Project Risk Assessment by Derek Hendrikz

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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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Project Risk Assessment

derek hendrikzwww.derekhendrikz.com

Copyright © 2014

Derek Hendrikz Consulting

www.derekhendrikz.com

…the absence of certainty in a future or current event defines the risk of such event…

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Level of Risk = Level of Uncertainty

Project

Risk…www.derekhendrikz.com

An event or situation which can endanger all or part of the project.

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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).

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