Introduction to Risk management

This article contains most of the important information you need to know about the Introduction of Risk Management Chapter in order to answer questions related to this topic in the PMI-RMP Exam, I recommend you review this type of articles 1 week before your exam date, all information mentioned are based on PMBOK Guide 5th edition , Practice Standard for Risk Management and  Risk Management Tricks of the trade for Project Managers and PMI-RMP Exam Prep Guide , 2nd Edition by Rita Mulcahy .

  • Project risk management includes the processes concerned with conducting risk management planning , identification , analysis , responses, and monitoring and control on a project , the objective is to increase the probability and impact of positive events and decrease probability and impact of negative events .
  • It’s not an optional activity , it’s a systematic and proactive approach to taking control over projects instead of being controlled by the project.
  • Project Risk is an uncertain event or condition that if occurs has a negative or positive effect on the project objectives.
  • At the early stages of the project the level of risk exposure is at its maximum but information on the project risks at it’s minimum , the earlier in the project life cycle that the risks are recognized , the more realistic the project plans and expectations of results will be .
  • Project risk management should be conducted for all projects , the level of detail, sophistication tools and amount of time and resources applied to project risk management should be in proportion to the project characteristics .

 

  • Risk Factors are :
  1. Probability, likelihood that risk will occur.
  2. Impact , effect on the project if risk occur
  3. When it will happen ( Expected Timing )
  4. Frequency of the event.
  • Critical Success Factors for Project Risk management :
  1. Recognize the value of risk management , it should be believed specially by the organization that risk management will bring positive potential return on investment.
  2. Individual Commitment , Risk management is every body’s responsibility.
  3. Open and Honest Communications.
  4. Organization Commitment , it can be obtained if risk management goals are aligned with organization goals and values .
  5. Risk effort scaled to project , as the cost of project risk management should be appropriate with it’s potential value of the project.
  6. Integration with other project management activities.
  • Project management can be seen as an attempt to control the project uncertain environment, it’s effectiveness is increased by using information and results of risk management
  • Note that from risk definition the risk event affects the project objectives , so objectives should be defined and stated before the risk management starts.
  • It’s the project manager role to tailor risk management activities to the needs of the project , it’s the initiation phase in risk management , main actions required includes :
  1. Define objectives against which risks will be identified.
  2. Define how risk management elements will be scaled for the project.
  3. Define risk thresholds , tolerances and appetite.
  • Risk management process will be iterative through the project life cycle due to the emergent nature of risks.
  • Qualitative analysis used to gain understanding and evaluate individual risks while Quantitative analysis evaluate project overall risk.
  • Project Network diagram is an important input to Risk management as you should look for :
  1. Estimates , especially ones that contains padding
  2. Path Convergence , where more than one path leads to one activity.
  3. Allocation of resources and expert level.
  4. Parallel Activities.
  5. Critical Path as it should be within project allocated time.
  6. Number of near critical pathes.
  • One point estimates for activities schedule and cost contains the higher risk.
  • The best way to shorten project schedule is to identify and eliminate risks,
  • Communication management plan is an important input to risk management, reporting of risk activitites should be stated in communication management plan.
  • There are some specific communication check points such as :
  1. When charter is finalized.
  2. When WBS is created.
  3. When risks score is determined.
  4. When risk response plans are created.
  5. When creating monthly report.
  6. More formal checkpoints are Go/No Go Decisions.
  • Organization Process assets are valuable input to risk management as it provides some useful templates such as :
  1. Reporting forms of risks
  2. Standard Probability and Impact matrix.
  3. Risk ranking standards for Go/No Go Decisions.
  4. Procedures for Risk Audits.
  • Risk tolerance Areas are usually expressed in terms of project constraints , Scope , Cost , time , Quality , Resources , Risks and customer satisfaction.
  • Some Project Managers collect the risk thresholds and tolerances from key stakeholders while they are collecting requirements.

 



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