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Project management risk assessment by Derek Hendrikz works with probability, impact, mitigation, contingency ratios as well as risk remedies and quantification techniques. www.derekhendrikz.com
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Copyright © 2014
Derek Hendrikz Consulting
www.derekhendrikz.com
…the absence of certainty in a future or current event defines the risk of such event…
www.derekhendrikz.com
An event or situation which can endanger all or part of the project.
www.derekhendrikz.com
Risks can be both internal – arising from within the project – and external – arising
from the context or environment of the project.
Basic Assumptions Regarding the Probability & Impact of Risk…
▪ It definitely will happen.
▪ It probably won’t happen.
▪ It doesn’t matter anyway.
▪ Disaster if it happens.
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The Probability / Impact Risk Matrix
Disaster
Doesn’t matter
Probably won’t happen
Definitely will happen
1
2
3
4
5
1 2 3 4 5
Impact
Event
Probability
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Probability / Impact Ratio…P
roba
bilit
y
Impact
NoRisk
LowRisk
HighRisk
DisastrousRisk
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ContingencyPlan
Mitigation
Plan
Risk / Disaster Relationship…
Pro
babi
lity
Impact
RiskManagement
DisasterManagement
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Mitigation:
What can we do to mitigate (lessen the harshness) the risk in terms of frequency and severity...
Mitigation plans are mostly part of a risk management initiative.
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Contingency:
What can we do to manage an unplanned event or occurrence when it happens or how we can deal with it once it has happened...
Contingency plans are mostly part of a disaster management initiative.
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Mitigation / Contingency Ratio…
Miti
gatio
n
Contingency
Un-controlledRisk
ProbabilityReduced
ControlledRisk
ImpactManaged
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The Risk Management Process:Step 1: Risk Identification
· Analyse the project to identify sources of risk
Step 2: Risk AssessmentAssess risk in terms of:· Severity of impact· Likelihood of occurring· Controllability
Step 4: Risk Response Control· Implement risk strategy· Monitor and adjust plan for new risks· Change management
Step 3: Risk Response Development· Develop a strategy to reduce possible damage· Develop contingency plans
Known Risks
Quantified Risk
Managed Risk
New Risks
New Risks
New Risks
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Process to Objectives…
Understand Quantify Manage
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Risk Triggers:
Level 1 Triggers = We are warned before the event!!!
Level 2 Triggers = We are warned during the event!!
Level 3 Triggers = We are warned after the event!
RISK
DISASTER
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Two Risk Remedies…
Take the RISK or
Don’t take the Risk!!!
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Dealing with Risk:
Risk Managem
ent
Take the Risk
Retain Mitigate
Don’t take the Risk
Transfer Avoid
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Failure Mode and Effects AnalysisFMEA
Impact x Probability x Detection = Risk Value
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3 basic formulas to understanding RM:
Risk = Probability x Impact (scale of the threat).
Reduction = Mitigation x Contingency (ability to manage the threat).
Exposure = Risk – Reduction (the amount of risk that you simply cannot avoid).
www.derekhendrikz.com
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