Risk is an uncertain condition which nobody can predict. It can be having multiple consequences. Sometime Risk is calculative and expected, but sometime it brings surprise. Now a day the level of competition is so high in almost everywhere, and when there are high competition and demand then chance of Risk increased.
Process to Manage Risk
- Plan Risk Management
- Identify Risks
- Perform Qualitative Risk Analysis
- Perform Quantitative Risk Analysis
- Plan Risk Responses
- Implement Risk Responses
- Monitor Risks
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Plan Risk Management
It is process when management works on How and Who’s. I mean if Risk occur then
- Who Will Involved
- How to performed risk management activities
- How much time it will take
Cause and Impact of Risks
A risk can have more than one cause. Also, if a risk occurs, it can have more than one impact. For example:
- Project scope.
- Project time.
- Project Cost
- Project quality.
- Project performance
Risk management planning needs to be sync and updated with the project’s plan for :
- Scope
- Schedule
- Cost
- Quality
This information should be shared and sync to address a Risk, because based on Scope management, Schedule Management, Cost management and Quality Mgmt. needs to analysis the criticality, priority, Impact of the Risk.
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Identify Risk
It is something we identify that it can be or it is a Risk.
Suppose: You have prepared a project plan and it look all good. In the mid of project, you found that as per Customer expectation or SOW, you to plan for one application integration.
But as you were not fully aware about SOW or you missed that point, now as per Cost management, it is an overburdened and over Budgeted. It will impact your project implementation, Manpower, profit and Quality as well because it was not planned or budgeted. It is a Risk which you have identify.
Method to Identify the RISK
- Gather Information
- The Delphi technique
- Root cause analysis and diagramming techniques
- Risk identification analysis
- Checklist analysis
- Assumption Analysis
- SWOT (Strength, Weakness, Opportunities and Threats) Analysis
RISK register
Once RISK is identified, Analysis and response then it should be well recorded for future reference and project review in RISK Register.
3. Perform Qualitative Risk Analysis
To focus on those Risk whose probability is high need to perform Qualitative Risk analysis.
Ways to perform Qualitative Risk Analysis
- Data Gathering
- Categorisation of Risk
- Analysis of Urgent Risk
- Expert Opinion and evaluation
Based on the scoring of potential Risk we can easily priorities the risk which are required immediate attention to resolve or mitigate. Rest we can put in “Watch List” and keep an eye on the same.
4. Perform Quantitative Risk Analysis
Once Qualitative Analysis performed and identify the high priory Risks, then to assign some numeric Rating to analysis further based on their priory and probability to occur based on SCOPE, TIME, COST, EFFORTS.
This analysis is for big project where high cost and time are invested. IT needs a deeper analysis.
Ways to Perform Quantitative Risk Analysis
- The first step to quantifying uncertainty is to get more information.
- Re-Analysis for cost estimates and get an optimistic, pessimistic, and most likely estimate for each WBS element.
- Apply PERT (Project Evaluation & Review Technique).
Other Methods–Scenarios, modelling, and simulation
Sensitivity analysis: – A quantitative risk analysis and modeling technique help to identify the risks have the most expected effect on the project. We can also use what-if models or simulations to see the impact of a risk on either the budget or the schedule. Most of the time Result display in this model are in form of Tornado Diagram.
A tornado diagram has the following characteristics:
- The longer the bar, the more sensitive the project objective is to the risk.
- The risks are presented in descending order, with the largest impact on the top and the least
- impact on the bottom.
- It allows the team to focus on those risks with the greatest impact on a project objective.
Expected Monetary Value (EMV) analysis: – It is Statistical technique.
To determine the expected monetary value of a risk or a decision, do the following:
- Identify the scenarios that could occur.
- Determine the probability of each scenario.
- Determine the monetary value associated with each outcome.
- Multiply the probability times the monetary value of each outcome.
- Sum the outcomes to get the expected monetary value of the risk or decision.
EMV can be calculated easily in a spreadsheet or a table. More often, it is displayed as a decision tree.
Decision Tree
It is a technique where we can get a visual display of the uncertainty and the various decision options for project risks.
Simulation. Project simulations use computer models and estimates of risk, usually expressed as a probability distribution of possible costs or duration at a detailed work level, and are typically performed by using Monte Carlo analysis.
5. Plan Risk Response
Once we identified, Quantify, analysis and have exact risk and impact on the project, then we need to make plan to response or mitigate that RISK to resolve and avoid to re-occur in future too.
Key point during planning to response any Risk that:
- Response should be appropriate toward actual Risk
- It should be Cost effective
- Should be realistic
- It should be manageable in a define timeline to avoid project timelines
- It should be agreed by all stakeholder and implementors.
- It should not affect or impact any other part of project in future.
How to record or document a Risk
Whenever a project has any Risk, plan, resolve, then it should be recorded or documented somewhere to avoid and make records. It will also work as KEDB (Known Error Data Base).
RISK Register one of the formats where we can record all project RISK.
There are some Information should be documented in RISK Register:
- Trigger conditions
- Residual risks
- Fallback plans
- Workarounds
- Contingency reserves
Trigger conditions. An event or a situation that indicates that a risk is about to occur.
Residual risk. A risk that remains after risk responses have been implemented.
Workaround. A response to a threat that has occurred, for which a prior response had not been planned
or was not effective.
Contingency reserve. Budget within the cost baseline or performance measurement baseline that is
allocated for identified risks that are accepted and for which contingent or mitigating responses are
developed.
6. Implement RISK Response
Implementing risk responses involves taking specific actions to address identified risks and to avoid to re-accrue.
7. Monitor RISK
Identifying or mitigation the RISK is not the only activity in project, need to monitor the identify risk as well as potential Risk.
Fallback plan
Include an alternative set of actions and tasks available in the event that the primary plan
needs to be abandoned because of issues, risks, or other causes.
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