Managing Project

Uncertainty: Risk
and Procurement
Management
Plan Risk Management
Risk Breakdown Structure
Managing Project Uncertainty: Risk and Procurement Management

Module 1 Agenda
• Risk Management Process Overview
• Concepts of Risk Management
• Threats and Opportunities

MODULE 1 – Introduction to Risk Management

Managing Project Uncertainty: Risk and Procurement Management

Project
Management
Process

Risk Breakdown Structure

Managing Project Uncertainty: Risk and Procurement Management

The Nature of Risk

• Risks are associated with “uncertainty” concerning the
assumptions made about projects’ activities such as their
duration, cost and performance requirements.
• Uncertainty will eventually affect a project’s objectives and hence
its success:
• Negatively, resulting in threats
• Positively, resulting in opportunities

Risk Breakdown Structure

Managing Project Uncertainty: Risk and Procurement Management

The Dimensions of Risk

Risk Breakdown Structure

Managing Project Uncertainty: Risk and Procurement Management

Sources of Uncertainty in Projects

Risk Breakdown Structure

Managing Project Uncertainty: Risk and Procurement Management

Project Risk Management (PMBOK)

• Project Risk Management (PRM) is the systematic process of
identifying, analyzing, and responding to project risks.
• It includes:
– Maximizing the probability and consequences of positive events
(opportunities); and minimizing the probabilities and consequences of
negative events (threats)
– An Opportunity is not the absence of threat. Distinctive opportunities exist
in their own right presenting a chance to deliver the project’s product early,
at a lower cost and, therefore, increasing customer satisfaction

Risk Breakdown Structure

Managing Project Uncertainty: Risk and Procurement Management

The Definition of Risk

Risk Breakdown Structure

Managing Project Uncertainty: Risk and Procurement Management

Risk and Decision Making

• Cost Benefit Analysis: A risky course of action should only be taken when the
potential benefit and chance of winning exceed the remedial cost of an
unsuccessful decision and chances of loosing by a acceptable margin
• The risk taker should obtain answers to:
– Why should the risk be taken?
– What will be gained?
– What could be lost?
– What are the chances of success and failure?
– What can be done if the desired result is not achieved?
– Is the potential reward worth the risk?

Risk Breakdown Structure

Managing Project Uncertainty: Risk and Procurement Management

Risk and Decision Makers

• Risk elements that tend to Attract and/or determine the Response attitudes of
decision makers include:
– Potential frequency of loss
– Amount and reliability of information available
– Severity of potential loss
– Vividness of the consequences
– Potential for (adverse) publicity
– Ability to measure the consequences

Risk Breakdown Structure

Managing Project Uncertainty: Risk and Procurement Management

Risk Management is Proactive

• Project risk management should be advance preparation for
possible adverse events, rather than responding as they happen –
though both may be needed.
• Crisis Management (reactive mode) consists of taking the
appropriate response if an event occurs.
• Anticipation and Planning (proactive mode) makes it possible –we
hope –to avoid this situation in the first place by planning an
appropriate response should the adverse event take place.

Risk Breakdown Structure

Managing Project Uncertainty: Risk and Procurement Management

Typical life Cycle Risks

Risk Breakdown Structure

Managing Project Uncertainty: Risk and Procurement Management

Risk Conditions in Knowledge Areas

Risk Breakdown Structure

Managing Project Uncertainty: Risk and Procurement Management

Risk Management Process

• Attributes of the effective Risk Management Process (RMP)
• Value Added: The RMP should be seen to provide value to the
project team but simple to use and implement, without undue
administrative burden.
• Structured and Generic: The process should be a structured and
generic but readily adaptable to sector-specific projects
• Scalable: RMP should be readily scalable to projects of different
scope

Risk Breakdown Structure

Managing Project Uncertainty: Risk and Procurement Management

Risk Management Process

Elements of an appropriate RMP infrastructure
– Project Management Information System
• Risk Management Information System
• Performance Failure Information System
• Lessons Learned Information System
• Earned Value Information System
– Risk Analysis Software Tools
• Simulation Tools
• Decision Analysis Tools
– Risk Resources
• Policies and Procedures
• Standards and Templates
• Risk Experts
• Training for Project Team
• Networking with Relevant External Bodies

Risk Breakdown Structure

Managing Project Uncertainty: Risk and Procurement Management

Plan risk Management: Inputs

Risk Breakdown Structure

Managing Project Uncertainty: Risk and Procurement Management

Plan risk Management: Tools and Techniques

Risk Breakdown Structure

Managing Project Uncertainty: Risk and Procurement Management

Plan risk Management: Output

Risk Breakdown Structure

Managing Project Uncertainty: Risk and Procurement Management

Risk Category Identification

Risk Breakdown Structure

Managing Project Uncertainty: Risk and Procurement Management

Risk Breakdown Structure(RBS)

Risk Breakdown Structure

Managing Project Uncertainty: Risk and Procurement Management

Risk Breakdown Structure(RBS)

Risk Breakdown Structure

Managing Project Uncertainty: Risk and Procurement Management

Integrating Risk with Knowledge Areas

Risk Breakdown Structure

Managing Project Uncertainty: Risk and Procurement Management

Typical Life cycle Projects

Risk Breakdown Structure

Managing Project Uncertainty: Risk and Procurement Management

Next Week
Risk Identification

Risk Register

Risk Breakdown Structure

Managing Project Uncertainty: Risk and Procurement Management

Thank you for your Attention

MODULE 1 – Introduction to Risk Management