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Project Risk Management

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 Project Risk
Management

BOOK 9, PROJECT MANAGEMENT

BY AMIR MANZOOR

Engr. Amir
Manzoor
Copyright © 2019 by Amir Manzoor

No part of this book shall be reproduced, stored in

retrieval system, or transmitted by any means,
electronic, mechanical, photocopying, recording, or
otherwise, without prior written permission form
the author. No patent liability is assumed with
respect to the use of the information contained
herein. While every precaution has been taken in
the preparation of this book, the publisher and
authors assumes no responsibility for errors and
omissions. Neither is any liability assumed for
damages resulting from the use of the information
contained herein. All inquiries should be addressed
to the author.

Project Risk Management

ISBN-13: 978-969-709-049-5

All rights reserved under the copyright laws of the

United States of America.

Printed in the United States of America

Trademark Acknowledgements

Full acknowledgement is given of all proprietary

trademarks and registered trademarks that are
mentioned in this book. In addition, terms
suspected of being trademarks or series marks have
been appropriately capitalized, author cannot attest
to the accuracy of this information. Use of a term
in this book should not be regarded as affecting the
validity of any trademark or service mark.
Project Risk Management

iv
 DEDICATION

To the faculty, professionals, and students dedicated to the creation and

dissemination of knowledge about project management.
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 Engr. Dr. Amir Manzoor

ABOUT THE AUTHOR

Engr. Dr. Amir Manzoor holds a PhD in

management sciences. He is a graduate of
NED University, Pakistan, Lahore
University of Management Sciences (LUMS),
Pakistan, and Bangor University, United
Kingdom. He has more than 20 years of
diverse professional and teaching experience
working at many renowned national and
internal organizations and higher education
institutions. His research interests include E-
commerce, Strategic Management,
Enterprise Resource Planning (ERP), Project Management, Supply
Chain Management, Data Analysis, and Technology applications.
His published research articles/book chapters have received more
than 180 citations. He has published books that have been adopted
as textbook/reference books in curriculum of undergraduate of
graduate programs of more than 20 large and reputed Asian and
European universities. Amir can be contacted at
amir@amirmanzoor.com.

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Project Risk Management

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 PREFACE
According to the latest statistics, US alone spend approximately
$2.3 trillion annually on projects. Around the globe, nearly $10
trillion is spent on all kinds of projects. Great project management
can deliver success by providing clear objectives, ample resources,
realistic planning, low risk, high quality deliverables, efficient
budget utilization, and on time delivery of product. This book is
part of a series of books titled “Project Management by Amir
Manzoor”. This series focusses on Project Management Body of
Knowledge (PMBOK) 6th Edition of Project Management
Institute, USA to provide comprehensive coverage of all aspects
of project management. PMBOK contains one of the most widely
used standard terminology, best practices, and process guidelines
around project management. This book series includes 11 books
providing coverage of all areas of project management.

This book covers fundamentals of project risk management. The

important topics covered include risk management planning, risk
identification, qualitative risk analysis, quantitative risk analysis,
risk response planning, risk response implementation, and risk
monitoring. Compared with available texts on project
management, the perspective of this book is global project
management. The book is written in simple language, provides up-
to-date coverage of covered topics. This book is useful for
undergrad and graduate students, professionals, and anyone
looking to gain a solid foundation to continue their learning of the
discipline of project management. This book is also a great
companion to prepare for PMP certification exam. The book series
“Project Management by Amir Manzoor” has a dedicated website
http://www.pmbyam.com. A companion Facebook page is also
available.

Engr. Dr. Amir Manzoor

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Project Risk Management

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 Engr. Dr. Amir Manzoor

ACKNOWLEDGEMENTS

The final shape of this book would not have been possible without
the contribution of so many people that invested their time and
energy to provide valuable ideas and suggestions. Collective
wisdom, work, and experience of many professors, researchers,
students, and practitioners have enriched the text. All the
references to the published work have been provided in the
bibliography section. I am highly indebted and thankful to all those
people who helped shape the development of this text. My special
thanks and appreciation for all those people helped shape the
development of this text by providing valuable material and
suggestions for this book. I would like to thank my colleagues and
friends at many universities in Pakistan, India, United States,
Canada, Germany, France, Japan, UK, China, Netherlands,
Turkey, Russia, Belgium, Australia, Austria, Denmark, Sweden,
Spain, and New Zealand.

I also want to thank you, the reader, for investing the time and
effort to read and study this text. I have put significant energy and
effort to make sure this text provides you the knowledge required
to understand, formulate, implement, and evaluate projects for any
organization with which you become associated. Finally, I want to
welcome and invite your suggestions, ideas, thoughts, comments,
and questions regarding any part of this text or the supplementary
materials. Please contact me at amir@amirmanzoor.com or write
me at the Management Sciences Department, Bahria University,
13, National Stadium Road, Karachi, Pakistan 75260. I sincerely
appreciate and need your input to continually improve this text in
future editions. I will especially appreciate if you are willing to draw
my attention to specific errors or deficiencies in coverage or
exposition.

Thank you for using this text.

Engr. Dr. Amir Manzoor

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Project Risk Management

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 Engr. Dr. Amir Manzoor

List of Figures
FIGURE 1: RISK PROBABILITY & IMPACT MATRIX ...............47
FIGURE 2: RESULTS OF MONTE CARLO ANALYSIS .............58
FIGURE 3: TORNADO DIAGRAM FOR E-BOOK PROJECT ....61
FIGURE 4: DECISION TREE ANALYSIS OF A POWER PLANT
PROJECT ....................................................................................62
FIGURE 5: SAMPLE INFLUENCE DIAGRAM ............................64

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 Engr. Dr. Amir Manzoor

List of Tables
TABLE 1: ESTIMATES FOR SCENARIOS OF MONTE CARLO
ANALYSIS ...................................................................................57
TABLE 2: POSSIBLE OUTCOMES OF MONTE CARLO
SIMULATION ...............................................................................58

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 Engr. Dr. Amir Manzoor

CONTENTS

CHAPTER 1: INTRODUCTION TO PROJECT RISK

MANAGEMENT .............................................................................1
INTRODUCTION ................................................................................................. 1
KEY PROCESSES OF PROJECT RISK MANAGEMENT ................................... 1
Plan Risk Management...................................................................................... 1
Identify Risks ..................................................................................................... 2
Perform Qualitative Risk Analysis..................................................................... 2
Perform Quantitative Risk Analysis .................................................................. 2
Plan Risk Responses .......................................................................................... 3
Implement Risk Responses.................................................................................. 3
Monitor Risks .................................................................................................... 3
SIGNIFICANCE OF PROJECT RISK MANAGEMENT ...................................... 3
KEY CONCEPTS OF PROJECT RISK MANAGEMENT .................................... 4
BEST PRACTICES OF PROJECT RISK MANAGEMENT ................................... 5
TRENDS AND EMERGING PRACTICES OF PROJECT RISK MANAGEMENT
............................................................................................................................... 6
Non-event risks .................................................................................................. 6
Project Resilience................................................................................................. 7
Integrated Risk Management .............................................................................. 8
TAILORING CONSIDERATIONS FOR PROJECT RISK MANAGEMENT ....... 8
Project size ......................................................................................................... 8
Project complexity ............................................................................................... 8
Project importance ............................................................................................... 9
Development approach ........................................................................................ 9
CONSIDERATIONS FOR AGILE/ADAPTIVE ENVIRONMENTS ................... 9
CHAPTER 2: PLANNING RISK MANAGEMENT .......................11
INTRODUCTION ............................................................................................... 11
PLAN RISK MANAGEMENT: INPUTS ............................................................. 11
Project Charter ................................................................................................. 11
Project Management Plan ................................................................................. 13
Project Documents ............................................................................................ 15
Enterprise Environmental Factors (EEF) ....................................................... 16
Organizational Process Assets (OPA) ............................................................. 16

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PLAN RISK MANAGEMENT: TOOLS & TECHNIQUES ................................ 16

Expert Judgement............................................................................................. 16
Data Analysis Techniques................................................................................ 19
Meetings ........................................................................................................... 19
PLAN RISK MANAGEMENT: OUTPUTS ......................................................... 20
Risk Management Plan.................................................................................... 20
CHAPTER 3: IDENTIFYING RISKS ............................................23
INTRODUCTION ............................................................................................... 23
IDENTIFYING RISKS: INPUTS ......................................................................... 23
Project Management Plan ................................................................................. 23
Project Documents ............................................................................................ 24
Agreements ....................................................................................................... 28
Procurement Documentation ............................................................................. 29
Enterprise Environmental Factors (EEF) ....................................................... 30
Organizational Process Assets (OPA) ............................................................. 31
IDENTIFYING RISKS: TOOLS AND TECHNIQUES ....................................... 31
Expert Judgement............................................................................................. 31
Data Gathering Techniques .............................................................................. 32
Data Analysis Techniques................................................................................ 34
Interpersonal and Team Skills .......................................................................... 37
Prompt Lists .................................................................................................... 38
Meetings ........................................................................................................... 39
IDENTIFYING RISKS: RISKS: OUTPUTS ........................................................ 39
Risk Register.................................................................................................... 39
Risk Report ..................................................................................................... 40
Project Document Updates ................................................................................ 41
CHAPTER 4: PERFORMING QUALITATIVE RISK ANALYSIS .43
INTRODUCTION ............................................................................................... 43
PERFORMING QUALITATIVE RISK ANALYSIS: INPUTS ............................. 43
Project Management Plan ................................................................................. 43
Project Documents ............................................................................................ 44
Enterprise Environmental Factors (EEF) ....................................................... 44
Organizational Process Assets (OPA) ............................................................. 44
PERFORMING QUALITATIVE RISK ANALYSIS: TOOLS AND TECHNIQUES
............................................................................................................................. 45
Expert Judgement............................................................................................. 45

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 Engr. Dr. Amir Manzoor

Data Gathering Techniques .............................................................................. 45

Data Analysis Techniques................................................................................ 45
Interpersonal and Team Skills .......................................................................... 48
Risk Categorization ......................................................................................... 48
Data Representation ......................................................................................... 48
Meetings ........................................................................................................... 49
PERFORMING QUALITATIVE RISK ANALYSIS: OUTPUTS ......................... 49
Project Document Updates ................................................................................ 49
CHAPTER 5: PERFORMING QUANTITATIVE RISK
ANALYSIS ...................................................................................51
INTRODUCTION ............................................................................................... 51
PERFORMING QUANTITATIVE RISK ANALYSIS: INPUTS .......................... 52
Project Management Plan ................................................................................. 52
Project Documents ............................................................................................ 52
Enterprise Environmental Factors (EEF) ....................................................... 54
Organizational Process Assets (OPA) ............................................................. 54
PERFORMING QUANTITATIVE RISK ANALYSIS: TOOLS AND
TECHNIQUES .................................................................................................... 54
Expert Judgement............................................................................................. 54
Data Gathering................................................................................................ 54
Interpersonal and Team Skills .......................................................................... 55
Representation of Uncertainty ........................................................................... 55
Data Analysis ................................................................................................. 55
PERFORMING QUANTITATIVE RISK ANALYSIS: OUTPUTS ...................... 64
Project Document Updates ................................................................................ 64
CHAPTER 6: PLANNING RISK RESPONSES ...........................65
INTRODUCTION ............................................................................................... 65
PLANNING RISK RESPONSES: INPUTS .......................................................... 66
Project Management Plan ................................................................................. 66
Project Documents ............................................................................................ 66
Enterprise Environmental Factors (EEF) ....................................................... 67
Organizational Process Assets (OPA) ............................................................. 68
PLANNING RISK RESPONSES: TOOLS AND TECHNIQUES ........................ 68
Expert Judgement............................................................................................. 68
Data Gathering................................................................................................ 68
Interpersonal and Team Skills .......................................................................... 68

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Strategies for Threats ........................................................................................ 69

Strategies for Opportunities ............................................................................... 70
Contingent Response Strategies and Fallback Plan ........................................... 72
Strategies for Overall Project Risk .................................................................... 73
Data Analysis ................................................................................................. 74
Decision Making .............................................................................................. 76
PLANNING RISK RESPONSES: OUTPUTS ...................................................... 76
Change Requests............................................................................................... 76
Project Management Plan Updates ................................................................... 78
Project Document Updates ................................................................................ 78
CHAPTER 7: IMPLEMENTING RISK RESPONSES ..................79
INTRODUCTION ............................................................................................... 79
IMPLEMENTING RISK RESPONSES: INPUTS................................................. 79
Project Management Plan ................................................................................. 79
Project Documents ............................................................................................ 80
Organizational Process Assets (OPA) ............................................................. 80
IMPLEMENTING RISK RESPONSES: TOOLS AND TECHNIQUES............... 80
Expert Judgement............................................................................................. 80
Interpersonal and Team Skills .......................................................................... 80
Project Management Information System (PMIS) ............................................. 81
IMPLEMENTING RISK RESPONSES: OUTPUTS ............................................ 81
Change Requests............................................................................................... 81
Project Document Updates ................................................................................ 81
CHAPTER 8: MONITORING RISKS ...........................................83
INTRODUCTION ............................................................................................... 83
MONITORING RISKS: INPUTS ........................................................................ 83
Project Management Plan ................................................................................. 83
Project Documents ............................................................................................ 84
Work Performance Data .................................................................................. 84
Work Performance Reports............................................................................... 84
MONITORING RISKS: TOOLS AND TECHNIQUES ...................................... 85
Data Analysis ................................................................................................. 85
Risk Audits ..................................................................................................... 86
Meetings ........................................................................................................... 86
MONITORING RISKS: OUTPUTS .................................................................... 87
Work Performance Information (WPI)............................................................. 87

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 Engr. Dr. Amir Manzoor

Change Requests............................................................................................... 87
Project Management Plan Updates ................................................................... 87
Project Documents Updates .............................................................................. 87
Organizational Process Assets (OPA) Updates................................................ 88
APPENDICES ..............................................................................89
APPENDIX 1: CASE STUDY: PROJECT RISK MANAGEMENT..................... 91
APPENDIX 2: PROJECT RISK MANAGEMENT PLAN................................... 93
APPENDIX 3: RISK SUBMISSION FORM ...................................................... 119
APPENDIX 4: RISK IDENTIFICATION DOCUMENT .................................. 123
APPENDIX 5: RISK ASSESSMENT DOCUMENT .......................................... 127
APPENDIX 6: RISK FACTORS CHECKLIST .................................................. 131
APPENDIX 7: RISK TRACKING LOG ........................................................... 155
APPENDIX 8: RISK REGISTER ...................................................................... 159
APPENDIX 9: RISK AUDIT REPORT ............................................................ 161
APPENDIX 10: RISK DATA SHEET .............................................................. 165
APPENDIX 11: SWOT ANALYSIS DOCUMENT ......................................... 167
APPENDIX 12: RISK BREAKDOWN STRUCTURE ....................................... 171
BIBLIOGRAPHY ........................................................................175

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V i e w p u b l i c a t i o n s t a t s