²65# # 0RGXOH#7=#5LVN#0DQDJHPHQW... decisions and actions „ Tracking risks allows the team to monitor the status of risks and any actions taken to mitigate them „ Controlling risk moves risk management into day-to-day project management, which is crucial in making sure that risk management remains a high-profile activity 0RGXOH#7=#5LVN#0DQDJHPHQW# /HVVRQ#6=#5LVN#,GHQWLILFDWLRQ#DQG#$QDO\VLV Lesson 3: Risk Identification and Analysis... effectively convert risk data into risk decision-making information „ Assess risk probability „ Assess risk impact „ Calculate risk exposure Example: Understanding what might cause a fire in the warehouse and how costly fire damage would be Analyzing risks moves the project team from gathering raw data about risks to deciding what to do about them Risk analysis allows the team to quantify risk priorities... the exposure of each risk Lab 0RGXOH#7=#5LVN#0DQDJHPHQW# /HVVRQ#7=#5LVN#3ODQQLQJ Lesson 4: Risk Planning The third step in the risk process: planning how to deal with risks # 7²56 7²57# # 0RGXOH#7=#5LVN#0DQDJHPHQW 'HYLVLQJ#5LVN#3ODQV To effectively plan against risk „ Prioritize planning decisions based on risk priority „ Consider five key areas Research Do you know enough about the risk? „ Acceptance... MSF risk management is a five-step process through which the team mitigates risks by identifying them and taking actions appropriate to the nature of each individual risk „ Identifying risks allows the team to bring risks to the surface so it can deal with them before they hurt the project „ Analyzing risks converts risk data into information the team can use to make decisions „ Devising risk plans... a fire Don’t confuse risk mitigation with risk avoidance Avoiding risks involves eliminating the circumstances that would cause the risks to arrive Mitigating risks includes taking steps to minimize the risk s probability and impact 7²59# # 0RGXOH#7=#5LVN#0DQDJHPHQW 3ODQQLQJ#5LVN#&RQWLQJHQF\ To minimize the impact if the risk occurs „ Focus on high-exposure risks „ Plan how to react to the consequence... technology Proactive risk management involves identifying risks ahead of time and preventing them through reduction, transference, or avoidance „ Risk reduction tries to minimize the likelihood that a risk will occur (for example, by building a warehouse out of fireproof materials) or to minimize the impact (for example, by installing automatic sprinklers) „ Risk transference tries to shift the risk to someone... risks continuously throughout the project life cycle „ Uses risk- based decision-making „ Establishes some level of formality „ Covers all key persons and processes, including business and technology areas „ Treats risk identification as a positive This slide lists a few of the characteristics typical of successful risk management # 7²44 7²45# # 0RGXOH#7=#5LVN#0DQDJHPHQW 06)#5LVN#0DQDJHPHQW Manage risk . Module 4: Risk Management 4 THIS PAGE LEFT INTENTIONALLY BLANK 0RGXOH#7=#5LVN#0DQDJHPHQW##7²6 2EMHFWLYHV At the end of this module, you will. risk and why managing it is important „ Understand the MSF proactive risk management process „ Understand the differences between risk mitigation and risk