1、Chapter 11: Project Risk Management,Information Technology Project Management, Fifth Edition,Chapter 11 Project Risk Management,Learning Objectives,Understand what risk is and the importance of good project risk management Discuss the elements involved in risk management planning and the contents of
2、 a risk management plan List common sources of risks in information technology projects,2,Chapter 11 Project Risk Management,Learning Objectives (continued),Describe the risk identification process, tools and techniques to help identify project risks, and the main output of risk identification: a ri
3、sk register Discuss the qualitative risk analysis process and explain how to calculate risk factors, create probability/impact matrixes, and apply the Top Ten Risk Item Tracking technique to rank risks,3,Chapter 11 Project Risk Management,Learning Objectives (continued),Explain the quantitative risk
4、 analysis process and how to apply decision trees, simulation, and sensitivity analysis to quantify risks Provide examples of using different risk response planning strategies to address both negative and positive risks Discuss what is involved in risk monitoring and control Describe how software ca
5、n assist in project risk management,4,Chapter 11 Project Risk Management,The Importance of Project Risk Management,Project risk management is the art and science of identifying, analyzing, and responding to risk throughout the life of a project and in the best interests of meeting project objectives
6、 Risk management is often overlooked in projects, but it can help improve project success by helping select good projects, determining project scope, and developing realistic estimates Unfortunately, crisis management has higher visibility due to the obvious danger to the success of the project but
7、its risk management that helps a project have fewer problems to begin with.,5,Chapter 11 Project Risk Management,Research Shows Need to Improve Project Risk Management,Study by Ibbs and Kwak shows risk has the lowest maturity rating of all knowledge areas A similar survey was completed with software
8、 development companies in Mauritius, South Africa in 2003, and risk management also had the lowest maturity (1.84 vs average of 2.29) A KLCI Research Group study (2001) shows the benefits of following good software risk management practices 97% had procedures to identify and asess risk 80% identifie
9、d anticipating and avoiding problems as the primary benefit of risk management 70% had defined s/w development processes 64% has a Project Management Office,6,Chapter 11 Project Risk Management,Project Management Maturity by Industry Group and Knowledge Area*,KEY: 1 = LOWEST MATURITY RATING 5 = HIGH
10、EST MATURITY RATING,*Ibbs, C. William and Young Hoon Kwak. “Assessing Project Management Maturity,” Project Management Journal (March 2000).,7,Chapter 11 Project Risk Management,Benefits from Software Risk Management Practices*,*Kulik, Peter and Catherine Weber, “Software Risk Management Practices 2
11、001,” KLCI Research Group (August 2001).,8,Chapter 11 Project Risk Management,Negative Risk,A dictionary definition of risk is “the possibility of loss or injury” Negative risk involves understanding potential problems that might occur in the project and how they might impede project success Negativ
12、e risk management is like a form of insurance; it is an investment If IT projects are so risky, why do companies pursue them?,9,Chapter 11 Project Risk Management,Risk Can Be Positive,Positive risks are risks that result in good things happening; sometimes called opportunities A general definition o
13、f project risk is an uncertainty that can have a negative or positive effect on meeting project objectives The goal of project risk management is to minimize potential negative risks while maximizing potential positive risks,10,Information Technology Project Management, Fifth Edition, Copyright 2007
14、,Chapter 11 Project Risk Management,Best Practice,Some organizations make the mistake of only addressing tactical and negative risks when performing project risk management David Hillson (www.risk-) suggests overcoming this problem by widening the scope of risk management to encompass both strategic
15、 risks and upside opportunities, which he refers to as integrated risk management Ensure that project delivery is tied to organizational needs and vision Allowing an appropriate level of risk to be taken intelligently with full awareness of the degree of uncertainty and its potential effects on obje
16、ctives,11,Chapter 11 Project Risk Management,Risk Utility,Different organizations and people have different tolerances for risk Risk utility or risk tolerance is the amount of satisfaction or pleasure received from a potential payoff Utility rises at a decreasing rate for people who are risk-averse
17、Those who are risk-seeking have a higher tolerance for risk and their satisfaction increases when more payoff is at stake The risk-neutral approach achieves a balance between risk and payoff,12,Chapter 11 Project Risk Management,Risk Utility Function and Risk Preference,13,Chapter 11 Project Risk Ma
18、nagement,Project Risk Management Processes,Risk management planning: deciding how to approach and plan the risk management activities for the project Risk identification: determining which risks are likely to affect a project and documenting the characteristics of each Qualitative risk analysis: pri
19、oritizing risks based on their probability and impact of occurrence,14,Chapter 11 Project Risk Management,Project Risk Management Processes,Quantitative risk analysis: numerically estimating the effects of risks on project objectives Risk response planning: taking steps to enhance opportunities and
20、reduce threats to meeting project objectives Risk monitoring and control: monitoring identified and residual risks, identifying new risks, carrying out risk response plans, and evaluating the effectiveness of risk strategies throughout the life of the project,15,Chapter 11 Project Risk Management,Pr
21、oject Risk Management Summary,16,Chapter 11 Project Risk Management,Risk Management Planning,The main output of risk management planning is a risk management plana plan that documents the procedures for managing risk throughout a project The project team should review project documents, corporate ri
22、sk management policies, lessons-learned reports from past projects and understand the organizations and the sponsors approaches to risk Important to clarify roles and responsibilities, prepare budget and schedule estimates for risk-related work and identify risk categories for consideration The leve
23、l of detail will vary with the needs of the project,17,Chapter 11 Project Risk Management,Topics Addressed in a Risk Management Plan,Methodology: How will risk management be performed on this project? What tools and data sources are available and applicable? Roles and Responsibilities: Who are the i
24、ndividuals responsible for implementing specific tasks and providing deliverables related to risk management? Budget and Schedule: What are the estimated costs and schedules for performing risk-related activities? Risk Categories: What are the main categories of risks that should be addressed on thi
25、s project? Is there a risk breakdown structure for the project? Risk Probability and Impact: How will the probabilities and impacts of risk items be assessed? What scoring and interpretation methods will be used for the qualitative and quantitative analysis of risks? Risk Documentation: What reporti
26、ng formats and processes will be used for risk management activities?,18,Chapter 11 Project Risk Management,Contingency and Fallback Plans, Contingency Reserves,In addition to a risk management plan, many projects also include: Contingency plans predefined actions that the project team will take if
27、an identified risk event occurs Expecting new release of a s/w package, must plan to use older version if delayed Fallback plans - developed for risks that have a high impact on meeting project objectives, and are put into effect if attempts to reduce the risk are not effective College grad has main
28、 plan and contingency plans of where to live after graduation but needs fallback plan to possibly live at home Contingency reserves or allowances - provisions held by the project sponsor or organization to reduce the risk of cost or schedule overruns to an acceptable level Project falling behind sch
29、edule due to inexperience with new technology, use these funds to hire outside trainer,19,Chapter 11 Project Risk Management,Common Sources of Risk in Information Technology Projects,Several studies show that IT projects share some common sources of risk The Standish Group developed an IT success po
30、tential scoring sheet (next slide) based on potential risks If a potential project does not receive a minimum score, the organization might decide not to work on it or to take actions to reduce the risks before it invests too much time or money The Standish Group developed specific questions for eac
31、h success criterion to help decide the number of points to assign to a project User Involvement: Do I have the right users? Did I involve the users early on? Do I make involvement easy? ,20,Chapter 11 Project Risk Management,Information Technology Success Potential Scoring Sheet,21,The number of que
32、stions corresponding to each success criterion determines the number of points each positive response is assigned Ex: User involvement: 19/5 (or 3.8) points per question answered positively,Chapter 11 Project Risk Management,Broad Categories of Risk,Many organizations develop their own risk question
33、naires. Some of the categories of risk might include: Market risk Will the new service or product be useful to the organization or marketable to others? Will the users accept it? Will someone else create a better product? Financial risk can the organization afford to undertake the project? Will the
34、project meet NPV, ROI and payback estimates? Technology risk is the project technically feasible? Is it leading edge or bleeding edge technology? People risk Are people with appropriate skills available to help complete the project? Does senior management support the project? Structure/process risk
35、What is the degree of change the new project will introduce into user areas and business procedures? With how many other systems does a new project/system need to interact?,22,Chapter 11 Project Risk Management,What Went Wrong?,KPMG, a large consulting firm, published a study in 1995 that found that
36、 55 percent of runaway projectsprojects that have significant cost or schedule overrunsdid no risk management at all; 38 percent did some (but half did not use their risk findings after the project was underway); and 7 percent did not know whether they did risk management or not The timing of risk m
37、anagement is also an important consideration Comair delayed replacing a legacy system that managed flight crews and, when it eventually crashed over the holidays, 3,900 flights were cancelled, 200,000 passengers were stranded and ran up a tab of $20 million.,Information Technology Project Management
38、, Fifth Edition, Copyright 2007,23,Chapter 11 Project Risk Management,Risk Breakdown Structure,A risk breakdown structure is a hierarchy of potential risk categories for a project Similar to a work breakdown structure but used to identify and categorize risks In addition to identifying risk based on
39、 the nature of the project or products produced, it is also important to identify potential risks according to project management knowledge areas,24,Chapter 11 Project Risk Management,Sample Risk Breakdown Structure,25,Chapter 11 Project Risk Management,Potential Negative Risk Conditions Associated
40、With Each Knowledge Area,26,Chapter 11 Project Risk Management,Risk Identification,Risk identification is the process of understanding what potential events might hurt or enhance a particular project This is an ongoing process throughout the project lifecycle as things change You can not manage risk
41、s that you dont identify Risk identification tools and techniques include: Brainstorming The Delphi Technique Interviewing SWOT analysis,27,Chapter 11 Project Risk Management,Brainstorming,Brainstorming is a technique by which a group attempts to generate ideas or find a solution for a specific prob
42、lem by amassing ideas spontaneously and without judgment An experienced facilitator should run the brainstorming session Be careful not to overuse or misuse brainstorming Psychology literature shows that individuals produce a greater number of ideas working alone than they do through brainstorming i
43、n small, face-to-face groups Group effects often inhibit idea generation,28,Chapter 11 Project Risk Management,Delphi Technique,The Delphi Technique is used to derive a consensus among a panel of experts who make predictions about future developments Developed by the RAND Corporation for the US Air
44、Force in the late 1960s Provides independent and anonymous input regarding future events Uses repeated rounds of questioning and written responses and avoids the biasing effects possible in oral methods, such as brainstorming Requires a panel of experts for the particular area in question,29,Chapter
45、 11 Project Risk Management,Interviewing,Interviewing is a fact-finding technique for collecting information in face-to-face, phone, e-mail, or instant-messaging discussions Useful to have a prepared set of questions as a guide to the interview Interviewing people with similar project experience is
46、an important tool for identifying potential risks,30,Chapter 11 Project Risk Management,SWOT Analysis,SWOT analysis (strengths, weaknesses, opportunities, and threats) can also be used during risk identification Project teams focus on the broad perspectives of potential risks for particular projects
47、 What are the companys strengths and weaknesses related to this project What opportunities and threats exist Helps identify the broad negative and positive risks that apply to a project,31,Chapter 11 Project Risk Management,Other Risk Identification Methods,Checklists based on risks encountered in p
48、revious projects Analyze the validity of project assumptions as incomplete, inaccurate and/or inconsistent assumptions can lead to identifying more risks Diagramming techniques: cause-and-effect, fishbone, flowcharts and influence diagrams Influence diagrams represent decision problems by displaying
49、 essential elements, including decisions, uncertainties, causality and objectives and how they influence each other ( 11 Project Risk Management,Other Risk Identification Methods,An influence diagram is a simple visual representation of a decision problem. Influence diagrams offer an intuitive way t
50、o identify and display the essential elements, including decisions, uncertainties, and objectives, and how they influence each other. This simple influence diagram shows how decisions about the marketing budget and product price influence expectations about its uncertain market size and market share
51、. These, in turn, influence costs and revenues, which affect the overall profit. The product manager, VP of marketing, and market analyst may work together to draw such a diagram to develop a shared understanding of the key issues. The diagram provides a high-level qualitative view under which the analyst builds a detailed quantitative model.,
