PRM Unit 1

Project Risk Management

- Project risk is an uncertain event or condition that, if it occurs, has a adverse/ negative
(threats) or positive (opportunities) impact on project objectives such as schedule, costs,
quality, or scope.
- Uncertainty: probability/ likelihood of risk event occurring/ materializing
- Impact: consequence of risk event materializing

7 Constraint Model for Project Risk Management

Stakeholder risk attitudes

Risk tolerance
- Risk tolerance tells you how much risk an organization or individual can withstand, e.g.
organization may allow schedule or cost slippage by 3–5%.
Risk Appetite
- “Risk appetite is the degree of uncertainty an organization is willing to accept in anticipation
of a reward, e.g. Some organizations m \]ight take a high risk if the reward is high; others
may want to play it safe or be conservative.
Risk Threshold
- The risk threshold is an amount of risk that an organization or individual is willing to accept/
specific limit beyond which risks becomes unacceptable, e.g. You are planning to bid on a
contract. You think that the value of this contract will be approximately R100,000. Your
organization has told you that, because of budgetary constraints, they cannot allow you to go
beyond R110,000 - Here, your risk threshold is R10,000
Risk averse
 - This describes a person or entity that prefers certainty over uncertainty and is willing
to accept lower returns or pay higher prices to avoid risk

Risk seeker or taker

- This refers to someone who actively seeks out opportunities with higher risk in
exchange for potentially higher returns.

Risk neutral

- This describes individuals or entities who are indifferent between taking risks and
avoiding them.

Risk tolerant
- These are individuals or entities who are willing to accept a certain level of risk in their
investments in exchange for potential higher returns

Project Risk Management Summary

Risk Management Planning
- The initial work performed to identify the risk management approach to be used on the
project and the project-specific assessment criteria.
Risk Identification
- The process of identifying the potential sources of risks both initially and on an ongoing
basis.
Qualitative Risk assessment
- is a subjective process of identifying risks to measure both the likelihood of a specific risk
event occurring during the project life cycle and the impact it will have on the overall
schedule should it hit. (e.g. high likelihood; low impact)
Quantitative risk assessment
- The process of assessing uses verifiable data to analyze the effects of risk in terms of cost
overruns, scope creep, resource consumption, and schedule delays.
Risk Response Planning
- The creative process of identifying the risk response strategies that will be used and the
detailed risk response plan(s) (what will be done or not done) for each risk identified. This
planning includes identifying the trigger event that will cause the risk response plan to be
executed.
Risk Monitoring and Control
- The process of monitoring for a risk event occurrence, reassessing the risk (likelihood and
consequence) and monitoring the performance of the risk response plan and reporting the
results.

Unit 2
Purpose and Objectives of Plan Project Risk Management
- To develop overall risk management strategy for the project.
- To decide how the risk management process will be executed.
- To integrate project risk management with all project management activities.

Categories of Success for Risk Management

- Project Related Criteria (cost, time & scope)
- Process Related Criteria (inherent level of uncertainty)

Project Risk Related Communication

- Within the project team
- Between the project team and the other project stakeholders
- The principles for each communication is defined in the risk management plan

Critical Success Factors for the Plan Project Risk Management Process
- Acceptance by the stakeholders
- Identification of bias and correcting it
- Alignment with internal and external constraints and priorities
- Balance between cost or efforts and benefits
- Completeness to the needs of the risk management process

Example of Element of Risk Breakdown Structure (RBS)

Technical Risks
- Scope definition
- Requirement definition
Management Risk
- project management
- organisation
Commercial Risk
- suppliers & vendors
- subcontracts
External risk
- legislation
- exchange rates
Unit 3
4 kinds of risks
known knowns.
 - Risk is already recognized by team members and present early in the planning stages/ can
plan for in advance (opposition voices, budget overages, shortage of materials, resource
limitations, etc.). These should be thoroughly documented in your risk management plan well
in advance.
Known unknowns.
- Are those risks which you ‘know that you don’t know’ – risks that you know exist, but can’t
accurately quantify their potential impact.
Unknown knowns
- (impact is unknown but existence is known, i.e., untapped knowledge)
Unknown- unknowns
- Which no one can be reasonably expected to anticipate and is usually a surprise to most
individuals (a system failure, sudden illness, accident, etc.). Risks will still surface regularly
and will need to be added to the appropriate register and subsequently reviewed.

Risk Breakdown Structure

External
Market
- Customer acceptance
- Profit potential
Environmental Impact
- Pollution Risk
- Community Protests

Internal
Technical
- Performance
Organisational
- Funding safety
- Skilled Resources

Risk Identification, Assessment and Response Strategy

The City of Cape Town’s Water and Sanitation Catchment Management Department has begun
installing two new litter fences that will help prevent waste from entering Zeekoevlei via the Big and
Little Lotus Rivers. Create a Word document in which you identify 15 possible risks For now, the
table must have categories, descriptions and effects
Risk
ID Category Description Effect Existing Control
Pollution from Contamination of water Compliance with environmental
R1 Environmental construction materials sources regulations
Cost overrun on project Financial strain on Regular budget reviews and
R2 Financial budget department oversight
Design flaws in litter Ineffective waste Quality assurance checks on design
R3 Technical fences prevention and construction
Failure to obtain Project delays and
R4 Legal necessary permits potential fines Proactive permit acquisition efforts
Community opposition Community engagement and
R5 Stakeholder to the project Public relations backlash consultation
Worker injuries during Project delays and legal
R6 Safety installation liabilities Implementation of safety protocols
Delays in material Project delays and
R7 Supply Chain delivery increased costs Diversification of suppliers
Unforeseen impact on
R8 Environmental local wildlife Ecological damage Environmental impact assessments
Ineffective waste Regular maintenance and
R9 Technical Technology malfunctions interception monitoring
Damage to infrastructure Contingency planning for adverse
R10 Weather Extreme weather events and delays weather
Regular project tracking and
R11 Schedule Project timeline delays Missed project milestones scheduling
Public perception of the Negative community Public relations campaigns and
R12 Stakeholder project sentiment communication
Breach of contractual Legal disputes and Robust contract management
R13 Legal agreements financial penalties procedures
Supplier bankruptcy or Disruption in material Contractual agreements with
R14 Supply Chain insolvency procurement financially stable suppliers
Invasive species Ecological monitoring and
R15 Environmental introduction Ecological imbalance prevention measures