Project Risk Management

EECS811: IT Project ManagementPresenter: Gavaskar Ramanathan

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Overview

• Agenda [1]– PMBOK discussion

• Agenda [2]Case Study #1– Project risk management methodology for small firmsCase Study #2– Driving agile architecting with cost and risk

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Question

• What is risk ?– An uncertain event or condition which has negatively

impact project cost, time or scope.

• What is risk management?– Systematic process of identifying, analyzing and

responding to project risk.– It includes maximizing the probability and consequence of

positive events and minimizing the probability and consequence of adverse events.

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Summary

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Overview

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Process Explanation

• What is risk management planning ?– Deciding how to approach and plan risk management.

• What is risk identification ?– Which risks might affect the project and document them.

• What is qualitative risk analysis ?– Accessing the impact and likelihood of identified risks.

• What is quantitative risk analysis ?– Aims to analyze numerically the probability of each risk

and the consequence on project objectives.

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Process Explanation (Cont..)

• What is risk response planning ?– Developing options and determining actions to enhance

opportunities and reduce threads to project objectives.

• What is risk monitoring and control?– Keeping track of the identified risks and monitoring and

identifying new risks and ensuring the execution on risk plans and evaluation their effectiveness in reducing risk.

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Risk Management Planning

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Risk Identification

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Qualitative Risk Analysis

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Rating Impacts For A Risk

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Probability – Impact Matrix

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Quantitative Risk Analysis

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Cost Estimates From Interview

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Cost Risk Simulation

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Decision Tree Analysis

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Risk Response Planning

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Risk Monitoring And Control

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Agenda [2]

• Case Study #1– Project risk management methodology for small firms

• Case Study #2– Driving agile architecting with cost and risk

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Project RMM For Small Firms

• Introduction • Literature review• New risk management methodology design– Identification methodology need and characteristics– New methodology phases and tools

• Discussion and methodology validation– Implementation phases– Result discussion

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Project RMM For Small Firms

• Introduction • Literature review• New risk management methodology design– Identification methodology need and characteristics– New methodology phases and tools

• Discussion and methodology validation– Implementation phases– Result discussion

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Project Risk Management Methodology For Small Firms

• SME ( Small And Medium Enterprises)• SMEs generate 66.7% of employment in European

Union, employing over 90 million people.

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Project RMM For Small Firms

• Introduction– SMEs are companies with limited resources due to their

size.– Most of the time there are not using project management

in some cases due to ignorance or complexity.

• The aim of this paper is to present a project risk management methodology designed specifically for these situations

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Investigation Phases

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Project RMM For Small Firms

• Introduction • Literature review• New risk management methodology design– Identification methodology need and characteristics– New methodology phases and tools

• Discussion and methodology validation– Implementation phases– Result discussion

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Literature Review

• SMEs challenge– Growth accomplished through challenges– Raising capital and size of the company– Seeking access to new technologies– Strong capacity of innovation, however lack the resource

to manage the innovation process.– Various standards such as APM, IPMA, ISO, PMBOK can be

used only to large firms not SMEs

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Project RMM For Small Firms

• Introduction • Literature review• New risk management methodology design– Identification methodology need and characteristics– New methodology phases and tools

• Discussion and methodology validation– Implementation phases– Result discussion

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Identify Methodology Need & Characteristics• First phase– Identify the difficulties that SME encounter when facing

new project (7 different companies analyzed) – To confirm the information obtained in this first analysis, a

boarder study was carried with consulting firm with another 72 SMEs

– 17 Micro (24%) & 24 Small (33%) & 31 Medium (43%)– Sectors: Equipment (31%), services (15%), construction

(13%) and automotive (10%)

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Identify Methodology Need & Characteristics

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First Phase - Conclusion

• Conclusion– SMEs overlooked the initial and final project phases.– Chosen project not matching with company Strategic point

of view.– Hardly paying attention to closing phase of the project.– Lesson learned and project results.

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Project RMM For Small Firms

• Introduction • Literature review• New risk management methodology design– Identification methodology need and characteristics– New methodology phases and tools

• Discussion and methodology validation– Implementation phases– Result discussion

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New Methodology Phase And Tools

• Proposal:– Risk assessment should be more qualitative than

quantitative.– Objectivity priorities the risks according to their potential

impact.– Clear documentation, periodic review of risks and their

status into dynamics of the company.– Risk checklist and strategies to mange common risks.

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New Methodology Phase And Tools

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New Methodology Phase And Tools

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New Methodology Phase And Tools

• Project definition– Project environment analysis– Definition of project objectives– Identification of strategic risk with project

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New Methodology Phase And Tools

• Project planning– Definition of risk management plan– Operational risk identification– Risk analysis and evaluation– Project risk communication– Closure and final project evaluation– Project result management– Lesson learned

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Risk Classification Criteria

• The RPI index value is calculated with the following formula:

• RPI = I x P = (Ic x It X Is ) x P• where:– I Risk impact– Ic Cost impact– It Time impact– Is Scope impact– P Risk probability.

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Phases & Activities & Techniques

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Project RMM For Small Firms

• Introduction • Literature review• New risk management methodology design– Identification methodology need and characteristics– New methodology phases and tools

• Discussion and methodology validation– Implementation phases– Result discussion

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Implementation Phases

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Result Discussion

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Conclusion

• Less time spent on use of this methodology(< 85h) which is 3.77% of project time

• For shorter projects this % is increases because definition & planning and lesson learned and results management are the most time consuming and independent of project duration.

• Helps not only risk management, also other project management areas.

• Elimination of strategic risks and the correct definition of objectives, eliminating serious shortcomings in the project definition.

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Agenda [2]

• Case study#1– Project risk management methodology for small firms

• Case study#2– Driving agile architecting with cost and risk

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Question

• Does agility and architecture can coexist ?– We see agile methods that included architecting such as

scaled agile framework.– Five pieces of advice can help architects become more

effective in an agile world without having to implement new methods or frameworks.

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Five Ideas

• Decision are your main deliverables • Keep a backlog of architectural concerns• Let economic impact determine your focus• Keep it small• Just enough anticipation.

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Decision are your main deliverables

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Keep a backlog of architectural concerns

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Five Ideas

• Decision are your main deliverables • Keep a backlog of architectural concerns• Let economic impact determine your focus• Keep it small• Just enough anticipation.

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References

• PMI—Project Management Institute, 2008. A Guide to the Project Management Body of Knowledge (PMBOK), 4th edition. Project Management Institute, Inc., USA.

• Sara Marcelino-Sadaba, Amaya Perez-Ezcurdia, Angel M. Echeverría Lazcano, Pedro Villanueva, 2013,Project risk management methodology for small firms”, International journal of project management, 32(2), pp.327- 340

• Poort, E.R. , 2014, Driving Agile Architecting with Cost and Risk, “IEEE Computer Society”, 31(5), pp.20-23