5- Risk Management

Risk Management

Project Risk Management  In the past 

We treated risk as a “ let’s live with it. ” Today

Risk Management is part of doing business. It forces us to focus on the future where uncertainty continues to increase.

Project Organization Immediate Environment Significant Factors

External Environment

Project Risk Management Project Risk Management Is the systematic process of  Identifying, Analyzing, and Responding to project risk 

Maximizing the probability and consequences of  positive events & Minimizing the probability and consequences of  adverse events To Project Objectives

Major Processes Planning Risk  Risk  Management Management Planning Planning

Risk  Risk  Identification Identification

Qualitative Qualitative Risk Risk Analysis Analysis

Quantitative Quantitative Risk Risk Analysis Analysis

Controlling

Risk  Risk  Response Response Planning Planning

Risk  Risk  Monitoring Monitoring & & Control Control

Integrating Risk with other project management functions Integration Integration Communicatio Communicatio nn

Scope Scope Life cycle Expectations Environ. Variables

Quality Quality

Requirements Standards

Project Risk

Data Exchange Accuracy

Availability Productivity

HR HR

Services Time Objectives

Cost Objective

Time Time

s

Cost Cost

Performance

Procuremen Procuremen tt

Risk  An uncertain event or condition that, if it occurs, has a positive or negative effect on a project objective

The severity of any risk can be defined in terms of two quantities: Likelihood: The extent to which the risk effects are likely to occur. •

Impact (Consequence): The effect that a risk risk will have on the project if it occurs. •

Risk Management Planning Risk Management Planning The process of deciding how to approach and plan the risk management activities for a project

Risk Management Plan Describes how risk identification, qualitative and quantitative analysis, response planning, monitoring, and control will be structured and performed during the project life cycle. Timing

Methodology Roles and Responsibilities

Reporting Formats

Budgeting

Scoring and interpretation

Tracking

Risk Identification Involves determining which risks might affect the project and documenting their characteristics

Risk Categories Risks that may affect the project for better or worse can be identified and organized into categories Macro

Project

Environment

Target

Team

Market

Design

Control

Political

Procurement

Funding

Financial

Technical

Contractual

Social

Job Site

Act of God

Managerial

Information-Gathering Techniques Delphi Technique

Information-Gathering Techniques Interviewing ( Nominal Group Technique)

Information-Gathering Techniques SWOT Analysis Internal Factors External Factors

Strengths (S)

Weaknesses (W)

Opportunities (O)

SO

WO

Growth

Cooperate

ST

WT

Stability

Mitigation

Threats (T)

Qualitative Risk Analysis The process of assessing the impact and likelihood of identified risks Prioritizes risks according to their potential effect on project objectives

Probability-Impact Matrix

Probability-Impact Matrix

A

Likely

B

Probable

    P   i  l  i   b    a    b    o    r

High Risk 

Medium Risk 

Occasional Remote

C

Improbabl e

Low Risk  Minor

Major

Severe

Catastrophic

Quantitative Risk Analysis Process aims to analyze numerically the probability of each risk and its consequence on project objectives

Expected Monetary Value (EMV) Status

Payoff

Probability %

Good Market - Good Quality

80,000

15

Good Market - Poor Quality

50,000

45

Poor Market - G ood Quality

20,000

25

Poor Market - P oor Quality

-20,000

15

Expected Payoff for good good market = 80,000*0.15 + 50,000*0.45 = LE 34,500 Expected Payoff for good quality = 80,000*0.15 + 20,000*0.25 = LE 17,000 EMV = 80,000*0.15 + 50,000*0.45 + 20,000*0.25 + (-20,000)*0.15 = LE 36,500

Decision Tree Analysis

Purchase Machine 35,000 LE 17,500

Good Quality P : 70 %

80,000 80,000

Bad Quality P : 30 %

30,000 30,000

Good Quality P : 50 %

80,000 80,000

Bad Quality

30,000 30,000

65,000

40,000 47,500 Subcontrac t LE 15,000

55,000

Risk Response Planning The process of developing options and determining actions to enhance opportunities and reduce threats to the project’s objectives

 Risk response response planning must be :  Appropriate to the severity of the risk  Cost effective in meeting the challenge Timely to be successful   Realistic within the project context   Agreed upon by all parties involved  Owned by a responsive person            

Risk Response Strategies

Mitigation (Corrective action)

Avoidance

Acceptance

(Prevention)

(Accept consequences)

Transference

Risk Transference

Risk Monitoring and Control The process of keeping track of the identified risks, monitoring residual risks and identifying new risks, ensuring the execution of risk plans, and evaluating their effectiveness in reducing risk 

Workaround Plans Unplanned responses to emerging risks that were previously unidentified or accepted

Risk Form Risk ID:

001

Business Area:

Cement Factories

Raised By: Ayman Gaballah – Contract Project Name: Sinai White Cement Manager Date Raised: August 99 Project Manager: Michelle Monfleur Risk Description: As we signed as a main contractor with the client so we have liabilities against the mechanical design which will be done completely by FLSmish (equipment supplier) at Denmark. In case of any design mistake, like failing to achieve the required kiln daily production, we would be responsible. Likelihood: Impact: High Critical Impact Description: In case of design mistake, effecting the daily factory production, we would not be able to HANDOVER the plant to the client as it is a turnkey contract, this would conclude to a big fuss with the cli ent who would keep our retention guarantees. Recommended Preventative Actions: We should hire or obligate the designer to hire an international design office to review and ensure the technical design. Recommended Contingent Actions: We should get the eq uipment supplier sharing our guarantee and retention with the client and to make him obligated about any correct action required due to design mistake. Supporting Documentation: Contract special conditions

Signature:

Date: Eng. Ayman Gaballah

- Contract Manager

__19_/_08__/_99___ 

PLEASE FORWARD TO THE PROJECT MANAGER FOR PROJECT REVIEW GROUP

RISK REGISTER  Preventative Actions Description Likelihood of Impa ct (L/M/H)

Impact Preventativ (L/M/H/C) Actions

Prev en t. Owners

Continge ncy Actions

Prev en t. Contingenc Outcomes Actions

Conting. Owners

Conting. Outcomes

V - SWOT Analysis for Hospital Project  SWOT Worksheet 

Internal  strength

Weakness

* Staff Trained for project management techniques .(Major  )

* Newproject type

* Different individual skilled existing .(Major  )

* Data base onsimilar projects not available .(Major  )

* Construction Equipments available .(Minor  )

* Data about Egyptian market and suppliers in this field not too much .(Minor  )

High ----- 70

* Management interest for open new market .(Minor  )

* Funds and cashflowproblems

Low ----- 30

* Previous experience for large projects (Major  )

Major

Minor

----- 70

----- 30

* Good CompanyReputation

Opportunities

.

.(Minor  )

S-O Alternatives .(water,elec

…est ..)

* Highfelt need of  users .(High )

*Staff willingness for learningnewskills

.

     l    a    n * Available project funds    r    e (High )     t

.

* Good contact

/ sucsessful networking

* Positive trends incompanyfield that will create more jobs (e.g.,growth,globalization,technical

.(Major  )

W-O Alternatives

*Site facilityexisting

.(Low )

.(Major  )

* Staff available has no experience inthis industrygroup .(Minor  ) * Weak skills leadership

*Support of  government .(High )

* Little competition

.(Minor  )

* Designcriteria not clear for the government .

* Increase companywotk capacity

.

* Interactionwith professional organizations .

.

V - SWOT Analysis for Hospital Project   SWOT Worksheet  Threats

 S-T Alternatives

W-T Alternatives

* Lack of budget.(High)

* Payments of incentive staff based on  performance

* Review of equipment list by government for new technique

* Low price rate.(low)

* Starting a new career for hospital  projects.

* Limited donation funded.

* Delay for imported equipments.(High)

* Competitors with better job hunting more skills

* Competitors with superior  skills,experience and knowledge.

* Traffic problems.(Low)

6 x 70

420

4 x 30

120

5 x 70

350

5 x 30

150

540 500

RISK CATEGORY 1.Risk ID

2.Risk  

3.Expected Date

5.Impact

4.Cause of Risk  8.Consequences if  risk occurred

9.Risk Response

10.Contingency

HIGH

6.Probability

LOW 7.Overall Level

MEDIUM

Risk Track Sheet

Risk No .

Closed

Severity Y/N

R0001 R0002 R0003 R0004 R0005 R0006 R0007 R0008 R0009 R0010 R0011 R0012 R0013

In Hand Date

Y/N

Waiting Trigger  Date

Y/N

Date

Action Plan Reference

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