Project Risk

Management (Part 1)
INTRODUCTION TO PROJECT RISK MANAGEMENT
PGDPM – MANCOSA

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Learning Outcomes and Key Concepts
On successful completion of this unit, the Key Concepts
student will be able to:
▪ Introduction
▪ Place project risk management in context
▪ Risk Management Concepts
▪ Build an understanding of key concepts in
project risk management ▪ Risk Management Principles
▪ Integrate the various risk management principles ▪ Examples of Project Risk
into the project life cycle
▪ The Benefits of Project Risk Management
▪ Understand what constitutes a risk
▪ Appreciate the benefits of project risk
management

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Definition: What is risk?
1. ISO 31000 definition:
• New definition: “The effect of uncertainty on objectives.”
• Old definition: “Chance or probability of loss”
2. “The chance of something happening that will have an impact on objectives.” AS/NZS 4360

The emphasis shifted from ‘the event’ (something happens) to ‘the effect’ on objectives.
By way of illustration:
• Risk isn’t the chance of the share market crashing
• But the chance that a crash will disrupt or affect you or your organisation’s objectives by, for example,
limiting capital for expansion.

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Describe the scenario (in previous slide)

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 Introduction
Definition of
Definition of Risk
RiskManagement
Management
1. PMI
PMI USA(2017)(2017)
: “The
: “Theprocesses
processesof ofconducting
conductingrisk
risk management
management planning,
identification, analysis, response planning, response implementation, and
monitoring risk on a project. The objectives of project risk management are to
increase the
increase the probability
probabilityand
and// or impact of positive
or impact positive risks
risks and toto decrease
decrease the the
probability and
probability and//ororimpact
impact ofofnegative risks,
negative in order
risks, to optimize
in order to optimize the the
chances
chances of
project
of success.”
project success.” [PMBOK Guide,
[PMBOK6ed, 2017]
Guide, 6ed, 2017]

2. APM
APM UK (2019) : “Risk
(2019) analysis
: “Risk andandrisk
analysis riskmanagement
managementisis aa process
process that
that allows
and overall
individual risk events and overall risk
risk to
to be
beunderstood
understoodand
andmanaged
managedproactively,
proactively,
success by
optimising success byminimising
minimising threats andand
threats maximising opportunities.”
maximising opportunities.”
[APM BOK,[APM
7ed, 2019]
BOK, 7ed, 2019]

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Activity Go to menti.com voting code 9470 4270

Imagine you are asked to plan for risks on two different

projects:
1. A major road construction project.
2. Planning an outdoor dinner event at your place.

a) Would you handle the risks on these two projects the

same way?
b) Would you spend the same level of time and energy into
planning these two projects?

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Activity Go to menti.com voting code 9470 4270

Imagine you are asked to plan for risks on two different projects:
1. A major road construction project.
2. Planning an outdoor dinner event at your place.

•Would you handle the risks on these two projects the same way? Yes.
You would approach risk in the same way (Risk Management Process)
•Would you spend the same level of time and energy into planning these two projects? No.
You would spend more time / money on the major project (which is more vulnerable to risk events)
than the smaller event planning.

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Risk Management Process
• Decide how to approach and plan the RM activities for a project
Plan Risk
Management

• Determine which risks might affect the project objective and document their characteristics (Risk Management Register)
Identify
Risks

• Determine the probability and consequence of risks

Perform • Prioritise their impacts on project objectives + Implement Risks Response
Risk • Maybe qualitative or quantitative
Analysis

• Develop procedures and techniques / Define a set of actions to enhance opportunities and reduce threats to the project’s
Plan Risks objectives
Responses

Monitor and • Monitor residual risks, identify new risks, execute risk mitigation (resolution) plan
Control
Risks

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Case Study : Project Risk Management: Challenge Established
Practice
The article states that even though risk management has “been around for more than three decades”, projects are still
“delivered too late, over budget and often with less benefit than expected”. Drawing on recommendations from the article,
critically discuss how you would advise a project manager to successfully manage risk with the result of
minimizing project threats and maximizing opportunities presented?

Key Concepts in case study

• Risk Management is about people and competence
• Focus on both risks and opportunities
• Team collaboration
• Facilitation
• Suitable experts with skills, experience
• Best practices = Successful projects : Cost estimation under uncertainty

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 Self Test Questions
1. From a project of your choice, discuss 5 potential risks that may negatively impact the project.
1. And 1 potential risk that may positively impact the project.

2. Articulate what the benefits of project risk management are using examples from a project of
your choice.
3. What would be the risk of not adhering to the risk management principles when planning for
project risk management?

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Cause, Risk and Effect
Cause
Because of an existing condition
[fact about project or its environment]
As a result of using new/ unproven
technology (a requirement)
May result in
a risk Event Which may
affect an Objective
an uncertain event may occur which would an effect on the project objectives
lead to [uncertainty that could affect project if it [consequence / effect of risk on project
occurs] objectives]
Unexpected system integration errors may Which would lead to overspend on
occur (an uncertain risk) the project (an effect on the project
objective)
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Summary slide
Enablers of
What is at risk? Management
change
• Uncertainty • Objectives • Systematic (not
based on chance)
• Risk • Time, cost,
• Decision- quality, scope, • Proactive
making benefits & risk • Continual
activity (across
PLC)

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Key Messages
▪ RM is fundamental to project success.
▪ RM practices depends on various factors: Industry sector, Environment, Size / complexity of
projects, stage in PLC,…
▪ Risk Management : Systematic, Proactive, Preventive
▪ Risks may be:
▪ Negative (threat) aka downside risk
▪ Positive (opportunity) aka upside risk

▪ The Risk Management Process: Plan, Identify, Assess (Risk Analysis – Qualitative &
Quantitative) , Plan and Implement response, Monitor and Control risks
▪ Areas of risk extend to ALL project management knowledge areas

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