PROJECT RISK

MANAGEMENT
Course
PMI-RMP

Engr. ALAA SULTAN

Senior Project Manager
PMP, PMI-RMP, OCP, 6SIGMA
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INSTRUCTOR

ALAA SULTAN
Senior Project Manager,
PgMP,PMP, PMI-RMP, Oracle-OCP, 6Sigma.

❑ 23 years of Project Management Project

experience managing medium to
enterprise sized projects, involving all
project phases in the Middle East
area/Egypt and Gulf Region.

❑ Strong Project Management and Business

Analysis experience in multiple projects
and strong customer focus with emphasis
on delivering quality solutions.

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RMP OVERVIEW

COURSE OBJECTIVES

After completion the course, you will be able to.

❑ Plan risk management.

❑ Identify risks.
❑ Qualify risks.
❑ Quantify risks.
❑ Plan risk responses.
❑ Monitor and control risks.
❑ Pass the PMI-RMP exam.

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RMP OVERVIEW

WHO SHOULD APPLY?

❑ If you have advanced knowledge and experience

in risk management.

❑ If you are a project manager focused on project

risk management, including for large projects
and/or complex environments.

PMI-RMP LINK
https://www.pmi.org/certifications/types/risk-management-rmp

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RMP OVERVIEW

Gain and Maintain Your PMI-RMP

❑ The certification exam has 170 multiple-choice

questions and you have 3.5 hours to complete it.

Total Time/hours Scored Future test

Questions questions questions
170 3.5 150 20

❑ To maintain(Renew) your PMI-RMP, you must

earn 30 professional development units (PDUs)
in risk management topics every three years.

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RMP OVERVIEW

Price
Member: US$520.00
Non-member: US$670.00

Prerequisites
Secondary degree
(high school diploma, associate’s degree, or the global equivalent)
4,500 hours of project risk management experience
40 hours of project risk management education

OR

Four-year degree
(bachelor’s degree or the global equivalent)
3,000 hours of project risk management experience
30 hours of project risk management education.
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RMP OVERVIEW

Application (Risk Management Experiences).

Project Name: --------------.

Project Objective: Describe the project in one or tow rows.
Role: Project Manager or Project Engineer.

I lead the following risk management activities

1. Identify risks.
2. Assess and rank risks.
3. Develop risk management strategies.
4. Monitor and reassess risks .
5. Coach & educate stakeholders and project team
members in risk principles and implementing risk
processes.
6. Asses stakeholders risk tolerance and engage them on
risk prioritization.
7. Perform specialized risk analysis using advanced tools &
techniques and evaluate the attributes of risks.

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RMP OVERVIEW

The required Materials to Prepare for the Exam

❑ Review the Exam Content Outline .

❑ Review the
Practice Standard for Project
Risk Management.

❑ Review PMBOK5 A Guide to the Project Management

Body of Knowledge (PMBOK® Guide).
Only Ch10 ,Ch11 and Ch13.

❑ Practice Exams.

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RMP OVERVIEW

How to study the materials

❑ Studying duration from one to two months according

to your PMP Certificate date(recent PMP certified or
old).

❑ You have to read the materials four times by

integration method.

Example for the integration method:

For Identify Risk process, read from (Pmbok5 CH11

+ Practice Standard CH5 + Appendix-D D2 + Exam
Content Outline) in the same time.

❑ Solve questions during the reading up to day of the

exam.

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Exam Content Outline

The following table identifies the proportion of questions from each domain
that will appear on the PMI-RMP exam.

Domain Percentage of Items on Test

Risk Strategy and Planning (5 Tasks) 19–20%

Stakeholder Engagement ( 9 Tasks) 19–20%

Risk Process Facilitation (7 Tasks) 25–28%

Risk Monitoring and Reporting (7 Tasks) 19–20%

Perform Specialized Risk Analyses (3 Tasks) 14–16%

Total (31 Tasks) 100%

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Exam Content Outline

Domain 1: Risk Strategy and Planning

Activities related to developing policies, processes, and procedures for risk

assessment, planning, and response.

Tasks Risk Strategy and Planning (19–20%)

Develop risk assessment processes and tools that quantify stakeholder risk tolerances in
Task 1
order to assess and determine risk thresholds for the project and set criteria for risk levels.
Update risk policies and procedures using information such as lessons learned from
Task 2
projects and outputs of risk audits in order to improve risk management effectiveness.
Develop and recommend project risk strategy based on project objectives in order to
Task 3
establish the outline for the risk management plan.
Produce risk management plan for the project on the basis of inputs such as project
information, external factors, stakeholder inputs, and industry policies and procedures in
Task 4
order to define, fund, and staff effective risk management processes for the project that
align with other project plans.
Establish evaluation criteria for risk management processes based on project baselines and
Task 5
objectives in order to measure effectiveness of the project risk process.

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Exam Content Outline

Domain 2: Stakeholder Engagement

Activities related to promoting the understanding of project risk management for

stakeholders and project team members, assessing stakeholder risk tolerance,
prioritizing project risk, and promoting risk ownership.

Tasks Stakeholder Engagement (19–20%)

Promote a common understanding of the value of risk management by using interpersonal

Task 1 skills in order to foster an appropriate level of shared accountability, responsibility, and
risk ownership.
Train, coach, and educate stakeholders in risk principles and processes in order to create
Task 2 shared understanding of principles and processes, and foster engagement in risk
management.
Coach project team members in implementing risk processes in order to ensure the
Task 3
consistent application of risk processes.
Assess stakeholder risk tolerance using processes and tools such as interviewing
Task 4 stakeholders and reviewing historical stakeholder behaviors in order to identify project risk
thresholds.

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Exam Content Outline

Tasks Stakeholder Engagement (19–20%)

Identify stakeholder risk attitudes and cognitive biases using stakeholder

Task 5 analysis techniques in order to manage stakeholder expectations and
responses throughout the life of the project.
Engage stakeholders on risk prioritization process based on stakeholder risk
Task 6 tolerance and other relevant criteria, in order to optimize consensus
regarding priorities.
Provide risk-related recommendations to stakeholders regarding risk strategy
and planning, risk process facilitation, risk reporting, and specialized risk
Task 7
tasks by using effective communication techniques in order to support
effective risk-based decision making.
Promote risk ownership by proactively communicating roles and
Task 8 responsibilities and engaging project team members in the development of
risk responses in order to improve risk response execution.
Liaise with stakeholders of other projects by using effective communication
Task 9 techniques and sharing information on project risk performance in order to
inform them of implications for their projects.
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Exam Content Outline

Domain 3: Risk Process Facilitation

Activities related to facilitating risk identification, evaluation,

prioritization, and response among project team members.

Tasks Risk Process Facilitation (25–28%)

Apply risk assessment processes and tools in order to quantify stakeholder

Task 1
risk tolerances and determine risk levels.
Facilitate risk identification using a variety of techniques in order to enable
Task 2 the project team and stakeholders to understand and determine the risk
exposure of the project.
Facilitate the project team’s evaluation of the identified risks’ attributes using
Task 3 qualitative and quantitative tools and techniques in order to prioritize the
risks for response planning.
Facilitate the development of an aligned risk response strategy and related
Task 4 risk actions by risk owners from the information gathered during risk analysis
in order to ensure timely and defined action when required.

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Exam Content Outline

Domain 3: Risk Process Facilitation

Tasks Risk Process Facilitation (25–28%)

Facilitate the formulation of project contingency reserve based on the risk

Task 5 exposure of the project in order to have the capability and resources to
respond to realized risks.
Provide risk data to cost and schedule analysts/estimators to ensure that
Task 6 project risk is properly reflected in cost and schedule estimates for the
project.
Use scenarios to validate potential risk responses and evaluate key
Task 7 dependencies and requirements in order to enhance the likelihood of project
success.

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Exam Content Outline
Domain 4: Risk Monitoring and Reporting

Activities related to monitoring risk, evaluating risk response against established

metrics, and communicating risk response performance to stakeholders and
project team.

Tasks Risk Monitoring and Reporting (19–20%)

Document and periodically update project risk information using standard

Task 1 tools (including but not limited to risk register, risk database) and techniques
in order to maintain a single, current repository of all project risk information.
Coordinate with project manager using communication techniques in order to
Task 2
integrate risk management throughout the project.
Create periodic standard and custom reports using risk-related metrics as
Task 3 specified in the risk management plan in order to communicate risk
management activities and status.

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Exam Content Outline

Domain 4: Risk Monitoring and Reporting

Tasks Risk Monitoring and Reporting (19–20%)

Monitor risk response metrics by analyzing risk response performance

information, and present to key stakeholders in order to ensure resolution of
Task 4
risk and develop additional risk response strategies to address residual and
secondary risks.
Analyze risk process performance against established metrics in order to
Task 5
drive risk process improvements.
Update the project risk management plan using relevant internal and external
Task 6
inputs in order to keep the plan current.
Capture risk lessons learned through comprehensive review of the project
Task 7 risk management plan, risk register, risk audits, risk process performance
reports, and other associated reports in order to incorporate into future risk
planning.

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Exam Content Outline

Domain 5: Perform Specialized Risk Analyses

Activities related to the specialized quantitative and qualitative tools and

techniques used by project risk management professionals.

Tasks Perform Specialized Risk Analyses (14–16%)

Evaluate the attributes of identified risks using advanced quantitative tools

Task 1 and specialized qualitative techniques in order to estimate overall risk
exposure of the project.
Analyze risk data produced during the project using statistical analyses and
expert judgment in order to determine strengths and weaknesses of risk
Task 2
strategy and processes and recommend process improvements when
indicated.
Perform specialized risk analysis using advanced tools and techniques in
Task 3
order to support stakeholder decision making for the project.

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Table of Contents

1 LESSON 1 INTRODUCTION

2 LESSON 2 PRINCIPLES AND CONCEPTS

3 LESSON 3 INTRODUCTION TO PROJECT RISK MANAGEMENT PROCESSES

4 LESSON 4 PLAN RISK MANAGEMENT PROCESS

5 LESSON 5 IDENTIFY RISKS PROCESS

6 LESSON 6 QUALITATIVE RISK ANALYSIS

7 LESSON 7 QUANTITATIVE RISK ANALYSIS

8 LESSON 8 PLAN RISK RESPONSES

9 LESSON 9 MONITOR AND CONTROL RISKS

10 LESSON 10 GLOSSARY AND QUESTIONS

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 PROJECT RISK
MANAGEMENT
Course
PMI-RMP

LESSON 1
INTRUDUCTION
Engr. ALAA SULTAN
Senior Project Manager
PMP, PMI-RMP, OCP, 6SIGMA
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CONTENTS

This chapter includes the following sections

0- Standard Concepts.

1- Purpose of the Practice Standard for Project Risk Management.

2- Project Risk Management Definition.

3- Role of Project Risk Management in Project Management.

4- Good Risk Management Practice.

5- Critical Success Factors for Project Risk Management

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1.0 STANDARD CONCEPTS

PMI practice standards:

▪ Guides to the use of a tool, technique, or process identified in PMBOK or other PMI
standards.

▪ Does not prescribe how the process is to be implemented, leaving that subject for
handbooks, manuals, and courses.

Practice Standards Audiences

How
▪ Are targeted who participate in the management of
projects. This includes :

- Project managers.
- Project personnel.
- Contract personnel.
- Supervisors.
- Other project stakeholders.

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1.0 STANDARD CONCEPTS

PMI practice standard

describes processes, activities, inputs, and outputs
for a specific Knowledge Area.

It provides information on process, tool, or technique

▪what is the significant.
▪what it does
▪why it is significant
▪when it should be performed or executed
▪who should perform the process.

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1.1 Purpose of the Practice Standard for Risk Management

A- Provide a standard for

project management practitioners and other stakeholders that defines the aspects
of Project Risk Management that are recognized as good practice on most
projects most of the time.

Most Projects
B- Provide a standard:
▪ Globally applicable.
▪ Descriptive purpose rather than
one used for training or educational purposes.

❖ The Practice Standard covers risk management in single projects only, does not
cover risk in programs or portfolios.

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1.1 Purpose of the Practice Standard for Risk Management

The purposes of the practice standard to those of the

PMBOK and textbooks, handbooks, and courses.

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1.1 Purpose of the Practice Standard for Risk Management

❑The practice standard emphasizes some principles that are fundamental to

effective, comprehensive, and successful Project Risk Management.

❑ Different projects, organizations, and situations will require different

approaches to Project Risk Management.

❑ Risk management is a discipline that contains a series of processes to apply

to both large and small projects.

❑ Risk management will be more effective if its practice is tailored to the project
and compatible with the organizational culture, processes and assets.

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1.1 Purpose of the Practice Standard for Risk Management

➢Project Risk Management principles are applicable to projects carried out in a

global context, reflecting the many business and organizational
arrangements between participants. Examples:-

- Joint ventures between commercial and national companies.

- Government and non-government organizations.
- Cross-cultural environment often found on these project teams.

➢Practitioners can establish processes specific to their particular situation,

project, or organization and then compare them with these principles. thus
validating them against good Project Risk Management practice.

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1.2 Project Risk Management Definition

Project Risk Management Definition

Project Risk Management includes the
processes concerned with conducting risk
management planning, identification, analysis,
responses, and monitoring and control on a
project.

Objectives of Project Risk Management:

Increase the probability and impact of positive
events, and decrease the probability and
impact of negative events in the project.

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1.2 Project Risk Management Definition

Project risk :

An uncertain event or condition that, if it occurs, has a

positive or negative effect on a project’s objectives(scope,
schedule, cost, and quality) .

Project Risk Management aims :

Identify and prioritize risks in advance of their occurrence,

and provide action information to project managers. This
actions require consideration of events that may or may
not occur and are therefore described in terms of
likelihood or probability of occurrence and their impact on
objectives.

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1.3 Role of Risk Management in Project Management
❑ Project Risk Management is not an
optional activity It is essential to successful ESSENTIAL NOT
project management. OPTIONAL

❑ It should be applied to all projects and APPLIED TO ALL

hence be included in project plans and
operational documents. PROJECTS

❑ It is an integral part of every aspect of

INTEGRAL PART
managing the project, in every phase and in OF EVERY
every process group. ASPECT

UNCERTAINTY
❑ Project Risk Management addresses the
IN ESTIMATES&
uncertainty in project estimates and
assumptions. ASSUMPTIONS.
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1.3 Role of Risk Management in Project Management
❑ Project Risk Management is not a substitute
NOT SUBSTITUTE
for the other project management processes.
FOR OTHER
PROCESSES.

❑ Project Risk Management a valuable

VALUABLE
component and adds the perspective of
COMPONENT ADDS
project risk to the outputs of other processes VALUES TO OTHER
adds to their value by taking risk into account. PROCESSES

❑ In the early stages of a project, the level of

risk exposure is at its maximum but
information on the project risks is at a
minimum.
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1.3 Role of Risk Management in Project Management
❑ A risk management is applicable
throughout a project’s life cycle.

❑ The earlier in the project life cycle that the

risks are recognized, the more realistic the
project plans and expectations of results
will be.

❑ Risk management processes monitor the

changes in the project for new risks that
may emerge so that appropriate responses
to them can be developed, as well as check
for existing risks that are no longer active.

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1.3 Role of Risk Management in Project Management

❑ Project Risk Management plays a role in

providing realistic expectations for the
completion dates and cost of the project.

❑ Throughout the project and during project

closure, risk-related lessons are reviewed in
order to contribute to organizational
learning and support continuous
improvement of Project Risk Management
practice.

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1.4 Good Risk Management Practice

❑ Project Risk Management should be conducted

in a manner consistent with existing
CONSISTENT WITH
organizational practices and policies.
ORGANIZATIONAL
PRACTICES AND
POLICIES.

❑ Project Risk Management should be conducted

in a way that is appropriate to the project.
CONDUCTED
APPROPRIATE TO THE
PROJECT.

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1.4 Good Risk Management Practice

❑ Changes in the project management plan that result from the Project Risk
Management process may require decisions at the appropriate level of
management to:

▪Reassign personnel.
▪Establish or modify budgets.
▪Make commitments to others outside the project.
▪Interact with regulators.
▪Comply with the rules of accounting and law.

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1.4 Good Risk Management Practice

❑ Project Risk Management should always

be conducted on an ethical basis, in
keeping with the Project Management
code of ethics or conduct.

❑ Honesty, responsibility, realism,

professionalism and fair in dealing
with others are among the characteristics
of successful Project Risk Management.

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1.4 Good Risk Management Practice
❑ Effective Project Risk Management benefits from strong communication
and consultation with stakeholders.

❑ This enables agreement among stakeholders that Project Risk

Management in general, and risk identification, analysis, and response, in
particular, should be carried out in a realistic and objective way and
should not be subject to political or other unreasonable influences.
RISK MANAGEMENT
CARRIED In A Realistic And Objective Way
OUT No Political Or Unreasonable
RISK PROCESSES Influences

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1.4 Good Risk Management Practice
❑ Project Risk Management should be
CONDUCTED ON ALL
conducted on all projects.
PROJECTS LARGE AND
SMALL

❑ The degree, level of detail of tools, and DEGREE, LEVEL

VALUE AND
amount of time and resources applied to OF DETAIL OF
THE SIZE OF
Project Risk Management according to TOOLS, AMOUNT
THE
the value and the size of the project. OF TIME AND
PROJECT. RESOURCES

❑ Project Risk Management processes RISK PROCESSES

should be scaled to be appropriate SHOULD BE SCALED TO
to the project during the Plan Risk BE APPROPRIATE
Management process. TO THE PROJECT

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1.5 Critical Success Factors for Project Risk Management

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1.5 Critical Success Factors for Project Risk Management
1- Recognize the Value of Risk Management
Project Risk Management should be
recognized because it provides a positive
effects for :
▪ Organizational management. Recognize
▪ Project stakeholders (both
internal and external). The Value
▪ Project management.
▪ Team members.

2- Individual Commitment/Responsibility

Project participants and stakeholders

should all accept responsibility for Individual
undertaking risk-related activities as
required. Commitment/
Risk management is everybody’s
responsibility. Responsibility
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1.5 Critical Success Factors for Project Risk Management
3- Open and Honest Communication

Everyone should be involved in the

Project Risk Management
Open And
process. Any actions or attitudes that Honest
hinder communication about project risk Communic
reduce the effectiveness of Project Risk
Management.
ation

4- Organizational Commitment

❑ Established if risk management is

aligned with the organization’s goals
and values.
❑ Project Risk Management may require Organizational
a higher level of managerial support
because handling some of the risks
Commitment
will require approval of or responses
from levels above the project manager.

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1.5 Critical Success Factors for Project Risk Management
5- Risk Effort Scaled to Project

❑ Project Risk Management activities

should be consistent with the value of:
▪ Project to the organization Risk
▪ level of project risk and scale. Effort
▪ Organizational constraints.
Scaled to
❑ Cost of Project Risk Management Project
should be appropriate to its potential
value to the project and the organization.

6- Integration with Project Management

Project Risk Management does not exist in

a vacuum, isolated from other project
management processes.
Integration
Successful Project Risk Management
with Project
requires the correct execution of the other
project processes.
Management
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1.6 Questions

Q1 - The Practice Standard for Project Risk Management covers risk

management in ----------------.

A- single projects only.

B- programs or portfolios of projects.
C- Projects ,Programs and Portfolios.
D- Programs only.

Correct answer is A.

The Practice Standard covers risk management in single projects only,

does not cover risk in programs or portfolios.

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1.6 Questions

Q2 - A PMI practice standard describes processes, activities, inputs, and

outputs for ------------------.
A- Processes Group.
B- Specific Knowledge Area.
C- All Knowledge Areas.
D- All Processes Groups.

Correct answer B.
A PMI practice standard describes processes, activities, inputs, and outputs
for a specific Knowledge Area

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1.6 Questions

Q3 - Which one of the following provides information on what the significant

process, tool, or technique is, what it does, why it is significant, when it
should be performed or executed, and, who should perform the process?
A- PMBOK.
B- A PMI Standard.
C- Texts sheets.
B- Manuals.

Correct answer B.
PMI practice standard provides information on what the significant process,
tool, or technique is, what it does, why it is significant, when it should be
performed or executed, and, if necessary for further clarification, who
should perform the Process.

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1.6 Questions

Q4 - The PMI practice standard describes or provides all the following,

EXCEPT:
A. Sets down rules and guidelines for process implementation.
B. Creates highly planned and controlled tools and techniques for projects.
C. Inevitably mirrors the life-cycle and knowledge areas of a project.
D. Inclusion of processes applicable and restricted to application areas for
project knowledge.

Correct answer A.
PMI practice standard Does not prescribe how the process is to be
implemented, leaving that subject for handbooks, manuals, and courses.

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1.6 Questions

Q5 – Practice standards are targeted at audiences such as:

A- Individuals and groups of people who seek a standard that is globally
accepted and consistently applied.
B- Businessmen who need standards for implementing and solving
problems.
C- Professional practitioners, stakeholders, and developers of project
management concentrating on a specific knowledge area.
D- Project managers, project personnel, contract personnel, supervisors,
and other project stakeholders.

Correct answer is D
Practice standards are targeted at audiences who participate in the
management of projects. This includes project managers, project
personnel, contract personnel, supervisors, and other project stakeholders.

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1.6 Questions

Q6 - The purpose of the Practice Standard for Risk Management is to:

A- Provide standard guidelines for significant processes relevant to risk

management.
B- Cover risk in programs or portfolios of projects.
C- Provide a global and consistent standard that defines the aspects of
Project Risk Management for practitioners and stakeholders.
D- Depict risks associated with the life-cycle phases of projects.

Correct answer is C.
The purpose of the Practice Standard for Project Risk Management is to
provide a standard for project management practitioners and other
stakeholders that defines the aspects of Project Management that are
recognized as good practice on most projects most of the time and provide
a standard that is globally applicable and consistently applied.

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1.6 Questions

❑Q7- Project Risk Management is essential to all project. Which one of the
following options is wrong ?
A- Different projects, organizations, and situations will require different
approaches to Project Risk Management.
B- Similar approaches of Project Risk Management are required to all
projects.
C- Project Risk Management is integral part of project management.
D- Project Risk Management is iterative throughout the project live cycle.

Correct Answer is B.

Because different approaches of Project Risk Management are required to

different projects, organizations, and situations.

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1.6 Questions

Q8- The Project Risk Management includes processes concerned with -------.

A- Planning, identification, analysis, responses, monitoring, and control of

risks on a project.
B- Planning, implementation, monitoring and control of risks on a project.
C- Identification of risks on a project.
D- Analyzing the impact of identified risks on a project.

Correct Answer is A.
Project Risk Management includes processes concerned with conducting risk
management planning, identification, analysis, responses, monitoring and
control on a project.

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1.6 Questions

Q9- You are a project manager in your organization. You are discussing with
your project team the concepts and objectives of the project risk management
.What are the objectives of project Risk management?
A- Enhance the probability and impact of positive events, and enhance the
probability and impact of negative events in the project.
B- Enhance the probability and impact of positive events, and mitigate the
probability and impact of negative events in the project.
C- Increase the probability and impact of positive events, and decrease the
probability and impact of negative events in the project.
D- Exploit the probability and impact of positive events, and avoid the
probability and impact of negative events in the project.

Correct answer is C.
The objectives of Project Risk Management are to increase the probability
and impact of positive events, and decrease the probability and impact of
negative events in the project. Page 4 in Practice standard for project risk
management.

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1.6 Questions

Q10- You are a project manager in your company. The Sponsor of your new
project informed you that no need to waste time in Risk management since
the project is small. What is your decision?
A- Start immediately plan risk management process because you are the
project manager.
B- Start the project without risk management according to the Sponsor
instructions.
C- Agreed with the sponsor because the project is small so no need for risk
management.
D- Meet the sponsor and explain to him the benefits of risk management as
well as the risk management is essential not optional to all projects.

Correct answer is D.
Project Risk Management is not an optional activity; it is essential to
successful project management. It should be applied to all projects.
Reference is Practice standard for risk management page#4.

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PMI-RMP LESSON1. INTRODUCTION
RMP Coach
1.6 Questions

Q11- You are a project manager in your company. You have a new project,
now in the planning stage and the Sponsor discuss with you that the project is
behind schedule and no time for Risk management. What is your decision?
A- Start plan risk management.
B- Start the project without risk management and save time.
C- Hire Subject matter expert (Consultant) to start risk management.
D- Most of the project considers risk management is optional.

Correct answer is C.
Project Risk Management is not an optional activity: it is essential to
successful project management. It should be applied to all projects.
Reference is practice standard for project risk management page#4.

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PMI-RMP LESSON1. INTRODUCTION
RMP Coach
1.6 Questions

Q12- Which one of the following statements on Project Risk Management in

Project Management is wrong?
A- It is an integral part for every project and each phase of the process group.
B- It provides realistic expectations for the completion of dates and cost of the
project.
C- It addressed the uncertainty in project estimates and assumptions.
D- It is a substitute for other project management processes.

Correct answer is D.
Project Risk Management is not a substitute for other project management
processes such as scheduling, budgeting, and change management

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PMI-RMP LESSON1. INTRODUCTION
RMP Coach
1.6 Questions

Q13- Which of the following is a critical success factor for Project Risk
Management?
A- Individual Commitment/Responsibility
B- Non-scalability of risk efforts to Project Management.
C- Team members and stakeholders motivation.
D- Non-integration of risk management with Project Management.

Correct answer is A.
Individual Commitment/Responsibility is a CSF of Project Risk Management.

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PMI-RMP LESSON1. INTRODUCTION
RMP Coach
1.6 Questions

Q14- Which of the following conditions, ensures that risk management is

effective?
A- If it is tailored to the project and compatible with the organizational culture,
processes and assets.
B- If it is carried out by risk experts.
C- If appropriate amount of contingency fund is allotted to the project.
D- If the day-to-day management of project by project manager is overseen
by the project board.

Correct answer is A:
Risk management will be more effective if its practice is tailored to the project
and compatible with the organizational culture, processes and assets.

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PMI-RMP LESSON1. INTRODUCTION
RMP Coach
1.6 Questions

Q15- What is Project Risk?

A- Project Risk is the predictable risk that can occur during the course of a
project, which has a negative or positive effect on the project’s objective.
B- Project Risk is an uncertain event or condition that, if it occurs, has a
positive or negative effect on a project’s objectives.
C- Project Risk is defined as the risks that will create a positive/negative
influence on Project Management.
D- Project Risk is an uncertain event or condition that, if it occurs, has little or
no effect on a project’s objectives.

Correct answer is B.
In the PMBOK® Guide – Fifth Edition, "project risk is an uncertain event or
condition that, if it occurs, has a positive or negative effect on a project’s
objectives." Project objectives include scope, schedule, cost, and quality.

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 PROJECT RISK
MANAGEMENT
Course
PMI-RMP

LESSON 2
Principles
And
Engr. ALAA SULTAN
Concepts Senior Project Manager
PMP, PMI-RMP, OCP, 6SIGMA
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 LESSON2. PRINCIPLES AND CONCEPTS
1-Definition of Project Risk

What is Project risk?

➢Project risk is an uncertain event

or condition that, if it occurs, has
a positive or negative effect on
one or more project objectives
such as scope, schedule, cost,
quality and performance.

➢ A risk may have one or more

causes and, if it occurs, it
may have one or more impacts.

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 LESSON2. PRINCIPLES AND CONCEPTS
1-Definition of Project Risk

Risks

Threats or Negative Risks Opportunities or Positive risks

Threats which occur called Opportunities which occur may

issues or problems, have be called benefits, have
a negative effect on the project a positive effect on the project
objectives. objectives.

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 LESSON2. PRINCIPLES AND CONCEPTS
1-Definition of Project Risk
It is important to distinguish between Risks, Causes, Effects and Impacts.

➢Risks
Are uncertain future events or conditions which may or may not occur, but which
would matter if they did occur.

➢Causes
Events or circumstances which currently exist or are certain to exist in the future
and which might give rise to risks.

➢Effects
Are conditional future events or conditions which would directly affect one or
more project objectives if the associated risk occurs.

➢Impacts
A measure of the effect of a risk on one or more objectives if it occurs

➢Structured risk statement (Meta-Language)

“Because of <one or more causes>, <risk> might occur, which would lead to
<one or more effects>”.
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 LESSON2. PRINCIPLES AND CONCEPTS
2-Individual Risks and Overall Project Risk
Individual risks

➢Specific events or conditions that might affect project objectives, may

positively or negatively affect one or more of the project objectives,
elements, or tasks.

➢Understanding individual risks can assist in determining how to apply

effort and resources to enhance the chances of project success.

➢Day-to-day Project Risk Management focuses on these individual risks

in order to enhance the project success.

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 LESSON2. PRINCIPLES AND CONCEPTS
2-Individual Risks and Overall Project Risk

Overall risks
Represents the effect of uncertainty on the project as a whole.

➢ Overall project risk is more than the sum of individual risks on a project,
since it applies to the whole project.

➢ Represents the exposure of stakeholders to the implications of

variations in project outcome.

➢ It is an important component of strategic decision-making, program and

portfolio management.

➢ Investments are sanctioned or cancelled and priorities are set.

➢ Realistic cost and duration of a project, establish the contingency

reserve levels required to protect the project stakeholders, set
appropriate project priorities, and judge whether the risk of overall
success is increasing or decreasing as implementation advances.

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 LESSON2. PRINCIPLES AND CONCEPTS
3-Stakeholder Risk Attitudes

Risk Attitude
A chosen mental disposition towards uncertainty, adopted explicitly or
implicitly by individuals and groups, driven by perception, and evidenced
by observable behavior. Risk attitude exists on a continuous spectrum, but
common risk attitudes include risk averse, risk tolerant, risk neutral and
risk seeking.

❑The risk attitudes of the project stakeholders determine the extent to which
an individual risk or overall project risk matters

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 LESSON2. PRINCIPLES AND CONCEPTS
3-Stakeholder Risk Attitudes

➢Understanding stakeholders Risk attitudes risk is an important component

of risk management planning that precedes risk identification and analysis,
in order to optimize both project success and stakeholder satisfaction with
the project’s results.

➢ Attitudes should be identified and managed proactively and updated

throughout the Project Risk Management process.

➢ Attitudes may differ from one project to another for the same stakeholders

➢ Attitudes usually differ from one group of stakeholders to another.

➢ Single stakeholder may adopt different risk attitudes at various stages in

the same project.

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 LESSON2. PRINCIPLES AND CONCEPTS
3-Stakeholder Risk Attitudes

Risk Attitudes Type

Risk Averse Risk Seeking Risk Neutral Risk Tolerant
•They don’t like to •They like to take •Neither risk •Very conformable
take risk. risks. seeker nor with ignoring the
•They unwilling to • Prefer the more Averse. risk.
take risks. uncertain • Deal objectively •They don’t care
•They want to outcome and may with risks. and never pay
avoid risks as be willing to pay a • Analyze the risk any attention to
much as possible. penalty to take a (decision tree risks until
• They prefer a more risk. analysis and becomes an
certain outcome EMV) then take issue.
decision.

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 LESSON2. PRINCIPLES AND CONCEPTS
3-Stakeholder Risk Attitudes
Factors Influence Risk Attitude

➢ Scale of the project within the range of stakeholders’ overall activities.

➢ Strength of public commitments made about the performance of the

project.

➢ Stakeholders’ sensitivity to issues such as environmental impacts,

industrial relations, and other factors.

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 LESSON2. PRINCIPLES AND CONCEPTS
3-Stakeholder Risk Attitudes
Other Factors Influence Risk Attitude

Risk Appetite
The degree of uncertainty an entity is willing to take on in anticipation of a
reward.

Risk Tolerance
The degree, amount, or volume of risk that an organization or individual will
withstand.

Risk threshold
Refers to measures along the level of uncertainty or the level of impact at
which a stakeholder may have a specific interest. Below that risk threshold,
the organization will accept the risk. Above that risk threshold, the
organization will not tolerate the risk.

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 LESSON2. PRINCIPLES AND CONCEPTS
4- Iterative Process

➢The amount of information available about risks will usually increase as time
goes on.

➢ Some risks will occur while others will not, new risks will arise or be
discovered, and the characteristics of those already identified may change.

➢ The Project Risk Management processes should be repeated and the

corresponding plans progressively elaborated throughout the lifetime of the
project.

➢ To ensure that Project Risk Management remains effective, the identification

and analysis of risks should be revisited periodically.

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 LESSON2. PRINCIPLES AND CONCEPTS
4- Iterative Process

➢ The progress on risk response actions should be monitored, and the action
plans adjusted accordingly.

➢ If external circumstances change significantly, it may also be necessary to

revisit the risk management planning process.

➢The frequency and depth of reviews and updates will depend on.
- The nature of the project.
- The volatility of the environment in which the project is being
implemented.
- The timing of other project management reviews and updates.

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 LESSON2. PRINCIPLES AND CONCEPTS
5- Communication

➢ Project Risk Management cannot take place in isolation. Success relies

heavily on communication throughout the process.

➢ Risk identification and analysis depend on comprehensive input from

stakeholders in a project to ensure that nothing significant is overlooked
and that risks are realistically assessed.

➢This demands effective and honest communication from the Project Risk
Management process to the rest of the project team and other project
stakeholders.

➢ Communication of the results of the Project Risk Management process

- should be targeted to meet the specific needs of each stakeholder.

- should be reflected within the communication management plan with
each stakeholder’s responsibility and role in risk management
identified and agreed-upon.

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 LESSON2. PRINCIPLES AND CONCEPTS
6-Responsibility for Project Risk Management

Risk management is everyone’s responsibility

➢ Project Risk Management should be included as an integral part of all other
project processes.

➢ Since project risks can affect project objectives, anyone with an interest in
achieving those objectives should play a role in Project Risk Management.

➢ The roles depend on the project team members’ and other stakeholders’
place within the project and their relation to project objectives.

➢ Roles and responsibilities for Project Risk Management should be clearly

defined and communicated, and individuals should be held responsible and
accountable.
- For specific activities within the risk process.
- For actions required to implement agreed-upon responses.
- Responsibility for ensuring that risk-related lessons are captured for
future use.

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 LESSON2. PRINCIPLES AND CONCEPTS
7- Project Manager’s Role in Project Risk Management

Project Manager’s Role for Overall Project

➢The project manager has overall responsibility for delivering a successful project
objectives.
➢The project manager is accountable for the day-to-day management of the
project, including effective risk management.

Project Manager’s Role for Project Risk Management

➢ Encouraging senior management support for Project Risk Management

activities.
➢ Determining the acceptable levels of risk for the project in consultation with
stakeholders.
➢ Developing and approving the risk management plan.
➢ Promoting the Project Risk Management process for the project.
➢ Facilitating open and honest communication about risk within the project
team and with management and other stakeholders.

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 LESSON2. PRINCIPLES AND CONCEPTS
7- Project Manager’s Role in Project Risk Management

➢ Participating in all aspects of the Project Risk Management process.

➢ Approving risk responses and associated actions prior to implementation.
➢ Applying project contingency funds to deal with identified risks that occur
during the project.
➢ Overseeing risk management by subcontractors and suppliers.
➢ Regularly reporting risk status to key stakeholders, with recommendations
for appropriate strategic decisions and actions to maintain acceptable risk
exposure.
➢ Escalating identified risks to senior management where appropriate, such:
risks outside the authority or control of the project manager, risks required
input or action from outside the project, and risks required release of
management reserve funds.
➢ Monitoring the efficiency and effectiveness of the Project Risk Management
process.
➢ Auditing risk responses for their effectiveness and documenting lessons
learned.

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 PROJECT RISK
MANAGEMENT
Course
PMI-RMP

LESSON 3
Introduction To
Project Risk
Management Engr. ALAA SULTAN
Senior Project Manager
PMP, PMI-RMP, OCP, 6SIGMA
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 LESSON3. INTRODUCTION TO RISK MANAGEMENT
1- Project Risk Management and Project Management

➢ All projects are uncertain since projects are unique and temporary
undertakings based on assumptions and constraints.

➢ Project Risk Management provides an approach by which uncertainty can

be understood, assessed, and managed within projects.

➢ Project Risk Management is an integral part of project management.

➢ Effective Project Risk Management is a critical success factor for project

success.

➢ Project Risk Management is not an optional process or performed as an

additional overhead task, It is essential for all projects large and small
projects.

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 LESSON3. INTRODUCTION TO RISK MANAGEMENT
1- Project Risk Management and Project Management

➢Effective Project Risk Management requires input from other project

management processes, outputs such as:
• Work breakdown structure (WBS).
• Estimates.
• Project schedule.
• Assumptions list, etc.

➢ Project management effectiveness is increased by using the information

and results(outputs) from Project Risk Management.

➢The outputs of Project Risk Management impact the following.

• Estimating resource requirements, cost, or duration.
• Assessing the impact of proposed scope changes.
• Planning or re-planning the forward strategy of the project.
• Allocating resources to tasks.
• Reporting progress to stakeholders, etc.

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 LESSON3. INTRODUCTION TO RISK MANAGEMENT
2- Project Risk Management Processes

➢project risk is an uncertain event or condition that, if it occurs, has a positive

or negative effect on a project’s objectives. From this definition, it is clear
that risks only exist in relation to objectives.

➢ It is essential at the start of the Project Risk Management process to clearly

define the objectives.

➢ Different projects are exposed to different levels of risk, so each step in the
Project Risk Management process should be scalable to meet the varying
degrees of risk. Scalable elements of the process include:
• Available resources.
• Methodology and processes used.
• Tools and techniques used.
• Supporting infrastructure.
• Review and update frequency.
• Reporting requirements.

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 LESSON3. INTRODUCTION TO RISK MANAGEMENT
2- Project Risk Management Processes

➢ Risk thresholds is a precondition for a successful Project Risk Management.

➢ Risk thresholds define the key stakeholders’ views on acceptable levels of

risk, as well as a framework against which identified risks can be assessed.

➢Project Risk Management process always starts with an initiation step in

order to ensure a common understanding and agreement of the team and
other stakeholders on the following:
• Risk Management approach.
• Parameters that will be applied in managing risk in this project.
• Project Risk Management process Scope and objectives.

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 LESSON3. INTRODUCTION TO RISK MANAGEMENT
2- Project Risk Management Processes

➢ Project Risk Management activities, resources, and attention should

be appropriate to the project since different projects have different levels of
risk management application.

➢ The main actions to provide the required tailoring are as follows:

• Define objectives against which risks will be identified.
• Define how the elements of the Project Risk Management process will be
scaled for this project.
• Define risk thresholds, tolerances, and the assessment framework.

➢ The outputs from this initial step should be documented, communicated, and
then reviewed by the stakeholders to ensure a common understanding of the
scope and objectives for the Project Risk Management process.

➢ The document should be formally approved at a senior level.

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 LESSON3. INTRODUCTION TO RISK MANAGEMENT
2- Project Risk Management Processes

➢ Project Risk Management activities, resources, and attention should

be appropriate to the project since different projects have different levels of
risk management application.

➢ The main actions to provide the required tailoring are as follows:

• Define objectives against which risks will be identified.
• Define how the elements of the Project Risk Management process will be
scaled for this project.
• Define risk thresholds, tolerances, and the assessment framework.

➢ The outputs from this initial step should be documented, communicated, and
then reviewed by the stakeholders to ensure a common understanding of the
scope and objectives for the Project Risk Management process.

➢ The document should be formally approved at a senior level.

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 LESSON3. INTRODUCTION TO RISK MANAGEMENT
2- Project Risk Management Processes

1- Plan Risk Management.

- Defining how to conduct risk management activities for a project.
- Defines the scope and objectives of the Project Risk Management process.
- Ensures that the risk process is fully integrated into project management
plan.

2- Identify Risks.
determining which risks may affect the project and documenting their
characteristics.

3- Perform Qualitative Risk Analysis.

prioritizing risks for further analysis or action by assessing and combining
their probability of occurrence and impact.

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 LESSON3. INTRODUCTION TO RISK MANAGEMENT
2- Project Risk Management Processes

4- Perform Quantitative Risk Analysis.

numerically analyzing the effect of identified risks on overall project objectives.

5- Plan Risk Responses.

- Determines appropriate response strategies and actions for each individual
risk and for overall project risk, to enhance opportunities and reduce threats
to project objectives and overall project risk.
- Integrates the actions into project plan.

6- Monitor and Control Risks

- Implements agreed-upon actions of the risk response plans.
- Reviews changes in project risk exposure.
- Identifies additional risk management actions as required.
- Assesses the effectiveness of the Project Risk Management process and risk
responses.
- Tracking identified risks, monitoring residual risks and identifying new risks.

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 LESSON3. INTRODUCTION TO RISK MANAGEMENT

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 PROJECT RISK
MANAGEMENT
Course
PMI-RMP

LESSON 4
Plan Risk
Management
Engr. ALAA SULTAN
Process Senior Project Manager
PMP, PMI-RMP, OCP, 6SIGMA
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PMI-RMP LESSON4. PLAN RISK MANAGEMENT PROCESS
RMP Coach
4.1 Purpose, Objectives and Concepts

❑ Develop the overall risk management strategy for the project.

▪ To decide how the risk management processes will be executed.

▪ To integrate Project Risk Management with all other project
management activities.

❑ It describes the relationships among Project Risk Management, general

project management, and the management processes in the
organization.

❑ Provide sufficient resources and time for risk management activities and
to establish an agreed upon basis to evaluate risks.

❑ The key benefit :

Ensures that the degree, type, and visibility of risk management are
commensurate with both the risks and the importance of the project to
the organization.
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PMI-RMP LESSON4. PLAN RISK MANAGEMENT PROCESS
RMP Coach
4.1 Purpose, Objectives and Concepts

❑ It is vital to communicate with and obtain agreement and support from

all stakeholders to ensure the risk management process is supported
and performed effectively over the project life cycle.

❑ Effective risk management requires creation of a risk management

plan.

❑ Careful and explicit planning enhances the probability of success for

other risk management processes.

❑ Begin when a project is conceived and completed early in project

planning.

❑ The risk management plan may need to be updated as the needs of

the project and its stakeholders.

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PMI-RMP LESSON4. PLAN RISK MANAGEMENT PROCESS
RMP Coach
4.1 Purpose, Objectives and Concepts

▪ Project Risk Management processes form an integral part of the overall

project management plan.

▪ Risk management activities should be integrated into the project

management plan.

▪ The budget in terms of resources, cost, and time for the specific risk
management activities should be established in order to better track,
control and, as necessary, defend the corresponding expenditures
throughout the project.

▪ The cost of treating the risks themselves should be included appropriately

in the project budget, while the risk management plan should describe
how this part of the project budget is evaluated, allocated, and managed.

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PMI-RMP LESSON4. PLAN RISK MANAGEMENT PROCESS
RMP Coach
4.1 Purpose, Objectives and Concepts

▪ The risk management plan will define the monitoring methods to ensure
that the corresponding expenditures are tracked appropriately, as well as
the conditions under which the approved budget for risk management
can be modified.

▪ Risk management activities need to be repeated throughout the project.

▪ Risk management plan should define both the normal frequency for
repeating the processes and specific or exceptional conditions.

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PMI-RMP LESSON4. PLAN RISK MANAGEMENT PROCESS
RMP Coach
4.1 Purpose, Objectives and Concepts

Project Risk and attitudes

▪ The level of accepted risk in a project depends on the risk attitudes of the
relevant stakeholders.

▪ Quantify stakeholder risk tolerances in order to assess and determine risk

thresholds for the project and set criteria for risk levels.

▪ The risk attitudes of both the organization and the stakeholders may be
influenced by a number of factors, all need to be identified.
▪ Tolerance .
▪ Relative importance to achieving or missing specific project
objectives.
▪ Appetite.
▪ Threshold.
▪ Stakeholders sensitivity to issue.

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PMI-RMP LESSON4. PLAN RISK MANAGEMENT PROCESS
RMP Coach
4.1 Purpose, Objectives and Concepts

▪ Guidelines and rules for escalating risk-related information to

management and other stakeholders should reflect the risk attitudes and
expectations of the corresponding stakeholders.

▪ The project manager should maintain effective communication with the

stakeholders as the project evolves, in order to become aware of
any changes in the stakeholders’ attitudes and update the risk
management approach to take any new facts into account.
.

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PMI-RMP LESSON4. PLAN RISK MANAGEMENT PROCESS
RMP Coach
4.1 Purpose, Objectives and Concepts

▪ Share a common understanding of all terms used to describe the risks,

and that the critical values and thresholds that will serve as parameters for
the tools should be defined in a manner consistent with the scope of the
project and the attitudes of the stakeholders.

▪ “high impact” or “medium probability,” should be defined objectively in the

risk management plan.

▪ the risk management plan should specify any key numerical values
required in quantitative analysis or for decision-making in risk response
planning or risk monitoring and control.

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PMI-RMP LESSON4. PLAN RISK MANAGEMENT PROCESS
RMP Coach
4.2 Critical Success Factors

1- Identify and Address Barriers to

Successful Project Risk Management.

2- Involve Project Stakeholders in

Project Risk Management.

3- Comply with the Organization’s

Objectives, Policies, and Practices.

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PMI-RMP LESSON4. PLAN RISK MANAGEMENT PROCESS
RMP Coach
4.2 Critical Success Factors
1- Identify and Address Barriers to Successful Project Risk Management.

❑ Organization. and the stakeholders don't recognize the value

/benefits of risk management.

❑ No clear definition for project objectives.

❑ Unavailability of OPA which will consume more time to be

developed.

❑ Risk Management Plan isn’t integrated in overall project plan.

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PMI-RMP LESSON4. PLAN RISK MANAGEMENT PROCESS
RMP Coach
4.2 Critical Success Factors
2- Involve Project Stakeholders in Project Risk Management.

❑ To build on their skills and experience .

.
❑ To ensure their understanding of, and commitment to, the full
Project Risk Management process.

❑ Management should be involved in the analysis of the level of

resourcing required for managing project risk and accept the risks
that may arise from specific limitations.

❑ Address and resolve disagreements between stakeholders in the

areas of risk tolerance and evaluation measures .

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PMI-RMP LESSON4. PLAN RISK MANAGEMENT PROCESS
RMP Coach
4.2 Critical Success Factors
3- Comply with the Organization’s Objectives, Policies, and Practices.

❑ The feasibility of risk management planning is dependent upon the

features of the organization.
.
❑ The rules and guidelines defined in the risk management plan
should be compatible with the culture of the organization, its
capabilities from the point of view of people and facilities, and its
values, goals, and objectives.

❑ Project management in general, and risk management in particular,

contribute to the organization’s effective governance.

❑ The risk management plan should identify and take into account the
relevant organizational procedures and any other enterprise
environmental factors such as strategic risk management
or governance processes..

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PMI-RMP LESSON4. PLAN RISK MANAGEMENT PROCESS
RMP Coach
4.3 Inputs, Tools & Techniques, and Outputs

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PMI-RMP LESSON4. PLAN RISK MANAGEMENT PROCESS
RMP Coach
4.3 Inputs, Tools & Techniques, and Outputs

Plan Risk Management Data Flow Diagram

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PMI-RMP LESSON4. PLAN RISK MANAGEMENT PROCESS
RMP Coach
4.3 Inputs, Tools & Techniques, and Outputs

Inputs 1- Project Management Plan

Project Management Plan

▪ Includes all approved subsidiary Change management plan Quality management plan
management plans and baselines
Communications management Requirements management
should be taken into plan plan
consideration in order to make
the risk management plan Configuration management Risk management plan
plan
consistent with them.
Cost baseline Schedule baseline
▪ The risk management plan is also
Cost management plan Schedule management plan
a component of the project
management plan. H R management plan Scope management plan

Process improvement plan Stakeholder management

▪ The project management plan plan
provides baseline or current state
Scope baseline Procurement management
of risk-affected areas including Project scope statement plan
scope, schedule, and cost. WBS
WBS dictionary

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PMI-RMP LESSON4. PLAN RISK MANAGEMENT PROCESS
RMP Coach
4.3 Inputs, Tools & Techniques, and Outputs

Inputs 2- Project Charter

Project Charter

Project Charter
The project charter can
provide various inputs such
as

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PMI-RMP LESSON4. PLAN RISK MANAGEMENT PROCESS
RMP Coach
4.3 Inputs, Tools & Techniques, and Outputs

Inputs 2- Project Charter

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PMI-RMP LESSON4. PLAN RISK MANAGEMENT PROCESS
RMP Coach
4.3 Inputs, Tools & Techniques, and Outputs

Inputs 3- Stakeholder Register

Identification Name, organizational position, location, role in the project,

information contact information

Major requirements, main expectations, potential influence in

Assessment
the project,
information
phase in the life cycle with the most interest

Stakeholder Internal/external, supporter/neutral/ resistor, etc.

classification.

The stakeholder register should be consulted and updated on a regular

basis, as stakeholders may change, or new ones identified throughout the
life cycle of the project.

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PMI-RMP LESSON4. PLAN RISK MANAGEMENT PROCESS
RMP Coach
4.3 Inputs, Tools & Techniques, and Outputs

Inputs 3- Stakeholder Register

Stakeholder
Register
stakeholder register,
which contains all
details related to the
project’s stakeholders

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PMI-RMP LESSON4. PLAN RISK MANAGEMENT PROCESS
RMP Coach
4.3 Inputs, Tools & Techniques, and Outputs

Inputs 4- Enterprise Environmental Factors

1- Organizational culture, structure, and governance.

2- Geographic distribution of facilities and resources.

3- Government or industry standards (e.g., regulatory agency regulations, codes of

conduct, product standards, quality standards, and workmanship standards).

4- Infrastructure (e.g., existing facilities and capital equipment).

5- Existing human resources (e.g., skills, disciplines, and knowledge, such as

design, development, legal, contracting, and purchasing).

6- Personnel administration (e.g., staffing and retention guidelines, employee

performance reviews and training records, reward and overtime policy, and time
tracking).

7- Company work authorization systems

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4.3 Inputs, Tools & Techniques, and Outputs

Inputs 4- Enterprise Environmental Factors .. Cont.

8- Marketplace conditions.

9- Stakeholder risk tolerances, threshold and attitude.

10- Political climate.

11- Organization’s established communications channels.

12- Commercial databases (e.g., standardized cost estimating data, industry risk
study information, and risk databases).

13- Project management information system (e.g., an automated tool, such as a

scheduling software tool, a configuration management system, an information
collection and distribution system, or web interfaces to other online automated
systems).
14- Benchmarking.
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4.3 Inputs, Tools & Techniques, and Outputs

Inputs 5- Organizational Process Assets

1- Risk control procedures including risk categories, probability definition and

impact, and probability and impact matrix.

2- Standard Templates (e.g., risk register, Risk breakdown structure, probability

definition and impact, and probability and impact matrix).

3- Specific organizational standards such as policies (e.g., human resources

policies, health and safety policies, ethics policies, and project management
policies),

4- Guidelines and criteria for tailoring the organization’s set of standard processes
and procedures to satisfy the specific needs of the project.

5- Change control procedures.

6- Historical information and lessons learned knowledge bases (e.g., project records
and documents, and information from risk management activities,.).
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4.3 Inputs, Tools & Techniques, and Outputs

Inputs 5- Organizational Process Assets..Cont.

7 - Risk categories.

8- Common definitions of concepts and terms.

11- Risk statement formats, or templates.

12- Roles and responsibilities.

13- Authority levels for decision making.

14- Lessons learned.

15- Project files, including actual data from previous projects (risk registers, planned
response actions, and defined risk impact, ..).

16- Risk-rating rules.

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4.3 Inputs, Tools & Techniques, and Outputs

Tools and Techniques 1- Analytical Techniques

Analytical techniques are used to understand and define

Overall risk management context.

is a combination of

Stakeholder Risk Attitudes Strategic Risk exposure

stakeholder risk profile analysis Strategic Risk Scoring Sheets

Grade and qualify High-level assessment

appetite and tolerance of the risk exposure

Then the project team can allocate appropriate resources and focus on the risk
management activities.
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4.3 Inputs, Tools & Techniques, and Outputs

Tools and Techniques 2- Expert Judgment

To ensure a comprehensive establishment of the risk management plan, judgment,

and expertise should be considered from groups or individuals with specialized
training or knowledge on the risk management.

❑ Senior management.
❑ Project stakeholders including customers or
sponsors, suppliers.
❑ Project managers who have worked on
projects in the same area (directly or
through lessons learned).
❑ Subject matter experts (SMEs) in
business or project area.
❑ Industry groups and consultants.
Project team members and
❑ Professional and technical associations.
❑ Other units within the organization. the project manager are not
❑ Project management office (PMO). Expert Judgment for their
project.

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4.3 Inputs, Tools & Techniques, and Outputs

Tools and Techniques 3- Meetings ( Planning Meeting and analysis)

Project teams hold planning meetings to

develop the risk management plan.

Attendees
❑ Project manager.
❑ Selected project team members.
❑ Selected stakeholders.
❑ Anyone in the organization with
responsibility to manage the risk
planning and execution activities.
❑ SME, Facilitator and Others, as needed.

Risk management
cost elements and schedule activities should be developed for inclusion in the
project budget and schedule,

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4.3 Inputs, Tools & Techniques, and Outputs

Tools and Techniques 3- Meetings ( Planning Meeting and analysis).Cont

❑ High-level plans for conducting the risk management

activities are defined in these meetings.
❑ Risk contingency reserve application approaches may
be established or reviewed.
❑ Risk management responsibilities should be assigned.
❑ Templates for risk and definitions will be tailored to the
specific project :-
▪ Levels of risk.
▪ probability by type of risk.
▪ Impact by type of objectives.
▪ Probability and impact matrix.
▪ RBS.

If templates for other steps in the process do not exist, they may be generated
in these meetings.
The outputs of these activities are summarized in the risk management plan.
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4.3 Inputs, Tools & Techniques, and Outputs

Tools and Techniques 3- Meetings ( Planning Meeting and analysis).Cont

Strengths,
Weaknesses and CSF
of planning Meeting

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4.3 Inputs, Tools & Techniques, and Outputs

Tools and Techniques Planning Session

Attendees
❑ Project manager.
❑ Selected project team members.
❑ Selected stakeholders.
❑ Anyone in the organization with
responsibility to manage the risk
planning and execution activities.
❑ SME, Facilitator and Others, as needed.

❑ Risk responsibilities, methodology, templates, terms, definitions, time

schedules, and cost budgets Risk processes should be assigned and accepted.

❑ The specification (all parameters and other inputs required )for the tools will be
used in risk processes should be documented in the risk management plan,
when formally approved.

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4.3 Inputs, Tools & Techniques, and Outputs

Tools and Techniques Planning Session

Planning sessions are recommended in order

to build a common understanding of the
project’s risk approach between project
stakeholders and to gain agreement on the
techniques to be used for managing risk.

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4.3 Inputs, Tools & Techniques, and Outputs

Tools and Techniques Risk Management Plan Templates

Formal risk Risk breakdown Status report

statement structure structure template

Probability and
Meeting agenda Definitions for
impact matrix
template threat impacts
template

Risk prioritization
Definitions for Definitions for
and selection
opportunity impacts probabilities
guidelines

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4.3 Inputs, Tools & Techniques, and Outputs
Output Risk Management Plan ..Contd.

The risk management plan is a component of the project management plan.

▪ Describes how risk management activities will be structured and performed.

▪ Describe what has been agreed upon.
▪ Describe the stakeholders’ involvement and responsibilities in the activities.

Key Areas of Focus for the Plan Risk Management Process

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4.3 Inputs, Tools & Techniques, and Outputs
Output Risk Management Plan ..Contd.

Depending upon the size and complexity of the project, some or all of the following
elements will be present in a risk management plan.

• Introduction;
• Project description;
• Risk management methodology;
• Risk management organization;
• Roles, responsibilities, and authority;
• Stakeholder risk tolerance;
• Criteria for success;
• Risk management tools and guidelines for use;
• Thresholds and corresponding definitions;
• Templates;
• Communications plan;
• Strategy; and
• Risk breakdown structure.

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4.3 Inputs, Tools & Techniques, and Outputs
Output Risk Management Plan ..Contd.

Risk Management Plan includes

1- Methodology Defines the approaches, tools, and data sources that will be used to
perform risk management on the project.
2- Roles and Defines the lead, support, and risk management team members for
responsibilities. each type of activity in the risk management plan, and clarifies their
responsibilities.
3- Budgeting Estimates funds needed, based on assigned resources, for inclusion in
the cost baseline and establishes protocols for application of
contingency and management reserves.
4- Timing. Defines when and how often the risk management processes will be
performed throughout the project life cycle, establishes protocols for
application of schedule contingency reserves, and establishes
risk management activities for inclusion in the project schedule.

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4.3 Inputs, Tools & Techniques, and Outputs

Output Risk Management Plan ..Contd. 5- Risk categories

Grouping potential causes of risk. As Risk Breakdown Structure (RBS)

RBS
Hierarchical representation
of risks by risk categories.

OR

Hierarchical framework of potential

sources of risk.

❑ Generic RBS

❑ Project-specific RBS

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4.3 Inputs, Tools & Techniques, and Outputs

Output Risk Management Plan 6- Definitions of risk probability& impact

Definitions of probability levels and impact levels

are tailored to the individual project during the
Plan Risk Management process for use in
subsequent processes.

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4.3 Inputs, Tools & Techniques, and Outputs

Output Risk Management Plan 7- Probability and Impact Matrix

The combinations of probability and impact that lead to a risk being rated as
high, moderate, or low importance (Priority) are usually set by the
organization and can be tailored during plan risk management.

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4.3 Inputs, Tools & Techniques, and Outputs
Output Risk Management Plan ..Contd.

Risk Management Plan includes

8- Revised Stakeholders Risk Tolerances may be revised in the Plan Risk
stakeholders’ Management process.
tolerances

9- Reporting ❑ Define how the outcomes of The risk management process will be
formats documented, analyzed, and communicated.
❑ Describes the content and format of the risk register and any other
risk reports required.

10- Tracking Documents how risk activities will be recorded for the benefit of the
current project and how risk management processes will be audited.

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 PROJECT RISK
MANAGEMENT
Course
PMI-RMP

LESSON 5
Identify Risks
Process
Engr. ALAA SULTAN
Senior Project Manager
PMP, PMI-RMP, OCP, 6SIGMA
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INTRODUCTION

Definition
Process of determining which risks may affect the project and documenting their
characteristics.

The key benefit

Documentation of existing risks and the knowledge and ability it provides to the
project team to anticipate events.
Participants in risk identification activities
❑ project manager.
❑ project team members.
❑ risk management team (if assigned).
❑ Customers.
❑ Subject matter experts from outside the project team.
❑ End users.
❑ Other project managers.
❑ Stakeholders.
❑ Risk management experts.
❑ All project personnel should be encouraged to identify
potential risks.
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INTRODUCTION

Project team should be involved in the process to develop and maintain a sense of
ownership and responsibility for the risks and associated risk response actions.

Stakeholders outside the project team may provide additional objective information.

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5.1 Purpose and Objectives of the Identify Risks Process

Identify Risks Purpose

ITRATIVE PROCESS • To identify all the knowable risks to project objectives.

• Some risks are unknowable or emergent requires iterative.

IDENTIFY RISKS Identify risks to the maximum extent that is practicable

IDENTIFY
POTENTIAL Identify potential responses at the time when a risk is first
RESPONSES identified.

CONSIDER THE • For immediate action if such action is appropriate.

POTENTIAL • If not implemented immediately, should be considered
RESPONSE during the Plan Risk Responses process.

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5.1 Purpose and Objectives of the Identify Risks Process

Identify Risks Objectives

1 Identify risks

2 Document risks

3 Categorize risks

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5.2 Critical Success Factors

Critical Success Factors

5- EXPLICIT
1- EARLY
IDENTIFICATION OF
IDENTIFICATION
OPPORTUNITIES

2- ITERATIVE 6- MULTIPLE 9- OWNERSHIP AND

IDENTIFICATION PERSPECTIVES LEVEL OF DETAILS

3- EMERGENT 7- RISKS LINKED TO

10- OBJECTIVITY
IDENTIFICATION PROJECT OBJECTIVES

4- COMPREHENSIVE 8- COMPLETE RISK

IDENTIFICATION STATEMENT

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5.2 Critical Success Factors

• Identifies risk as early as possible in the project lifecycle.

• Enables key project decisions which may result in

1- EARLY successful implementation of the risk response.
IDENTIFICATION
• Gives time to develop & implement of risk responses

• Responses taken early are normally less costly than the

ones taken later.

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5.2 Critical Success Factors

• Not all risks can be identified at any given point.

• Repeated throughout the project life cycle.

2- ITERATIVE
IDENTIFICATION • Frequency determined during the Plan Risk Management.

• Might be repeated at key milestones and at significant

change to the project or its operating environment.

Identify Risk

Monitor&
Qualitative
control

Plan risk
Quantitative
response

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5.2 Critical Success Factors

3- EMERGENT Project Risk Management process should permit risks to be

IDENTIFICATION identified at any time, not limited to formal risk identification
events or regular reviews.

Identify
any time

Emergent
Risk

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5.2 Critical Success Factors

4- COMPREHENSIVE All sources of risk should be considered to ensure that all

IDENTIFICATION uncertainties have been identified.

ALL SOURCES OF
UNCERTAINITIES

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5.2 Critical Success Factors

5- Explicit
Identification of The Identify Risk should ensure opportunities are properly
Opportunities considered.

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5.2 Critical Success Factors

❑ Take input from a broad range of project stakeholders to

6- MULTIPLE ensure that all perspectives are represented and
PERSPECTIVES considered.
❑ Limiting risk identification to project team can not identify
all knowable risks.

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5.2 Critical Success Factors

7- RISKS LINKED TO ❑ Each identified project risk should relate to at least one
PROJECT project objective (time, cost, quality, scope, etc.),
OBJECTIVES
❑ Some risks may affect more than one objective.

RISK1 TIME

RISK2 COST

SCOPE
RISK3

QUALITY

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5.2 Critical Success Factors

❑ Risks should be clear and unambiguous to be

8- COMPLETE RISK understood by responsible for risk assessment and risk
STATEMENT response planning.
❑ Detailed descriptions are required.
❑ Explicitly state the uncertainty and its causes and
effects..

AS a result of CAUSE , RISK May occur, which would lead to EFFECT

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5.2 Critical Success Factors

9-OWNERSHIP AND ❑ Risks identified at a number of levels of detail.

LEVEL OF DETAIL
❑ High-level description make it difficult to develop
responses and assign ownership.

❑ Lot of detail create a great deal of work.

❑ Each risk should be described at a level of detail at

which it can be assigned to a single risk owner with
clear responsibility and accountability for its
management.

❑ Trigger conditions should also be identified where

this is possible and appropriate.

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5.2 Critical Success Factors

10 - OBJECTIVITY All human activities effected by bias especially when

dealing with uncertainty.

Both motivational Cognitive biases

where someone is trying to bias the occur where people are using their
result in one direction or another. best judgment and applying heuristics

❑ Bias should be explicitly recognized and addressed during the Identify Risks
process.

❑ Sources of bias should be uncovered wherever possible, and their effect on the
risk process should be managed proactively.

❑The aim is to minimize subjectivity, and allow open and honest identification of as
many risks as possible to the project.

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5.3 Inputs, Tools & Techniques, and Outputs

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5.3.1 Inputs

1- Risk Management Plan

Risk Management Plan includes

1- Methodology 6- Definitions of risk probability& impact
2- Roles and responsibilities. 7- Probability and Impact Matrix
3- Budgeting 8- Revised stakeholders’ tolerances
4- Timing. 9- Reporting formats
5- Risk categories 10- Tracking

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5.3.1 Inputs

2- Cost Management Plan

Provides processes and controls that can be used to help identify risks

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5.3.1 Inputs

3- Schedule Management Plan

Provides insight to project time/schedule objectives and expectations which may be

impacted by risks (known and unknown).

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5.3.1 Inputs

4- Quality Management Plan

The quality management plan provides a baseline of quality measures and metrics
for use in identifying risks.

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5.3.1 Inputs

5- Human Resource Management Plan

how project human resources should be defined, staffed, managed, and eventually
released.
❑ Roles and responsibilities.
❑ Project organization charts
❑ Staffing management plan, which form a key input to identify risk process.

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5.3.1 Inputs

6- Scope Baseline

❑ Project assumptions are found in the project scope statement.

❑ Uncertainty in the assumptions should be evaluated as potential causes of risk.
❑ WBS is a critical input to identifying risks as it facilitates an understanding of
potential risks at both the micro and macro levels.
❑ Risks can be identified and tracked at summary, control account, and/or
work package levels.

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5.3.1 Inputs

7- Activity Cost Estimates

❑Activity cost estimate provide a quantitative assessment of .

▪ the likely cost to complete scheduled activities.
▪ Or range with the width of the range indicating the degree(s) of risk.
❑ Review of the estimate indicates, that estimate is sufficient or insufficient to
complete the activity.

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5.3.1 Inputs

8- Activity Duration Estimates

❑ Useful in identifying risks related to the time allowances for the activities or
project as a whole,
❑ The width of the range of the estimates indicating the relative degree(s) of risk.

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5.3.1 Inputs

9- Stakeholder Register

❑ Provide Information about the stakeholders is useful for identifying risks.

❑ Ensure that key stakeholders( sponsor, and customer) are interviewed or

otherwise participate during the Identify Risks process.

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5.3.1 Inputs

10- Project Documents

􀁳 Project charter.
􀁳 Project schedule.
􀁳 Schedule network diagrams.
􀁳 Issue log.
􀁳 Quality checklist.

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5.3.1 Inputs

11- Procurement Documents

Procurement documents are key input to the Identify Risks process.

The complexity and the level of detail of the procurement documents should be
consistent with the value of, and risks associated with, planned procurement.

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5.3.1 Inputs

12- Enterprise Environmental Factors

13- Organizational Process Assets

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5.3 .2 Tools & Techniques

Tools and Techniques categories

A range of tools and techniques is available for risk identification.

These fall into the following three categories.

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5.3 .2 Tools & Techniques

Tools and Techniques categories Historical Review

❑ Historical reviews are based on what occurred in the past, either on this
project, or other similar projects in the same organization, or comparable
projects in other organizations.
❑ Careful selection of comparable situations which are genuinely similar to
the current project,
❑ Filtering of data to ensure that only relevant previous risks are considered.

❑ The risks identified in the selected historical situation should be

considered, asking whether they or similar risks might arise in this project.

1- Post-project reviews/ Lessons Learned/ Historical Information.

2- Check Lists.

3- Industry knowledge base

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5.3 .2 Tools & Techniques

Tools and Techniques categories Current assessments

❑ Rely on details of the current project.

❑ Analyzing its characteristics against given frameworks and models in
order to expose areas of uncertainty.
❑ Do not rely on outside reference points.
❑ Based purely on examination of the project.

1- System Dynamics
2- Document review
3- Assumptions & Constraints Analysis

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5.3 .2 Tools & Techniques

Tools and Techniques categories Creativity Techniques

❑ Encourages project stakeholders to use their imagination to find risks

which might affect the project.

❑ The outcomes or effectiveness of these techniques depend on the ability

of participants to think creatively.

❑ Used either singly or in groups.

❑ Employ varying degrees of structure.

❑ success is enhanced by use of a skilled facilitator.

1- brainstorming
2- Interviews
3- Nominal Group Techniques
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5.3 .2 Tools & Techniques

Tools and Techniques categories

❑ Each category has strengths and weaknesses.

❑ No single technique can reveal all knowable risks.

❑ No tools are complete nor can they replace original thinking.

❑ Identify Risks process use a combination of techniques, perhaps selecting

one from each category. For example checklist (historical review), together
with assumptions analysis (current assessment) and brainstorming
(creativity).

❑ Categories of potential risks on the project by RBS, a prompt list, or a set

of generic list categories ensure that as many sources of risk as
practicable have been addressed.

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5.3 .2 Tools & Techniques

Tools and Techniques categories

The identified risks should be unambiguously

described to ensure that the project risk process
is focused on the actual risks not non-risks.

Risk formal structured Statement = Risk meta-language =

three-part statements = Cause – Risk - Effect

Ensure clarity and distinguishing the risk ,cause(s) and effect(s),

“As a result of cause, risk may occur, which would lead to effect.”

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5.3 .2 Tools & Techniques

1- Documentation Reviews

A structured review of the project documentation.

❑ Plans.
❑ Assumptions.
❑ Previous project files,
❑ Agreements.
❑ Project charter.
❑ Statement of work.
❑ Contract terms and conditions.
❑ Subcontracts.
❑ Technical specifications.
❑ Regulatory requirements.
❑ Legal stipulations

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5.3 .2 Tools & Techniques

1- Documentation Reviews contd.

Documentation
The quality of the plans, as well as Reviews
consistency between those
plans and the project requirements
and assumptions, may be indicators
of risk in the project. Formal structured
methods
informal approach
Fagan Inspection
Process

Strengths Weaknesses CSFs

• Exposes detailed • Limited to risks • Understanding of

Documentation project-specific contained in project relevance of prior
Reviews risks documentation experience
• Requires no
specialist tools

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5.3 .2 Tools & Techniques
2- Information Gathering Techniques

2.1- Brainstorming

obtain a comprehensive
list of project risks in a
facilitated risk
identification workshop

Project risk ideas are generated under the

leadership of a facilitator, either in
❑ A traditional free-form brainstorm session or
❑ Structured mass interviewing techniques.

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5.3 .2 Tools & Techniques
2- Information Gathering Techniques
2.1- Brainstorming

❑ The project team usually performs brainstorming, often with a multidisciplinary

set of experts who are not part of the Team and key stakeholders.

❑ Structured Framework for the brainstorming by categories of risk, such as in a

risk breakdown structure, Prompt list, Check list and WBS.

❑ Risks are then identified and categorized by type of risk and their definitions are
refined.

❑Proposed risks will be evaluated in the risk identification brainstorm to remove

non-risks.

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5.3 .2 Tools & Techniques

TOOLS AND TECHNIQUES 2- Information Gathering Techniques

2.1- Brainstorming
❑Facilitator have to ensure active participation of relevant
stakeholders in a risk identification brainstorm.
❑Facilitator have to manage group dynamics carefully
Technique Strengths Weaknesses CSFs

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5.3 .2 Tools & Techniques
2- Information Gathering Techniques
2.2- Delphi technique
❖ The way to reach a consensus of experts.

❖ Project risk experts participate in this technique

anonymously.

❖ A facilitator uses a questionnaire to solicit ideas

about the important project risks.

❖ The responses are summarized and are then

re-circulated to the experts for further comment.

❖ Consensus may be reached in a few rounds of

this process.

❖ The Delphi technique helps reduce bias in the

data and keeps any one person from having
undue influence on the outcome.
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5.3 .2 Tools & Techniques
2- Information Gathering Techniques
2.2- Delphi technique

Technique Strengths Weaknesses CSFs

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5.3 .2 Tools & Techniques
2- Information Gathering Techniques
2.3- Interviewing

❖ Interviews should include all main stakeholders.

❖ Conducted by an independent skilled interviewer
using a structured agenda, in an atmosphere of
confidentiality, honesty, and mutual trust.
❖ A risk breakdown structure, checklist or prompt list
can be used as a framework for risk interviews.

Technique Strengths Weaknesses CSFs

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5.3 .2 Tools & Techniques
2- Information Gathering Techniques
2.4- Root cause analysis

❑ Identify a problem, discover the

underlying causes(may be visible
symptoms of more fundamental
forces ) that lead to it, and develop
preventive action.

❑ Identify common sources of several

risks, leading to broad-reaching risk
response strategies.

❑ Care needs to be taken when using

this technique for risk identification to
distinguish between risks (uncertain
causes of the impact) and issues
(certain causes of the impact).

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5.3 .2 Tools & Techniques
2- Information Gathering Techniques
2.4- Root cause analysis

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5.3 .2 Tools & Techniques
2- Information Gathering Techniques
2.4- Root cause analysis

Technique Strengths Weaknesses CSFs

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5.3 .2 Tools & Techniques
3- Checklist Analysis

Developed based on historical

information and from previous The lowest level
similar projects and other of the RBS can
sources of information be risk checklist

Should Include both

Quick and Simple.
threats and
Not Exhaustive .
opportunities

Team should explore items that should be reviewed during

do not appear on the checklist. project closure to incorporate
new lessons learned and
Regular maintenance to remove improve it for use on future
or archive related items. projects.

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5.3 .2 Tools & Techniques
3- Checklist Analysis

Technique Strengths Weaknesses CSFs

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5.3 .2 Tools & Techniques
4- Assumptions Analysis

❑ Every project based on a set of hypotheses,

1- List assumptions and
scenarios, or assumptions.
constraints for the
❑ Assumptions analysis explores the validity of project
assumptions.
❑ Identifies risks from inaccuracy, instability,
inconsistency, or incompleteness of
assumptions. 2A-Could the
No assumption/c
onstraint be
false?
3- <Assumption/ 2B- would one or
Yes
constraint> may prove false, more project
leading to <effect on objectives be Yes
objective(s)>. affected

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5.3 .2 Tools & Techniques
4- Assumptions Analysis

Technique Strengths Weaknesses CSFs

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5.3 .2 Tools & Techniques
5- Diagramming Techniques
5.1- Cause and effect also know as (Ishikawa or fishbone) diagrams

❑ Diagrammatic technique form the causes which contribute to a given outcome.

❑ The body of the fish represent the causes.

❑ Each main cause can be split into sub-causes.

❑ the fish’s head represent the effect on a project objective(the impact of a risk).

❑ Risks are the uncertain events which could result in occurrence of the impact.

❑ Care needs to be taken to distinguish between risks (uncertain causes of the

impact) and issues (certain causes of the impact)

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5.3 .2 Tools & Techniques
5- Diagramming Techniques
5.1- Cause and effect also know as (Ishikawa or fishbone) diagrams

Technique Strengths Weaknesses CSFs

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5.3 .2 Tools & Techniques
5- Diagramming Techniques 5-2- System or process flow charts

show how various elements of a system interrelate and the mechanism of

causation.

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5.3 .2 Tools & Techniques
5- Diagramming Techniques 5-2- Influence diagrams

❑ Graphical representations of
situations showing:-
▪ Causal influences.
▪ Time ordering of events.
▪ Relationships among
variables and outcomes.
▪ Main entities,
▪ Decision points.
▪ Uncertainties.
▪ Outcomes.

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5.3 .2 Tools & Techniques
5- Diagramming Techniques 5-3- Influence diagrams

The influence diagram can identify risks when combined with sensitivity
analysis or Monte Carlo simulation to reveal sources of risk within the
project

Technique Strengths Weaknesses CSFs

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5.3 .2 Tools & Techniques
6- SWOT Analysis

▪ Strengths, weaknesses, opportunities,

and threats (SWOT) perspectives.

▪ To increase the range of identified risks

by including internally generated risks.

▪ Identify Strengths and Weaknesses of

the organization, focusing on either the
project, organization or the business
area in general.

▪ Identifies any Opportunities for the

project that arise from Strengths.

▪ Identify Threats that arising from

organizational Weaknesses.
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5.3 .2 Tools & Techniques
6- SWOT Analysis

▪ SWOT also examines the degree to which organizational strengths offset threats.
▪ Identifying opportunities that may serve to overcome weaknesses.
▪ The technique is commonly used in strategic decision making

Technique Strengths Weaknesses CSFs

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5.3 .2 Tools & Techniques
7- Expert Judgment

▪ Risks may be identified directly by SME with

experience with similar projects or business
areas.

▪ Experts should be identified by the project

manage to consider all aspects of the project .

▪ Suggest possible risks based on their previous

experience and areas of expertise.

▪ The experts’ bias should be taken into account

in this process.

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5.3 .2 Tools & Techniques
8- FMEA/Fault Tree Analysis (FMEA)

❑ Analysis of a model structured to identify the various elements that can

cause system failure by themselves, or in combination with others, based
on the logic of the system.

❑ Identify risks by analyzing how risk impacts might arise.

❑ The probability of failure (or of reliability, mean time between failure, etc.) of the
overall system.

❑ level of quality of the system or product.

❑ If the level of reliability is not acceptable, the Fault Tree can indicate where the
system can be made more reliable.

❑ Used in engineering contexts.

❑ Useful in the design and engineering phase of the project

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5.3 .2 Tools & Techniques
8- FMEA/Fault Tree Analysis

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5.3 .2 Tools & Techniques
8- FMEA/Fault Tree Analysis

Technique Strengths Weaknesses CSFs

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5.3 .2 Tools & Techniques
9- Force Field Analysis

❑ Used in the change management context.

❑ Identifying driving forces(“forces for change”)

and restraining forces (“forces against
change”) which currently affect achievement
of a project objective.

❑ Risks can then be identified as uncertain

events or conditions which would lead to
change in the strength of one or more of the
identified forces

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5.3 .2 Tools & Techniques
9- Force Field Analysis

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5.3 .2 Tools & Techniques
9- Force Field Analysis

Technique Strengths Weaknesses CSFs

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5.3 .2 Tools & Techniques
10- Industry Knowledge Base

An industry knowledge base is a special case of a checklist, and is used similarly

Technique Strengths Weaknesses CSFs

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5.3 .2 Tools & Techniques
11- Nominal Group Technique

❑ A technique that enhances brainstorming with a voting process used to rank

the most useful ideas for further brainstorming or for prioritization.
❑ Participants share and discuss all issues before evaluation.
❑ Each participant participating equally in evaluation.

Technique Strengths Weaknesses CSFs

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5.3 .2 Tools & Techniques
12- Post-Project Reviews/Lessons Learned/Historical Information

❑ Reviewing databases of risks which occurred in previous similar situations.

❑ Such databases.
from post-project reviews lessons learned exercises or repositories of historical
information, either within an organization or industry body

Technique Strengths Weaknesses CSFs

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5.3 .2 Tools & Techniques
13- Prompt Lists
❑ Set of risk categories which can be used to stimulate risk identification.

❑ The prompt list may be presented as:-

• Risk breakdown structure.
• Set of headings.
•
❑ Used as a framework for brainstorming or risk interviews

Standard prompt lists

The PESTLE prompt list The TECOP prompt list The SPECTRUM prompt list
• Political • Technical • Socio-cultural
• Economic • Environmental • Political
• Social • Commercial • Economic
• Technological • Operational • Competitive
• Legal • Political • Technology
• Environmental • Regulatory/legal
• Uncertainty/risk
• Market
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5.3 .2 Tools & Techniques
13- Prompt Lists

Technique Strengths Weaknesses CSFs

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5.3 .2 Tools & Techniques
14- Questionnaire

❑ Questionnaire can be presented as a special form of checklist.

for example “Is the client’s requirement clearly defined?”) rather than
risk statements (“The client may change the requirement after project start.”).

❑ Questionnaire can be used to present the headings from a prompt.

Asking questions such as “Are there any uncertainties arising from the use of
technology on this project?”

Technique Strengths Weaknesses CSFs

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4.3 Inputs,
5.3Tools
.2 Tools
& Techniques,
& Techniques
and Outputs
15- Risk Breakdown Structure (RBS)
Grouping potential causes of risk. As Risk Breakdown Structure (RBS)

RBS
Hierarchical representation
of risks by risk categories.

OR

Hierarchical framework of potential

sources of risk.

❑ Generic RBS

❑ Project-specific RBS

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5.3 .2 Tools & Techniques
15- Risk Breakdown Structure (RBS)

Technique Strengths Weaknesses CSFs

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5.3 .2 Tools & Techniques
16- System Dynamics (SD)

❑ SD is a particular application of influence diagrams.

❑ Can be used to identify risks within a project situation.

❑ The SD model represents entities and information flows within a project.

❑ Analysis of the model can reveal feed-back and feed-forward loops which lead
to uncertainty or instability.

❑ The results of an SD analysis can show the impact of risk events on overall
project cost or schedule to be expected.

❑ Analyses of changes in the model or assumptions can indicate the system’s

sensitivity to specific events, some of which may be risks.

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5.3 .2 Tools & Techniques
16- System Dynamics

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5.3 .2 Tools & Techniques
16- System Dynamics

Technique Strengths Weaknesses CSFs

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5.3 .2 Tools & Techniques
17- WBS Review (WBS)

Can form a framework for a number of other risk identification techniques, such as
• Brainstorming.
• Risk interviews.
• Checklists.
• Prompt lists

Technique Strengths Weaknesses CSFs

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5.3 .2 Tools & Techniques
Neuro linguistic programming

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5.3 .3 OUTPUTS

Risk Register
❑ The main output from the Identify Risks process is the risk register recording all
relevant information currently available for each identified risks.
❑ Then becomes available to other project management and risk management
processes.
❑ Contains the outcomes of the other risk management processes as they are
conducted.
❑ The level and type of information contained in the register increase over time.

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5.3 .3 OUTPUTS

Risk Register
The risk register include
1- List of identified risks.
The identified risks are described in as much detail as is reasonable.
• Description “ If CAUSE exists, EVENT may occur leading to EFFECT’
• Root causes of risks.
❖ Are the fundamental conditions or events that may give rise to one or
more identified risks.
❖ They should be recorded and used to support future risk identification
for this and other projects.
• Nominated risk owner for each risk,.
• Trigger conditions.
• Causes and Effects

2- List of potential (preliminary) responses.

may sometimes be identified during the Identify Risks process.

These responses, if identified in this process, should be used as inputs to the Plan
Risk Responses process.
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 PROJECT RISK
MANAGEMENT
Course
PMI-RMP

LESSON 6
Perform
Qualitative Risk Engr. ALAA SULTAN
Analysis Senior Project Manager
PMP, PMI-RMP, OCP, 6SIGMA
20
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PMI-RMP LESSON6. Perform Qualitative Risk Analysis
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6.1 INTRODUCTIN

What is Perform Qualitative Risk Analysis?

It is the process of prioritizing risks for further analysis or action by

assessing and combining their probability of occurrence and impact.

The key benefit of this process.

Enables the project managers to reduce the level of uncertainty and to

focus on high-priority risks.

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6.1 INTRODUCTIN

❑ Qualitative risk analysis are applied to the list of risks created or updated
by the Identify Risks process to provide project management with the
characteristics of the risks that have the most influence (positive or
negative) on achieving the project’s objectives.

❑ Perform Qualitative Risk Analysis is a rapid and cost-effective means of

establishing priorities for Plan Risk Responses and lays the foundation
for Perform Quantitative Risk Analysis, if required.

❑ The Perform Qualitative Risk Analysis process is performed regularly

throughout the project life cycle, as defined in the project’s risk
management plan.

❑ This process can lead into Perform Quantitative Risk Analysis if required
or directly into Plan Risk Responses

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6.2 Purpose and Objectives

❑ Assess and evaluate the probability and the effect of each individual risk on the
project objectives based on agreed-upon characteristics , reflect the risk attitude
of the project team and other stakeholders

❑ Prioritize risks by the probability, impact, urgency and the organization’s risk
tolerance associated with the constraints of cost, schedule, scope, and quality

❑ Categorize risks according to their sources or causes.

▪ If several risks arise from a common source, called a root cause, risk
responses may be more effective when they focus on addressing this
root cause.
▪ Identifying common effects from groups of risks allows identification of
the areas of greatest risk exposure (e.g. to the project completion date,
the budget, or scope), facilitating risk response focus in these areas.

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6.3 Critical Success Factors

Agreement of the project stakeholders is a

fundamental criterion and a common theme.

❑ Use Agreed-Upon Approach the foundation of

process credibility.

❑ Use Agreed-Upon Definitions of Risk Terms.

enable high-quality information to be collected

❑ Collect High-Quality Information about Risks.

❑ Perform Iterative Qualitative Risk Analysis.

Finally, with these conditions, the process can be executed reliably, which
contributes to the credibility of its outputs.

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6.3 Critical Success Factors

1- Use Agreed-Upon Approach

All risks may be assessed according to the following:-

1. Probability of occurrence.

2. Impact on individual objectives if the risk occur.

3. Urgency (proximity).
Risks requiring near term responses may be considered more urgent to address.
❖ Indicators of urgency can include:-
• Lead time necessary to execute a risk response.
• Clarity of symptoms and warning signs (delectability) may trigger
the response.

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6.3 Critical Success Factors

1- Use Agreed-Upon Approach - contd

4. Manageability.
Some risks are not manageable would be a waste of resources address them.
The project team may examine these and decide to:

• Go forward, perhaps establishing a contingency reserve.

• Stop or re-scope the project because these risks.
• Inform the customer of the risks and ask for a decision from their point of
view.

5. Impact external to the project.

A risk may increase in importance if it affects the enterprise beyond
the project.

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6.3 Critical Success Factors

2- Use Agreed-Upon Definitions of Risk Terms

❑ Risk assessment based on agreed-upon definitions of important terms.

❑ Definitions should be used consistently when assessing each risk.

❑ The definitions assists the providers of the information in giving realistic

assessments for each risk.

❑ Facilitates the communication of the results to management and other

stakeholders.

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6.3 Critical Success Factors

3- Collect High-Quality Information about Risks

❑ Collection of high-quality information about

risks is required.

❑ This information is not available in any historic

database.

❑ Gathered by interviews, workshops, and other

means using expert judgment.

❑ Data gathered from individuals may be subject

to bias.

❑ Bias should be identified and addressed where

possible, or a different, unbiased source of
information should be found and used.

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6.3 Critical Success Factors

4- Perform Iterative Qualitative Risk Analysis

❑ The success of qualitative risk analysis is enhanced if the process is used
periodically throughout the project.

❑ It is impossible to know in advance all the risks that may occur in a project,
therefore the Identify Risks and Perform Qualitative Analysis processes should be
repeated periodically for individual risks.

❑ The frequency of this effort will be planned in the Plan Risk Management process,
but may also depend on events within the project itself.
Identify
Risk

Monitor&
Qualitative
control

Plan risk Quantitati

response ve
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6.4 Inputs, Tools & Techniques, and Outputs

Inputs, Tools & Techniques, and Outputs

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6.4 Inputs, Tools & Techniques, and Outputs

Perform Qualitative Risk Analysis Data Flow Diagram

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6.4.1 Inputs
1- Risk Management Plan

Risk Management Plan includes

1- Methodology 6- Definitions of risk probability& impact
2- Roles and responsibilities. 7- Probability and Impact Matrix
3- Budgeting 8- Revised stakeholders’ tolerances
4- Timing. 9- Reporting formats
5- Risk categories 10- Tracking

These inputs are usually tailored to the project during the Plan Risk
Management process. If they are not available, they may be developed
during the Perform Qualitative Risk Analysis process.

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6.4.1 Inputs
2- Scope Baseline

❑ Projects of a common or recurrent type tend to have more well-understood risks.

❑ Projects using state-of-the-art or first-of-its-kind technology, and highly complex

projects, tend to have more uncertainty. This can be evaluated by examining the
scope baseline.

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6.4.1 Inputs
3- Risk Register

The risk register contains the information that will be used to assess and
prioritize risks.

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6.4.1 Inputs

4- Enterprise Environmental Factors

5- Organizational Process Assets

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6.4.2 Tools and Techniques
1- Risk Probability and Impact Assessment
❑ Risk probability assessment investigates the likelihood that each specific risk will
occur.

❑ Risk impact assessment investigates the potential effect on a project objective

such as schedule, cost, quality, or performance, including both negative effects for
threats and positive effects for opportunities.

❑ Probability and impact are assessed for each identified risk.

❑ Risks can be assessed in interviews or meetings with participants selected for

their familiarity with the risk categories on the agenda.

❑ Project team members and knowledgeable persons external to the project are
included.

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6.4.2 Tools and Techniques
1- Risk Probability and Impact Assessment

❑ The level of probability for each risk and its impact on each objective is evaluated
during the interview or meeting.

❑ Explanatory detail, including assumptions justifying the levels assigned, are

recorded.

❑ Risk probabilities and impacts are rated according to the definitions given in the
risk management plan.

❑ Risks with low ratings of probability and impact will be included within the risk
register as part of the watch list for future monitoring.

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6.4.2 Tools and Techniques
1- Risk Probability and Impact Assessment

The common way to assign levels of risk probability by ranges of probability, the
subject matter experts only need to assess a risk’s probability within a range rather
than as a specific value.

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6.4.2 Tools and Techniques
1- Risk Probability and Impact Assessment

❑ Impact level definitions are very project-specific.

❑ Levels are defined by the organization as causing the same amount of pain or
gain to the project for each level across objectives.

❑ If the impact is uncertain and could be assigned to more than one level of impact
(e.g. from moderate to high) the analyst may choose to
• Assign the risk to the impact level that represents the expected or average
impact.
• Extra analysis to reduce the range of uncertainty to fit within a single
range.

❑ Definitions should be tailored or scaled by stakeholders to the specific project to

be used for opportunities and threats.

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6.4.2 Tools and Techniques
1- Risk Probability and Impact Assessment

Technique Strengths Weaknesses CSFs

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6.4.2 Tools and Techniques
2- Probability and Impact Matrix
❑ Risks can be prioritized for further quantitative analysis and planning risk
responses based on their risk rating.
❑ Ratings are assigned to risks based on their assessed probability and impact.
❑ Evaluation of each risk’s importance and priority conducted using a look-up table
or a probability and impact matrix by combinations of probability and impact that
lead to rating the risks as low, moderate, or high priority.
❑ Descriptive terms or numeric values can be used depending on organizational .

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6.4.2 Tools and Techniques
2- Probability and Impact Matrix
❑ The organization classify the risk-rating to high risk, moderate risk, and low risk.

❑ Usually, these risk-rating rules are specified by the organization in advance of

the project and included in organizational process assets.

❑ Risk rating rules can be tailored in the Plan Risk Management process to the
specific project.

❑ May develop ways to determine one overall rating for each risk.

❑ Opportunities and threats are handled in the same matrix using definitions of the
different levels of impact that are appropriate for each.

❑ The risk score helps guide risk responses.

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6.4.2 Tools and Techniques
2- Probability and Impact Matrix

❑ Risks that have a negative impact on objectives, known as threats if they occur,
and that are in the high-risk (dark gray) zone of the matrix, may require priority
action and aggressive response strategies.

❑ Threats found in the low-risk (medium gray) zone may not require proactive
management action beyond being placed in the risk register as part of the watch
list or adding a contingency reserve.

❑ Similarly for opportunities, those in the high-risk (dark gray) zone, which may be
obtained most easily and offer the greatest benefit, should be targeted first.

❑ Opportunities in the low-risk (medium gray) zone should be monitored.

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6.4.2 Tools and Techniques
2- Probability and Impact Matrix

Technique Strengths Weaknesses CSFs

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6.4.2 Tools and Techniques
2- Probability and Impact Matrix

Technique Strengths Weaknesses CSFs

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6.4.2 Tools and Techniques
3- Risk Data Quality Assessment
❑ Evaluate the degree to which the data about risks is
useful for risk management.

❑ Examining the degree to which the risk is understood and

the accuracy, quality, reliability, and integrity of the data
about the risk.

❑ The use of low-quality risk data may lead to a qualitative

risk analysis of little use to the project.

❑ If data quality is unacceptable, it may be necessary to

gather better data.

❑ Collection of information about risks is difficult, and

consumes more time and resources than originally planned.

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6.4.2 Tools and Techniques
4- Risk Categorization

Risks to the project can be categorized by

❑ Sources of risk (e.g., using the RBS).

❑ The area of the project affected (e.g., using the WBS).

❑ The areas of the project most exposed to the effects of uncertainty (e.g., project
phase)
❑ Common root causes.

This technique helps determine work packages, activities, project phases or even
roles in the project, which can lead to the development of effective risk responses.

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6.4.2 Tools and Techniques
5- Risk Urgency Assessment

❑ Risks requiring near-term responses may be considered more urgent to address.

❑ Indicators of priority may include

• Probability of detecting the risk.
• Time to affect a risk response.
• Symptoms and warning signs
• Risk rating.

❑ In some qualitative analyses, the assessment of risk urgency is combined with

the risk ranking that is determined from the probability and impact matrix to give a
final risk severity rating.

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6.4.2 Tools and Techniques
6- Expert Judgment

❑ Expert judgment is required to assess the probability

and impact of each risk to determine its location in
the matrix .

❑ Experts generally are those having experience with

similar, recent projects.

❑ Using expert judgment is often in facilitation

workshops or interviews.

❑ The experts’ bias should be taken into account in

this process.

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6.4.2 Tools and Techniques
7- Analytic Hierarchy Process (AHP)
❑ AHP is a method to calibrate preferences for achieving the different objectives of
a project.
• Do they prefer to achieve time more than cost?
• Is quality more important than scope?
• What is the relative weighting of the project’s objectives in terms of their
priority to the stakeholders or to management?

❑ The results are weights (summing to 100%) that reflect the relative priority of
each objective.

❑ This prioritization can be important in determining how trade-offs affecting

different objectives (e.g., Should we reduce scope to finish on time?) will be
decided.

❑ It can also be used to create an overall project risk priority list from risks that
have been assessed on their implications for individual objectives.

❑ Specialized software implementing AHP is available.

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6.4.2 Tools and Techniques
7- Analytic Hierarchy Process (AHP) AHP spreadsheet

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6.4.2 Tools and Techniques
7- Analytic Hierarchy Process (AHP)
Technique Strengths Weaknesses CSFs

8- Post-project reviews/Lessons Learned/Historical Information

9- Root-Cause Analysis
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6.4.3 Outputs
1- Project Documents Updates

Project documents that may be updated include, but are not limited to:
1-1 Risk register updates.
As new information becomes available through the qualitative risk assessment, the
risk register is updated. Updates to the risk register may include:-

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6.4.3 Outputs
1- Project Documents Updates

1-2 Assumptions log updates.

❑ As new information becomes available through the qualitative risk assessment,

assumptions could change.

❑ The assumptions log needs to be revisited to accommodate this new information.

❑ Assumptions may be incorporated into the project scope statement or in a

separate assumptions log.

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The Perform Qualitative Risk Analysis Process

is illustrated in this figure

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1- Select Risk Characteristics that Define Risks’ Importance

❑ Qualitative risk analysis tools provide ways to distinguish those risks that are
important for response or further analysis from those that are less important.

❑ The criteria that make a risk of interest to management are agreed upon in
advance and implemented in the tools used.

❑ Output from qualitative risk analysis tools includes a listing of risks in priority
order or in priority groups (e.g., high, moderate, and low).

❑ The tools for qualitative risk analysis allow the organization or project
stakeholders to specify those levels or combinations of risk characteristics that
make a particular risk of interest to management.

❑ Most tools assess a risk’s importance from a combination of probability of

occurrence and impact on objectives.

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2- Collect and Analyze Data

❑ Assessment of individual risks is based on information collected about them.

❑ Interviews, workshops, and references to databases of prior projects, require

management support and attention.

❑ It is important to protect against bias in data gathering, which is important

when relying on expert judgment for the information.

3- Prioritize Risks by Probability and Impact on Specific Objectives

❑ Some tools distinguishing a risk’s priority in terms of the affected objective.

❑ Provides a list of risks that are important for any specific objective of interest to
management.

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4- Prioritize Risks by Probability and Impact on Overall Project

❑ For easy communication with management and other stakeholders, one list of
prioritized risks for the entire project to be created as contrasted with its
importance to specific objectives.

❑ The organization should be explicit about how that index is created.

❑ Usually the index reflects the organization’s preference among objectives.

❑ The technique for creating the overall risk priority measure should be documented
in the Plan Risk Management process.

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5- Categorize Risk Causes

❑ Understanding the relationships between risks may provide a better
understanding of the possibility and magnitude of project risk than if risks are
only considered as separate and independent events.

❑ Identifying common root causes of a group of risks, may reveal both the
magnitude of the risk event for the group as a whole along with effective
strategies that might address several risks simultaneously.

❑ Some risks may be linked with others in a causal chain, and understanding the
chain of risks may lead to a better understanding of the implication of risk for the
project.

❑ Identifying risks that can occur at the same time or using the same resources for
recovery might provide a realistic picture of problems of risk mitigation using
scarce resources.

❑ Combining the results of the Perform Qualitative Risk Analysis process with the
risk breakdown structure can show clusters of priority risks arising from specific
sources.
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6- Document the Results of the Perform Qualitative Risk Analysis Process

Update the risk register

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 PROJECT RISK
MANAGEMENT
Course
PMI-RMP

LESSON 7
Perform
Quantitative Risk Engr. ALAA SULTAN
Analysis Senior Project Manager
PMP, PMI-RMP, OCP, 6SIGMA
24
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7.1 Introduction
❑ Perform Quantitative Risk Analysis is the
process of numerically analyzing the effect of
identified risks on overall project objectives, when
considering risks simultaneously

❑ The key benefit of this process is that it produces

quantitative risk information to support decision
making in order to reduce project uncertainty.

❑ Used mostly to evaluate the aggregate effect of all

risks affecting the project.

❑ When the risks drive the quantitative analysis, the

process may be used to assign a numerical priority
rating to those risks individually.

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7.1 Introduction

❑ Quantitative Analysis follows Qualitative Risk Analysis process.

❑ In some cases Quantitative Analysis are bypassed:

▪ lack of sufficient data to develop appropriate models.

▪ Qualitative analysis provide enough information for development of

effective risk responses, especially for smaller projects.

▪ No need for or no viability of quantitative risk analysis.

▪ Unavailability of time and budget.

Qualitative Quantitative Plan Risk Responses

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7.1 Introduction

❑ The project manager should exercise expert judgment to determine the need
for and the viability of quantitative risk analysis.

❑ During the Plan Risk Management process, the benefits of quantitative risk
analysis should be weighed against the effort required to ensure that the
additional insights and value justify the additional effort.

❑ The availability of time and budget, and the need for qualitative or quantitative
statements about risk and impacts, will determine which method(s) to use on
any particular project.

❑ Quantitative Analysis should be repeated, as needed, as part of the Control

Risks process to determine if the overall project risk has been satisfactorily
decreased.

❑ Trends may indicate the need for more or less focus on appropriate risk .
management activities.

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7.1 Introduction

❑ Qualitative risk analysis is prioritizing individual risks viewed one at a time,

therefore cannot produce measures of overall project risk when all risks are
considered simultaneously.

❑ Specific project risks are usually best understood and quantified at a detailed
level such as the line-item cost or schedule activity level.

❑ By contrast, project objectives such as achievement of the project’s budget or

the schedule are specified at a higher level, often at the level of the total project.

❑ An overall risk analysis, by quantitative techniques, estimates the implication of

all quantified risks on project objectives.

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7.1 Introduction

The implementation of overall risk analysis using quantitative methods requires:

❑ Complete and accurate representation of the project objectives built up from

individual project elements (project schedule or cost estimate).

❑ Identifying risks on individual project elements such as schedule activities or line-

item costs at a level of detail that lends itself to specific assessment of individual
risks.

❑ Including generic risks that have a broader effect than individual project
elements.

❑ Applying a quantitative method (such as Monte Carlo simulation or decision tree

analysis) that incorporates multiple risks simultaneously in determining overall
impact on the overall project objective.

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7.1 Introduction

❑ Results from this analysis evaluate :

• likelihood of success in achieving project objectives and to estimate

(time and cost) .
• Contingency reserves.

❑ Usually for time and cost objectives because are appropriate to both the
risks and the risk tolerance of project stakeholders.

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7.1 Introduction
Using quantitative techniques such as Monte Carlo simulation may provide
more realism in the estimate of the overall project cost or schedule
than a non-probabilistic approach which assumes that the activity durations or
line-item cost estimates are deterministic

Probabilistic Non-Probabilistic( deterministic )

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7.1 Introduction
Results of the quantitative analysis will be compared to the project plan (baseline or
current) to give management an estimate of the overall project risk

and will answer important questions such as:

❑ What is the probability of meeting the project’s objectives?

❑ How much contingency reserve (e.g., reserves or buffers of time, resources, and
cost) is needed to the organization confidence level based upon its risk tolerance?

❑ What are those parts of the project, such as line-item costs or schedule activities,
which contribute the most risk when all risks are considered simultaneously?

❑ Which individual risks contribute the most to overall project risk?

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7.1 Introduction

Estimating overall project risk using quantitative methods helps distinguish

between

• Risks beyond the tolerance of the stakeholders.

• Risks within acceptable tolerances.

Risks beyond the tolerance of the stakeholders need vigorous risk

responses to protect the most important objectives to the stakeholders.

Risks beyond the Risks within acceptable

tolerance tolerances.

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7.1 Introduction

A high-level comparison of quantitative and qualitative

risk analysis processes

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7.2 Critical Success Factors

1- Prior Risk Identification and Qualitative Risk Analysis

❑ The Quantitative process after the Identify Risks and Qualitative processes have
been completed.

❑ Reference to a prioritized list of identified risks ensures that the Perform

Quantitative Risk Analysis process will consider all significant risks when
analyzing their effects quantitatively.

consider all
significant risks

Qualitative Quantitative Plan Risk Responses

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7.2 Critical Success Factors

2- Appropriate Project Model

❑ An appropriate model of the project should be used as the basis for quantitative
risk analysis.

❑ Project models most frequently used in quantitative risk analysis include:

▪ Project schedule (for time).
▪ line-item cost estimates (for cost).
▪ Decision tree (for decisions in the face of uncertainty).
▪ Other total-project models.

❑ Quantitative risk analysis is especially sensitive to the completeness and

correctness of the model of the project that is used.

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7.2 Critical Success Factors

3- Commitment to Collecting High-Quality Risk Data

❑ Often high-quality data about risks are not available in any historic database.

❑ Should be gathered by interviews, workshops, and other means using expert

judgment.

❑ Collection of risk data requires resources and time as well as management

support.

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7.2 Critical Success Factors

4- Unbiased Data

❑ Success in gathering data requires the ability

to recognize when biases occur and should
address that bias or developing other
unbiased sources of the data.

❑ Common sources of bias are

cognitive bias and motivational bias.

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7.2 Critical Success Factors

5- Overall Project Risk Derived from Individual Risks

❑ Overall project risk derives from the individual risks.

❑ Risk analysis of cost and schedule an appropriate method is Monte Carlo

simulation.

❑ Decision tree is an appropriate method for making decisions when future events
are not certain, using the probability and impact of all risks, and combining their
effect to derive an overall project measure such as value or cost.

❑ In these methods, the risks are specified at the level of the detailed tasks or line-
item costs and incorporated into the model of the project to calculate effects on
objectives such as schedule or cost for the entire project, by combining those
risks.

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7.2 Critical Success Factors

6- Interrelationships Between Risks in Quantitative Risk Analysis

❑ Individual risks in the project model may be related to each other.

For example, several risks may have a common root cause and therefore are
likely to occur together.

❑ This possibility is sometimes addressed by correlating the risks that are related,
ensuring that they generally occur together during the analysis.

❑ Another common way to represent the risks which occur together is by using the
risk register listing of the risk or root cause and attaching it to several project
elements such as schedule activities or cost elements.

❑ When a particular risk occurs, the affected elements will all experience the effect
of that risk together.

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7.3 Inputs, Tools & Techniques, and Outputs

Inputs, Tools & Techniques, and Outputs

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7.3 Inputs, Tools & Techniques, and Outputs

Perform Quantitative Risk Analysis Data Flow Diagram

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7.3.1 Inputs
1- Risk Management Plan
The risk management plan provides guidelines, methods, and tools to be used in
quantitative risk analysis.

2- Cost Management Plan

The cost management plan provides guidelines on establishing and managing risk
reserves.

3- Schedule Management Plan

The schedule management plan provides guidelines on establishing and managing

risk reserves.

4- Risk Register

The risk register is used as a reference point for performing quantitative risk analysis.

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7.3.1 Inputs

5- Enterprise Environmental Factors

6- Organizational Process Assets

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7.3.2 Tools and Techniques
1- Data Gathering and Representation Techniques 1-1 Interviewing

❑ Interviewing techniques based on experience and historical data to quantify the

probability and impact of risks on project objectives.

❑ The information depends upon the type of used probability distributions.

For instance, information would be gathered on the optimistic (low),

pessimistic (high), and most likely scenarios for some commonly used
distributions.

❑ Reliability and credibility of the interviews by documenting the rationale of the

risk ranges and the assumptions behind them.
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7.3.2 Tools and Techniques
1- Data Gathering and Representation Techniques 1-2 Probability distributions
Continuous probability distributions

❑ Continuous probability distributions are used

extensively in modeling and simulation.

❑ Represent the uncertainty in values such as

• Durations of schedule activities.
• Costs of project components.
Beta distribution
❑ Beta and Triangular distribution are widely
used during the quantitative risk analysis.

❑ Other commonly used distributions include

the uniform, normal and lognormal.

❑ Horizontal (X) axes represent possible

values of time or cost and the vertical (Y)
axes represent relative likelihood.
Triangular distribution
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7.3.2 Tools and Techniques
Continuous probability distributions contd.

Uniform distributions Can be used if there is

no obvious value that is more likely than any
other between specified high and low bounds.

Used in early concept stage of design.

Low High

Discrete distributions

Discrete distributions can be used to represent

uncertain events.
such as the:
• Outcome of a test.
• Possible scenario in a decision tree.

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7.3.2 Tools and Techniques
2- Quantitative Risk Analysis and Modeling Techniques
Commonly used techniques use both event-oriented and project-oriented analysis
approaches
2-1 Sensitivity analysis.

❑ Determine which risks have the

most potential impact on the project.

❑ Understand how the variations in

project’s objectives correlate with
variations in different uncertainties.

❑ Examines the how the uncertainty

of each project element affects the
objective being studied when all other
uncertain elements are held at their
baseline values

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7.3.2 Tools and Techniques

Tornado diagram Comparing relative

importance and
❑ Comparing relative importance and
impact of
impact of variables that have a high degree
of uncertainty to those that are more stable
Variables Variables
Have high degree more stable
of uncertainty

❑ Analyzing risks whose quantitative

analysis highlights possible benefits
greater than corresponding identified
negative impacts
quantitative identified
analysis negative
benefits impacts

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7.3.2 Tools and Techniques

Tornado diagram
❑ A tornado diagram is a special type of
bar chart.

❑ used in sensitivity analysis for

comparing the relative importance of the
variables.

❑ The Y-axis contains each type of

uncertainty at base values.

❑ The X-axis contains the spread or

correlation of the uncertainty to the studied
output.

❑ Each uncertainty contains a horizontal

bar and is ordered vertically to show
uncertainties with a decreasing spread
from the base values.

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7.3.2 Tools and Techniques

Expected monetary value (EMV) analysis

Statistical concept that calculates the average (weighted average or expected cost
or benefit) outcome when the future includes scenarios that may or may not happen
(analysis under uncertainty).

❑ The EMV of opportunities are generally expressed as positive values.

❑ The EMV of threats are generally expressed as negative values.

❑ EMV requires a risk neutral neither risk averse nor risk seeking.

❑ EMV for a project is calculated by multiplying the value of each possible outcome
by its probability of occurrence and adding the products together.

❑ A common use of EMV is a decision tree analysis.

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7.3.2 Tools and Techniques

2-2 Expected monetary value (EMV) analysis

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7.3.2 Tools and Techniques

2-2 Expected monetary value (EMV) analysis

Example of an Expected Monetary Value Calculation when there are Three

Uncertain Product Demand Scenarios

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7.3.2 Tools and Techniques

2-2 Expected monetary value (EMV) analysis

Technique Strengths Weaknesses CSFs

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7.3.2 Tools and Techniques
2-3 Modeling and simulation

❑ A project simulation uses a model that translates the specified detailed

uncertainties of the project into their potential impact on project objectives.

❑ Simulations are typically performed using the Monte Carlo technique, the
project model
is computed many times (iterated), with the input values (cost estimates= cost
line-items or activity durations) chosen at random for each iteration from the
probability distributions of these variables to build:

▪ Histogram (total cost or completion date) is calculated from the iterations

▪ Cumulative probability from which to compute desired contingency
reserves
of time or cost.

❑ Determine the relative importance of each input in determining the overall project
cost and schedule risk.

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7.3.2 Tools and Techniques
Histogram
Total Iterations 12090

1100/12090
= 9%

Beta distribution

1.2
Triangular distribution
1
0.8
Probabilty

0.6
0.4
0.2
0

Uniform distribution

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7.3.2 Tools and Techniques
Cumulative Probability

1.2

0.8
Probabilty

0.6

0.4

0.2

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7.3.2 Tools and Techniques
Monte Carlo Simulation for Schedule Risk Analysis

❑Using :
1. Schedule network diagram.
2. Duration estimates (O , M, P).
3. Probability Distribution

❑ The output:
▪ The probability of achieving the
completion date.
▪ List of completion dates with confidence
levels.
▪ Contingency reserves to bring the risk to
level acceptable to the organization.
▪ The relative importance of each input in
determining the overall project schedule
Risk.

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7.3.2 Tools and Techniques
Monte Carlo Simulation for Cost Risk Analysis

❑ The simulation uses

1. Cost estimates(cost line-items) .
2. Probability distribution.
❑ The output from a cost risk simulation is the
1. Probability of achieving the cost objective.
2. List of total cost with confidence.
3. Contingency reserves to bring the risk to level acceptable to the
organization.
4. The relative importance of each input in determining the overall project
cost Risk.

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7.3.2 Tools and Techniques
Monte Carlo Simulation
Technique Strengths Weaknesses CSFs

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7.3.2 Tools and Techniques
Monte Carlo Simulation

Technique Strengths Weaknesses CSFs

Monte Carlo
Simulation

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Monte Carlo Questions
ABC is a big Organization working in Construction by old style, they got new project with
Total Cost 18,821,540$ the customer requests to work by the Up to date style and
announced that the risk management very important for project success. Therefore the
organization hired a subject matter Expert to work as Risk manager during the project
life cycle.
The Sponsor, Project manager and the risk manager in the meeting, then the Risk
manager open the Lap top to explain the benefits of risk management and how and
when should be implemented, during the presentation the sponsor notice a complicated
graphics, he ask the Risk manager, what is this ,he told Mote Carlo Simulation technique
as below. The risk manager explained the technique then the Sponsor asked him. What
is the probability of achieving the planned cost objective? The values in the
graph by thousands.

A) 40%.
B) 50%.
C) 80%.
D) 30%.

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Monte Carlo Questions
Q1) Total Cost 18,821,540. What is the probability of achieving the planned cost
objective? The values in the graph by thousands.

A) 40%.
B) 50%.
C) 80%.
D) 30%.

From the graph check the probability beside 18,821,540 = 40%.

Correct Answer is A
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Monte Carlo Questions
Q2) Total Cost 18,821,540. What is the contingency reserve if the confidence level
change from P40 TO P75%? The values in the graph by thousands.

A) 460,700$.
B) 560,600$.
C) 600,000$.
D) 550,000$.

From the graph check the Total cost beside 75% = 19,282,240 and the budget
beside 40% = 18,821,540, then calculate the difference 19,282,240 – 18,821,540 =
460,700$.
Correct answer is A.
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Monte Carlo Questions
Q3) Total Cost 18,821,540. What is the average total cost of the project?
The values in the graph by thousands.

A) 18,460,700$.
B) 19,000,600$.
C) 18,000,000$.
D) 18,945,350$.

From the graph check the Total cost beside 50% = 18,945,350$.
Correct answer is D.
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Monte Carlo Questions
Q4) Total Cost 18,821,540. What is the probability to complete the project with
total cost 19,467,220?
The values in the graph by thousands.

A) 80%.
B) 85%.
C) 75%.
D) 60%.

From the graph check the probability beside total cost 19,467,220$ = 85%
Correct answer is B.
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Monte Carlo Questions
Q5) MEGA is a big Organization working in Construction by old style, they got new
project with completion date 05/Feb/2015 but the customer requirements to work by
the Up to date style and announced that the risk management very important for
project success. Therefore the organization hired a subject matter Expert to work as
Risk manager during the project life cycle. The Sponsor, Project manager and the risk
manager in the meeting, then the Risk manager open the Lap top to explain the
benefits of risk management and how and when should be implemented, during the
presentation the sponsor notice a complicated graphics, he ask the Risk manager,
what is this, he told Mote Carlo Sampling technique as below. The risk manager
explained the technique then the Sponsor asked, what is the probability to
complete the project on 05, Jul 2015?

A) 57%.
B) 80%.
C) 75%.
D) 78%.

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Monte Carlo Questions
Q5) completion date 05/Feb/2015. What is the probability to complete the project
on 05, Jul 2015?

A) 57%.
B) 80%.
C) 75%.
D) 78%.

From the graph check the probability beside date 05, Jul 2015 = 75%
Correct answer is C.

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Monte Carlo Questions
Q6) completion date 05/Feb/2015. What is the average date to complete the
project?

A) 28 FEB 2015.
B) 18 APR 2015.
C) 10 JAN 2015
D) 14 MAY 2015.

From the graph check the date beside probability 50% = 28, FEB 2015.
Correct answer is A.

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Monte Carlo Questions
Q7) completion date 05/Feb/2015. What is the Contingency reserve if the
confidence level changed from P40 to P90?

A) 7 Months and 2 days.

B) 8 Months and 13 days
C) 9 Months and 21 days
D) 3 Months and 17 days

From the graph check the date beside probability 40% = 10, JAN 2015.
And beside 90% = 31, OCT 2015, then calculate the difference = 31,OCT 2015 –
10, JAN 2015 = 9 Months and 21 day.
Correct answer is C.

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Monte Carlo Questions
Q8) completion date 05/Feb/2015. What is the probability of achieving the
planned completion date ?

A) 40%.
B) 45%
C) 80%
D) 75%

From the graph check the probability beside 05/FEB/2015 = 45%

Correct answer is B.

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7.3.2 Tools and Techniques

Monte Carlo Simulation Vs Latin Hyper-Cube

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7.3.2 Tools and Techniques

Monte Carlo Simulation Vs Latin Hyper-Cube

item Latin Hyper Cube Sampling (LHC) Monte Carlo Simulation

Speed Fast Slow

Efficient More Efficient Less Efficient
Iterations Less number of iterations More number of iterations
Standard Division small big
Random draws -Not entirely random it is a Entirely random sampling
stratified sampling method. technique
-Divide the distribution into equal
intervals (STRATA) with equal
probability and randomly draw
from each interval.

Clustering reduce clustering Create clustering

Sampling Area Insure that all portions in the Most draws are closer to the
distribution are sampled mean, but the tails (areas of
including the tails. high uncertainty) are usually
underrepresented in the
sampling.

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7.3.2 Tools and Techniques

2-4 Decision Tree Analysis

❑ Decision tree analysis is usually performed using specialized, but widely

available software.

❑ The software allows the user to specify :

• The structure of the decision with decision nodes.
• Chance nodes.
• Costs.
• Benefits.
• Probabilities.

❑The user can also evaluate the different decisions using:

• Linear utility functions based on Expected Monetary Value.
• Non-linear utility functions.

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7.3.2 Tools and Techniques

2-4 Decision Tree Analysis

❑ The negative numbers = outflows or investments (e.g. COTS).
❑ The percentages represent probabilities of the event occurring (Major Problems).
❑ The positive numbers = rewards or values (after “Fix the Problem”).
❑ “True” indicates the decision option taken from the square decision node.
❑ “False” indicates the decision option not taken.

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7.3.2 Tools and Techniques

2-4 Decision Tree Analysis

Technique Strengths Weaknesses CSFs

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7.3.2 Tools and Techniques

2-4 Decision Tree Analysis

Technique Strengths Weaknesses CSFs

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7.3.2 Tools and Techniques

2-5 Expert Judgment

❑ Expert judgment (ideally using experts with relevant,

recent experience).

❑ Required to identify potential cost and schedule

impacts, to evaluate probability, and to define inputs
such as probability distributions into the tools.

❑ Expert judgment also comes into play in the

interpretation of the data.

❑ Experts should be able to identify the weaknesses of

the tools as well as their strengths.

❑ Experts may determine when a specific tool may or

may not appropriate to organization’s capabilities and
culture.

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7.3.2 Tools and Techniques

2-6 FMEA/Fault Tree Analysis

2-7 Post-project reviews/Lessons Learned/Historical Information

2-8 System Dynamics

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7.3.3 Tools and Techniques Characteristics

1- Comprehensive Risk Representation

❑ Risk models permit representation of many, if not all, of the risks that have impact
on an objective simultaneously.

❑ They also permit the representation of both opportunities and threats to the
project’s objectives.

2- Risk Impact Calculation

Quantitative models facilitate the correct calculation of the effect of many risks, which
are typically identified and quantified at a level of detail below the total project, on the
project objectives.

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7.3.3 Tools and Techniques Characteristics

3- Quantitative Method Appropriate to Analyzing Uncertainty

❑ Probability models use a quantitative method that addresses uncertainty.

❑ Handle the uncertainty which is represented as probability of an event’s occurring

or as probability distributions for a range of outcomes.

❑ Monte Carlo simulation tools that permit the combination of probability distributions
of line-item costs or schedule activity durations, many of which are uncertain.

4- Data Gathering Tools

❑ Data gathering tools used in this process include assessment of historical data and
workshops, interviews, or questionnaires to gather quantified information.

❑ Such as the probability of a risk occurring, a probability distribution of its potential

impacts on cost or time, or relationships such as correlation between risks.

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7.3.3 Tools and Techniques Characteristics

5- Quantitative Method Appropriate to Analyzing Uncertainty

❑ Results from the quantitative tools are generally not available in standard
deterministic project management methods such as project scheduling or cost
estimating.

❑ These results, when all risks are considered simultaneously, include the following:
▪ Probability of achieving a project objective such as finishing on time or within
budget.

▪ A mount of contingency reserve in cost, time, or resources needed to provide a

required level of confidence.

▪ Identity or location within the project model of the most important risks.
❖ Sensitivity analysis in a cost risk analysis .

❖ Criticality analysis in a schedule risk analysis.

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7.3.3 Tools and Techniques Characteristics

5- Quantitative Method Appropriate to Analyzing Uncertainty

Structure of a Quantitative Risk Analysis

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7.3.3 Tools and Techniques Characteristics

6- Iterative Quantitative Risk Analysis

❑ The success of the Perform Quantitative Risk Analysis process is enhanced if the
process is used periodically throughout the project.

❑ The frequency of this effort will be determined during the Plan Risk Management
process but will also depend on events within the project itself

7- Information for Response Planning

❑ Overall project contingency reserve in time and cost should be reflected in the
project’s schedule and budget.

❑ Quantitative risk analysis provides information that may be used to modify the
project plan.

❑ If the overall risk to time and cost indicates that an adjustment in scope is needed,
the scope changes are agreed upon and documented and a new quantitative risk
analysis is carried out to reflect the new aspects of the project.

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7.3.4 Outputs

3-1 Project Documents Updates

Project documents are updated with information resulting from quantitative risk
analysis. For example, risk register updates could include:

❑ Probabilistic analysis of the project.

❑ Probability of achieving cost and time objectives.

❑ Prioritized list of quantified risks.

❑ Trends in quantitative risk analysis results.

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7.3.4 Outputs

Risk register updates

❖ Probabilistic analysis of the project.

❑Listing the possible completion dates and

costs with their associated confidence levels.

❑This output, often expressed as a

cumulative frequency distribution, is used
with stakeholder risk tolerances to permit
quantification of the cost and time
contingency reserves.

❑Contingency reserves are needed to bring

the risk of overrunning stated project
objectives to a level acceptable to the
organization.

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7.3.4 Outputs

Risk register updates

❖ Probability of achieving cost and time objectives.

With the risks facing the project, the

probability of achieving project objectives
under the current plan can be estimated
using quantitative risk analysis results

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7.3.4 Outputs

Risk register updates

❖ Prioritized list of quantified risks

❑This list includes those risks that pose

the greatest threat or present the greatest
opportunity to the project.

❑These include the risks that may have

the greatest effect on cost contingency and
those that are most likely to influence the
critical path.

❑These risks may be evaluated, in

some cases, through a tornado diagram
generated as a result of the simulation
analysis.

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7.3.4 Outputs

Risk register updates

❖ Trends in quantitative risk analysis results

❑ As the analysis is repeated, a trend may
become apparent that leads to conclusions
affecting risk responses.

❑ Organizational historical information on

project schedule, cost, quality, and performance
should reflect new insights gained through the
Perform Quantitative Risk Analysis process.

❑ Such history may take the form of a

quantitative risk analysis report.

❑ separate from , or linked to, the risk register.

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7.3.4 Outputs

Documenting the Results of the Perform Quantitative Risk Analysis Process

❑The contingency reserves calculated in quantitative project cost and schedule risk
analysis are incorporated, respectively, into the cost estimate and the schedule to
establish a prudent target and a realistic expectation for the project.

❑Contingency reserves may also be established to provide for the capture of

opportunities that are judged to be priorities for the project.
If the contingency reserve required exceeds the time or resources
available, changes in the project scope and plan may result.

❑Also, the results of the analysis may provide more or less urgency to risk response
depending on the probability of achieving the plan’s objectives or the amount of
contingency reserve required to provide the necessary level of confidence.

❑The results of a quantitative risk analysis are recorded and passed on to the
person and/or group responsible for project management within the organization for
any further actions required to make full use of these results.

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7.3.4 Outputs

Risk register updates

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 PROJECT RISK
MANAGEMENT
Course
PMI-RMP

LESSON 8
Plan Risk
Management Engr. ALAA SULTAN
Senior Project Manager
PMP, PMI-RMP, OCP, 6SIGMA
31
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PMI-RMP LESSON 8. Plan Risk Responses
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Introduction

Plan Risk Responses :

Process of developing options and actions to enhance opportunities and to
reduce threats to project objectives.

The key benefit of this process:

Addresses the risks by their priority, inserting resources and activities
into the budget, schedule and project management plan as needed

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Introduction
❑ The Plan Risk Responses process follows the Perform Quantitative Risk Analysis
process (if used).

❑ Each risk response requires an understanding of the mechanism by which it will

address the risk.

❑ The mechanism used to analyze if the risk response plan is having the desired
effect. It includes the identification and assignment of one person (an owner for
risk response) to take responsibility for each agreed-to and funded risk response.

❑ Risk responses should be appropriate for the significance of the risk, cost-effective
in meeting the challenge, realistic within the project context, agreed upon by all
parties involved, and owned by a responsible person.

❑ Selecting the optimum risk response from several options is often required.

❑ Presents commonly used approaches to planning responses to the risks.

❑ Risks include threats and opportunities that can affect project success, and
responses are discussed for each.
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8.1 Purpose and Objectives

❑ Determine the set of actions which most enhance the chances of project success
while complying with applicable organizational and project constraints.

❑ Once risks have been identified, analyzed, and prioritized, plans should be
developed for addressing every risk the project team considers to be sufficiently
important for threats and opportunities

❑ The planning entails agreeing upon the actions to be taken and the potential
changes to budget, schedule, resources, and scope which these actions might
cause.

❑ Contingent risk response actions need to be executed at the optimum time. For
this reason, the response specification for each such risk should include a
description of any corresponding trigger conditions.

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8.1 Purpose and Objectives

Risk Owner and Risk Action Owner

❑ The responsibility for monitoring the project conditions and

implementing the corresponding actions should be clearly assigned.

❑ Every risk should have been allocated to a risk owner as part of the
Identify Risks process, and each of the corresponding risk responses
should now be assigned to a specific risk action owner.

❑ The key roles for Project Risk Management are those of risk owner and
risk action owner.

❑ Role of the risk owner and that of the risk action owner may be assigned
to a single person.

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8.1 Purpose and Objectives

Risk Owner VS Risk Action Owner

RISK OWNER RISK ACTION OWNER(Response Owner)
A single risk owner should be assigned to every identified Each agreed-upon risk response should have a single risk
risk. action owner.
Manage the corresponding risk through all of the Reports periodically to the project manager on the
subsequent Project Risk Management processes. effectiveness of the plan, any unanticipated effects, and
any correction needed to handle the risk appropriately.
Select a suitable strategy for each individual risk based on Ensuring that the agreed-upon risk responses are carried
its characteristics and assessed priority. out as planned, in a timely manner.
Ensuring that the strategy is achievable, affordable, cost Take agreed-upon actions as required.
effective, and appropriate.
Defining actions to implement the chosen strategy. These Provide the risk owners with relevant information on status
actions may be delegated to action owners as appropriate. or changes to the risk characteristics.
Monitor actions to determine their effectiveness, and also Monitor the trigger conditions and ensure that the
to identify any secondary risks which may arise because of corresponding actions are carried out as defined, in a
the implementation of risk responses. timely manner.
Ensuring that the risk response is effective and for planning
additional risk responses if required.
Assess the effectiveness of any actions, decide whether
additional actions are required, and keep the project
manager informed of the situation.
Risk owner may choose to assemble a team to develop a
response.

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8.1 Purpose and Objectives

Secondary Risk and Residual Risk

❑ Secondary risk arise as a direct result of

implementing a risk response.

❑ Secondary risks have to be analyzed and

planned for in the same way as those
risks which were initially identified.

❑ Residual risks that will remain after the responses

have been implemented.

❑ Residual risks should be clearly identified,

analyzed, documented, and
communicated to all relevant stakeholders.

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8.1 Purpose and Objectives

❑ All the approved, unconditional actions arising from risk response planning should
be integrated into the project management plan in order to ensure that they are
carried out as part of normal project implementation.

❑ The corresponding organizational and project management rules should also be

invoked, including the following:
• Project change management and configuration control;
• Project planning, budgeting, and scheduling;
• Resource management; and
• Project communication planning.

❑ It is never feasible or even desirable to eliminate all threats from a project.

❑ there is a limit to the extent to which opportunities can be proactively managed.

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8.2 Critical Success Factors

A range of factors are important for the success of the Plan Risk Responses
process.

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8.2 Critical Success Factors

1- Communicate
OPEN AND
❑ Communication with the various stakeholders
should be maintained in an open and appropriate APPROPRIATE
manner.

❑ The plans are disseminated and approval obtained

in order to ensure full acceptance by all stakeholders.

❑ If organizational causes of risks, such as culture,

attitudes, or disagreements concerning objectives
are present, they should be addressed openly.

Require involving high levels of the organization’s

management and other stakeholders.

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8.2 Critical Success Factors

2- Clearly Define Risk-Related Roles and Responsibilities

❑ The risk response success will be dependent
upon the full support and involvement of Risk Action
the project team and other stakeholders. Owner
RISK1
Risk Action
❑ The key roles for Project Risk Management Owner
▪ Risk owner
▪ Risk action owner. RISK2
Risk Owner
❑ A single risk owner should be assigned to RISK3
every identified risk. Risk Owner/
Action Owner

❑ Each agreed-upon and funded risk response RISK4

should have a single risk action owner. Risk Owner

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8.2 Critical Success Factors

2- Clearly Define Risk-Related Roles and Responsibilities cond.

❑ The responsible people should be aware of what is expected of them, and other
project stakeholders should understand and accept the needs and authority of these
roles.

❑ Management may take ownership of risks with political, organizational causes,

senior management should approve and track associated risk-related
contingency reserves.

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8.2 Critical Success Factors

3- Specify Timing of Risk Responses

❑ Agreed-upon responses should be Response

integrated into the project management plan
and will therefore be scheduled and assigned Project Management
for execution. Plan

❑ The responses that depend on uncertain

conditions should also be monitored so as to
be performed if the conditions warrant them.

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8.2 Critical Success Factors

4- Provide Resources, Budget, and Schedule for Responses

❑ Each response should be planned in detail

and integrated into the project management
plan.

❑ Estimating the resources, costs, and

duration, then updating the budget and
schedule.

❑ Obtaining approval from management.

❑ Obtaining commitment from the risk

owners and risk action owners.

❑ Management’s role at this stage is vital for

supporting the project manager in developing
risk responses and authorizing the
corresponding resources.

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8.2 Critical Success Factors

5- Address the Interaction of Risks and Responses

❑ Responses may be developed to address risks related by
▪ Cause and effect .
▪ Common root cause.

❑ Categorization of risks, may help identify and address this

situation by:
▪ risk breakdown structure.
▪ affinity diagram.
▪ other categorizing tools

❑ Risks aggregated during the Perform Quantitative Risk

Analysis should be considered (e.g., ten small, related risks
combined may pose a big risk to the project), then develop
generic responses where possible.

❑ Another interaction effect that may occur is when one risk,

if it occurs, may affect the probability or impact of other risks.

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8.2 Critical Success Factors

5- Address the Interaction of Risks and Responses

❑ Deciding on the response strategy may require a

compromise, since some proposed responses may be
mutually exclusive or counterproductive.

❑ For example mitigating a threat to time could cost money,

thereby increasing pressure on the budget.

❑ Risk response planning also needs to take a holistic view of

all proposed responses and make sure they are coherent.

❑ Planning responses to risks need to control the potential

effects of the strategy developed for treating the original risk.

❑ If the Control is overlooked, the total level of

▪ Threat in a project can actually increase,
▪ Potential for opportunities can be decreased.

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8.2 Critical Success Factors

6- Ensure Appropriate, Timely, Effective, and Agreed-Upon Responses

❑ Responses should be appropriate, timely, cost-
effective, feasible, achievable, agreed-upon, ▪Appropriate
assigned, and accepted.
▪Timely
❑ Any proposed risk response plan needs to be
assessed against the following criteria:
▪cost-effective
▪ Consistency with organizational values, project
objectives, and stakeholder expectations.
▪Feasible
▪Achievable
▪ Technical feasibility.
▪agreed-upon
▪ Ability of the project team or risk action owners
outside the project to carry out the ▪Assigned
corresponding actions. ▪ accepted
▪ Balance between overall impact of the
response on the project objectives and
improvement in the risk profile of the project.
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8.2 Critical Success Factors

7- Address Both Threats and Opportunities

❑ Risk response planning should combine
responses that address the threats as well as
opportunities into a single, integrated plan.

❑ If either threats or opportunities are not fully

addressed, the combined set of response
strategies will be incomplete and may even be
invalid.

Address Threats
And Opportunities

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8.2 Critical Success Factors

8- Develop Strategies before Tactical Responses

❑ Risk response planning should be carried out in Response Planning
an open-minded manner rather than adopting the Open-minded Manner At
first response that seems to be feasible. General Strategy Level

❑ The responses should be planned at a general, Validate Strategy

strategic level and the strategy validated and
agreed upon, prior to developing the detailed
tactical approach. Agreed Upon
Strategy
❑ Once the responses have been planned at a
strategic level, they should be expanded into Expanded Into
actions at the tactical level and integrated into the
project management plan (e.g., schedule, budget,
Actions At The
and resource assignments). Tactical Level
❑ This activity may generate additional secondary Detailed Tactical
risks, which will need to be addressed at this time. Approach
Integrated In Project
Plan
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8.3 Inputs, Tools & Techniques, and Outputs
Inputs, Tools & Techniques, and Outputs

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8.3 Inputs, Tools & Techniques, and Outputs
Plan Risk Responses Data Flow Diagram

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8.3.1 Inputs
1- Risk Management Plan
❑ include roles and responsibilities, risk analysis definitions, timing for reviews and
risk thresholds for low, moderate, and high risks.

❑ Risk thresholds help identify those risks for which specific responses are needed.

Risk Management Plan includes

1- Methodology 6- Definitions of risk probability& impact
2- Roles and responsibilities. 7- Probability and Impact Matrix
3- Budgeting 8- Revised stakeholders’ tolerances
4- Timing. 9- Reporting formats
5- Risk categories 10- Tracking

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8.3.1 Inputs
2- Risk Register

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8.3.2 Tools and Techniques

❑ Risk response strategies for individual risks, sets of risks, and project level risks.

❑ The strategy or mix of strategies most likely to be effective should be selected for
each risk.

❑ Decision tree analysis can be used to choose the most appropriate responses.
Specific actions are developed to implement that strategy, including primary and
backup strategies, as necessary.

❑ The affected stakeholders should be involved in determining the strategies.

❑ Once the strategies have been selected, they need to be agreed upon by the
entity that approves those strategies.

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8.3.2 Tools and Techniques

❑ A fallback plan
can be developed for implementation if the selected strategy turns out not to be
fully effective or if an accepted risk occurs.

❑ Secondary risks
Risks that arise as a direct result of implementing a risk response.

❑ A contingency reserve
Often allocated for time or cost. If developed, it may include identification of the
conditions that trigger its use.

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8.3.2 Tools and Techniques
1- Strategies for Negative Risks or Threats
❑ Three strategies, for threats: avoid, transfer,
and mitigate. The fourth strategy, accept, can
be used for threats or opportunities.
Avoid
❑ Each of these risk response strategies have
varied and unique influence on the risk.

❑ These strategies should be chosen to match

the risk’s probability and impact on the Accept Threats Mitigate
project’s overall objectives.

❑ Avoidance and mitigation strategies are good

Transfer
strategies for critical risks with high impact,

❑ Transference and acceptance are good for

threats that are less critical and with low
overall impact.

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8.3.2 Tools and Techniques
1.1- Avoid

❑ Eliminate the threat or protect the project from

its impact.

❑ Usually changing the project management plan

to eliminate the threat entirely, Isolate project
objectives from the risk’s impact or change the
objective that is in jeopardy.

❑ Examples:
❑ Extending the schedule.
❑ Changing the strategy.
❑ Reducing scope.
❑ Shut down the project entirely.

❑ Some risks that arise early in the project can be

avoided by clarifying requirements, obtaining
information, improving communication, or
acquiring expertise.

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8.3.2 Tools and Techniques
1.2- Transfer

❑ Shifting the impact of a threat to a third party,

together with ownership and responsibility for its
management of the response. it does not
eliminate it.

❑ Transferring does not mean disowning the risk by

transferring it to a later project or another person
without his or her knowledge or agreement.

❑ Transfer nearly always involves payment of a risk

premium to the party taking on the risk.

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8.3.2 Tools and Techniques
1.2- Transfer

❑ Transferring liability for risk is most effective in

dealing with financial risk exposure.
❑ Examples
▪ Insurance.
▪ Performance bonds.
▪ Warranties.
▪ Guarantees.
▪ Contracts or agreements
❖ Cost-plus contract may transfer the cost
risk to the buyer.
❖ Fixed-price contract may transfer risk to
the seller.

❑ When a buyer has capabilities that the seller does

not has, some work and its concurrent risk
contractually back to the buyer.

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8.3.2 Tools and Techniques
1.3- Mitigate

❑ By reducing the probability and/or impact of an

adverse risk to be within acceptable threshold
limits.

❑ Taking early action to mitigate the risk is more

effective than trying to repair the damage after the
risk has occurred.
▪ Adopting less complex processes.
▪ Conducting more tests.
▪ Choosing a more stable supplier.
▪ Prototype development.
▪ Redundancy into a system

❑ If it is not possible to reduce probability, a

mitigation might address the risk impact reduce
the impact from a failure of the original
component(Redundancy into a system).

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8.3.2 Tools and Techniques
1.4 - Accept.
Project team decides to acknowledge the risk and not
take any action unless the risk occurs.

Adopted When:
❖ Not possible or cost-effective to address a
specific risk in any other way.
❖ Project team has decided not to change the
project management plan to deal with a risk.
❖ Unable to identify any other suitable response
strategy.

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8.3.2 Tools and Techniques
1.4 - Accept.
❑ This strategy :
❖ Passive ACCEPT
❖ Active.

❑ Passive acceptance
Requires no action except to document the
strategy, leaving the project team to deal
with the risks as they occur, and to
periodically review the threat to ensure that ACTIVE PASSIVE
it does not change significantly.
▪No action
Establish
▪ Document
❑ Active acceptance contingency
the strategy
The most common active acceptance reserve,
▪Deal with the
strategy is to establish a contingency including
risks as they
reserve, including amounts of time, money, amounts of
occur
or resources to handle the risks. time, money,
▪ Periodically
or resources
review
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8.3.2 Tools and Techniques
2-Strategies for Positive Risks or Opportunities
❑ Four responses are dealing with opportunities.
1. Exploit.
2. Share.
3. Enhance.
4. Accept

❑ The fourth strategy, accept, can be used for threats or opportunities.

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8.3.2 Tools and Techniques
2.1- Exploit

❑ The exploit strategy may be selected for risks with

positive impacts where the organization wishes
to ensure that the opportunity is realized.

❑ This strategy seeks to eliminate the uncertainty

associated with a particular upside risk by
ensuring the opportunity definitely happens.

❑ Examples of directly exploiting responses include:

❖ Assigning an organization’s most talented
resources to the project to reduce the time to
completion.

❖ Using new technologies or technology

upgrades to reduce cost and duration
required to realize project objectives.

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8.3.2 Tools and Techniques
2.2- Enhance
❑ The enhance strategy is used to increase the
probability and/or the positive impacts of an
opportunity.
Increase The
❑ Identifying and maximizing key drivers of the
impact may increase the probability.
Probability And
/ Or The Positive
❑ Examples of enhancing : Impacts
Adding more resources to an activity to finish
early.

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8.3.2 Tools and Techniques
2.2- Share

❑ Sharing a positive risk:

Involves allocating some or all of the ownership of
the opportunity to a third party who is best able to
capture the opportunity for the benefit of the
project.

❑ Examples of sharing
▪ Forming risk-sharing partnerships.
▪ Teams.
▪ Special-purpose companies.
▪ Joint ventures.

❑ Established to express purpose of taking

advantage of the opportunity so that all parties
gain from their actions.

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8.3.2 Tools and Techniques
2.4- Accept

Accepting an opportunity is being willing to take advantage of the opportunity

if it arises, but not actively pursuing it.

willing to take advantage

of the opportunity if it
arises, but not actively
pursuing

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8.3.2 Tools and Techniques
3- Expert Judgment

Expertise may be provided by any group or

person with specialized:
▪ Education.
▪ Knowledge.
▪ Skill.
▪ Experience.
▪ Training.
in establishing risk responses.

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8.3.2 Tools and Techniques
4- Applying Risk Response Strategies to Overall Project Risk

The four risk response strategies can be applied to address

overall project risk as follows:

❑ Avoid “Cancel the project, as a last resort, if the overall level of risk
remains unacceptable”.

❑ Share “Set up a business structure in which the customer and the

supplier share” the risk.

❑ Avoid “Re-plan the project or change the scope and boundaries of the
project, for example, by modifying the project priority, resource
allocations, delivery calendar, etc.

❑ Mitigate “ Address risks with exposure that exceeds the desired level.

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8.3.2 Tools and Techniques
5- Contingent Response Strategies

❑ Some responses are designed for use only if certain events

occur(Trigger Condition).

❑ For some risks the project team develop a response plan that will only be
executed under certain predefined conditions, if it is believed that there
will be sufficient warning to implement the plan.

❑ Events that trigger the contingency response should be defined

and tracked, such as:
▪ Missing intermediate milestones
▪ Gaining higher priority with a supplier.

❑ This type of responses called contingency plans or fallback plans

and include identified triggering events that set the plans in effect.

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8.3.2 Tools and Techniques
5- Contingent Response Strategies contd.

❑ For specific (normally high-impact) risks,

the risk owner may choose to assemble a
team to develop a response, as if the risk
had genuinely happened.

❑ The corresponding plan, with the

supporting information, should then be
documented and approved at project
management or sponsor level.

❑ This approval must include authorization

to deploy the corresponding resources if
the predefined .

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8.3.2 Tools and Techniques
5- Contingent Response Strategies contd.

Technique Strengths Weaknesses CSFs

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8.3.2 Tools and Techniques
6- Contingency Reserve Estimation.

❑ All of the conditional response plans, as well any of

the residual risks will, if they occur, have an effect on
the schedule and/or budget and/or performance
objectives of the project. An amount (time and cost)
needs to be allocated.

❑ This amount is made up of two components:

▪ Approved conditional responses
(contingency plans)
▪ Unspecified or passively accepted risks.

❑ Quantitative methods can be used to determine the

amounts that should be set aside.
▪ Decision trees for conditional responses.
▪ Simulation for the set of unspecified risks

❑ These reserves are tracked and managed in Monitor

and Control Risks.
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8.3.2 Tools and Techniques
6- Contingent Response Strategies contd.

Contingency Reserve.
Time, cost, recourse that is allocated for identified risks that are accepted and for
which contingent or mitigating responses are developed.

Technique Strengths Weaknesses CSFs

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8.3.2 Tools and Techniques
7- Multi-Criteria Selection Techniques
❑This is an adaptation of the Perform Qualitative Risk Analysis Process based on
selection criteria.
❑The spreadsheet used to calculate the weighted scores of two options, based on
a predefined set of prioritized criteria: points = weight x rating

Technique Strengths Weaknesses CSFs

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8.3.2 Tools and Techniques
8- Scenario Analysis
❑ Scenario analysis for risk response planning involves defining several reasonable
alternative scenarios.
❑ The different scenarios may require different risk responses that can be
described and evaluated for their cost and effectiveness.
❑ If the organization can choose between scenarios, the alternatives including the
responses can be compared.
❑ If the scenarios are out of the control of the organization, the scenario analysis
can lead to effective and necessary contingency planning.

Technique Strengths Weaknesses CSFs

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8.3.2 Tools and Techniques
9- Critical Chain Project Management
❑ The critical chain is the resource-constrained critical path.

❑ The critical chain method adds duration buffers that are non-work schedule
activities to manage uncertainty.

❑ Project buffer is placed at the end of the critical chain, protects the target finish
date from slippage along the critical chain.

❑ Feeding buffers, are placed at each point where a chain of dependent activities
that are not on the critical chain feeds into the critical chain. protect the critical
chain from slippage along the feeding chains.

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8.3.2 Tools and Techniques
9- Critical Chain Project Management

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8.3.2 Tools and Techniques
9- Critical Chain Project Management
Technique Strengths Weaknesses CSFs

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8.3.2 Tools and Techniques
9- Critical Chain Project Management

Technique Strengths Weaknesses CSFs

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8.3.2 Tools and Techniques
10- Brainstorming

11- Check Lists

12- Decision Tree Analysis

Technique Strengths Weaknesses CSFs

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8.3.2 Tools and Techniques
13- Delphi Technique
14- Expected Monetary Value (EMV)

15- Force Field Analysis

16- Industry knowledge base
Technique Strengths Weaknesses CSFs

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8.3.2 Tools and Techniques
17- Interviews 18- Nominal Group Technique
19- Post-project reviews/ Lessons Learned/ Historical Information

Technique Strengths Weaknesses CSFs

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8.3.2 Tools and Techniques
Tools and techniques categories

There are four categories of tools and techniques:

1. Creativity tools to identify potential responses.

2. Decision-support tools for determining the

optimal potential response.

3. Strategy implementation techniques designed

to turn a strategy into action.

4. Tools to transfer control to the Monitor and

Control Risks process.

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8.3.2 Tools and Techniques
Planning risk responses steps
1- Response Identification

❑ Risk response planning use the available

information about the potential risks to
determine the optimal set of responses.

❑ Involve subject matter experts and employ

creativity techniques in order to explore all of
the options.

❑ Project planning and execution techniques are

then required to evaluate the potential effects
of the various options on the project’s
objectives.

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8.3.2 Tools and Techniques
Planning risk responses steps 2- Response Selection
1. Once the set of potential responses is established,
decision-support techniques may need to select the
best possible subset from these responses.

2. The selection process should take into account:

▪ Cost of the responses.
▪ Impact on the project objectives.
▪ Uncertainty of outcomes.
▪ Possible secondary and residual risks.

3. Identify Risks, Quantitative Analysis, Plan Risk

Responses may then need to be applied to the
resultant project management plan and the residual
and secondary risks that it would entail.

4. This iterative approach continues until all of the

individual risks are deemed acceptable and the overall
risk is within a predefined threshold.

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8.3.2 Tools and Techniques
Planning risk responses steps

3- Action Planning
❑ Project planning tools are used to turn the chosen
strategies into concrete actions and to integrate these
into existing plans.

❑ The corresponding actions may be:

▪ Unconditional (i.e., integrated into the project
management plan).
▪ Contingent on a trigger condition and predefined
as a contingency response strategy.

Integrate Into
Strategies Actions
Plans

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8.3.2 Tools and Techniques
Planning risk responses steps

4- Ownership and Responsibility Assignment

❑ The project manager needs to use resource

assignment processes to ensure the availability of an
owner for each risk and for each response action.

❑ Each associated risk is managed and each

corresponding risk response is carried out in a timely
and effective manner.

❑ Every contingency response strategy should include a

set of trigger conditions.

❑ Risk action owner responsible for monitoring these

conditions , and should be clearly assigned in the Plan
Risk Responses and managed in the Monitor and
Control Risks.

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8.3.2 Tools and Techniques

4- Ownership and Responsibility Assignment

The strategic definition of risk responses should include

measurable criteria for success of the response.

Risk action owners:

▪ Monitor their assigned risks.
▪ Take agreed-upon actions as required.
▪ Provide the risk owners with relevant information
on status or changes to the risk characteristics.

Risk owners:
▪ Assess the effectiveness of any actions.
▪ Decide whether additional actions are required.
▪ Keep the project manager informed of the
situation.

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8.3.3 OUTPUT

1- Project Management Plan Updates

Schedule management plan.

Updated to reflect changes in process and practice driven by the risk responses. Include
▪ Changes in tolerance or behavior related to resource loading and leveling.
▪ Updates to the schedule strategy.

Cost management plan.

Updated to reflect changes in process and practice driven by the risk responses, include:
▪ Changes in tolerance or behavior related to cost accounting, tracking, and reports.
▪ Updates to the budget strategy and how contingency reserves are consumed.

Quality management plan.

Updated to reflect changes in process and practice driven by the risk responses. Include
▪ Changes in tolerance or behavior related to requirements, quality assurance, or quality
control.
▪ Updates to the requirements documentation.

Procurement management plan.

Updated to reflect changes in strategy, such as:
▪ Alterations in the make-or-buy decision.
▪ Contract type(s) driven by the risk responses.

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8.3.3 OUTPUT

1- Project Management Plan Updates

Human resource management plan.

The staffing management plan, part of the human resource management plan, is
updated to reflect changes in project organizational structure and resource
applications driven by the risk responses. This may include changes in tolerance or
behavior related to staff allocation, as well as updates to the resource loading.

Scope baseline.
Because of new, modified or omitted work generated by the risk responses, the
scope baseline may be updated to reflect those changes.

Schedule baseline.
Because of new work (or omitted work) generated by the risk responses, the
schedule baseline may be updated to reflect those changes.

Cost baseline.
Because of new work (or omitted work) generated by the risk responses, the cost
baseline may be updated to reflect those changes.

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8.3.3 OUTPUT

2- Project Documents Updates

❑ When appropriate risk responses are chosen and agreed upon, they are included
in the risk register.

❑ The risk register should be written to a level of detail that corresponds with the
priority ranking and the planned response.

❑ Often, the high and moderate risks are addressed in detail.

❑ Low priority are included in a watch list for periodic monitoring.

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8.3.3 OUTPUT

2- Project Documents Updates

2-1 Risk register updates

1. Risk owners and assigned responsibilities.

2. Agreed-upon response strategies.
3. Specific actions to implement the chosen response strategy.
4. Trigger conditions, symptoms, and warning signs of a risk occurrence.
5. Budget and schedule activities required to implement the chosen responses;
6. Contingency plans and triggers that call for their execution;
7. Fallback plans for use as a reaction to a risk that has occurred and the primary
response proves to be inadequate.
8. Residual risks that are expected to remain after planned responses have been
taken, as well as those that have been deliberately accepted.
9. Secondary risks that arise as a direct outcome of implementing a risk response.
10. Contingency reserves that are calculated based on the quantitative risk analysis
of the project and the organization’s risk thresholds.
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8.3.3 OUTPUT

2- Project Documents Updates

2-1 Risk register updates cond.

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8.3.3 OUTPUT

2- Project Documents Updates cond.

2-2 Assumptions log updates.

As new information becomes available through plan risk responses, assumptions
could change. The assumptions log needs to be revisited.

2-3 Technical documentation updates.

As new information becomes available through Plan risk responses, technical
approaches and physical deliverables may change. Any supporting documentation
needs to be revisited.

2-4 Change requests.

Planning for risk responses can result in recommendations for changes to the
resources, activities, cost estimates, and others. Then change requests are
generated and processed through the Perform Integrated Change Control process.

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8.4 Documenting the Results

1- Add Risk Responses to the Risk Register

❑ The response-related information for each risk is recorded in the risk register and
updated regularly.

❑ Any interested stakeholder should be able to rapidly access all the information
required to verify their responsibilities and manage the risk in accordance with the
risk response plan.

❑ The set of residual risks and their priorities are clearly identified and recorded.

Residual risks identified

and recorded

Responses Rapid access all

RISK REGISTER
information information

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8.4 Documenting the Results

2- Add Corresponding Risk Responses to the Project Management Plan

❑ While developing the detailed set of risk responses, the project-related implications
are evaluated for inclusion in a modified project management plan.

❑These include:
❑ Costs.
❑ Resource assignments.
❑ Scheduling details.
❑ Changes to project documentation.

❑Until these changes are formally approved along with the additional risks that they
may carry, risk response planning cannot be considered complete.

Response Be
Developing The Evaluate The Completed After
Modify The
Detailed Implication Of The The Formal
Project Plan
Responses Project Approval Of
Changes
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8.4 Documenting the Results

3- Review and Document Predicted Exposure

❑ Once the risk responses have been defined and

integrated into the project management plan.
The individual and overall residual risks
related to this plan are evaluated in order to
determine whether additional response
planning is required.

❑ This evaluation should provide an estimate of both:

▪ The expected post-response situation.
▪ The potential improvement of the risk
exposure assuming that the proposed
responses are effective.

❑ The evaluation should be documented.

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MANAGEMENT
Course
PMI-RMP

LESSON 9
Control Risks
Engr. ALAA SULTAN
Senior Project Manager
PMP, PMI-RMP, OCP, 6SIGMA
37
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9.1 Introduction

Control Risks
The process of implementing risk response plans, tracking identified risks, monitoring
residual risks, identifying new risks, and evaluating risk process effectiveness
throughout the project.

The key benefit

It improves efficiency of the risk approach throughout the project life cycle to
continuously optimize risk responses.

Planned risk responses

Are executed during the life cycle of the project, but the project work should be
continuously monitored for new, changing, and outdated risks.

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9.2 Purpose and Objectives

❑ Track identified risks.

❑ Monitor residual risks.

❑ Identify new risks.

❑ Ensure that risk response plans are executed at the appropriate time, and
evaluate their effectiveness throughout the project life cycle.

❑ Tracking and managing the risk response actions.

❑ Review the effectiveness of all of the Project Risk Management processes to

provide improvements to the management of the current project as well as future
ones.

❑ Ensure that the trigger conditions are effectively monitored and that the
corresponding actions are carried out as defined, in a timely manner. It is the
responsibility of the action owner.

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9.2 Purpose and Objectives

❑ Control Risks can involve choosing alternative strategies.

❑ Executing a contingency or fallback plan.

❑ Taking corrective action, and modifying the project management plan.

❑ Updating the organizational process assets.

❑ Including project lessons learned databases and risk management templates, for
the benefit of future projects.

❑ Control Risks applies techniques, such as variance and trend analysis, which
require the use of performance information generated during project execution.

❑ Other purposes of the Control Risks process are to determine if:

▪ Project assumptions are still valid.
▪ Analysis shows an assessed risk has changed or can be retired.
▪ Risk management policies and procedures are being followed.
▪ Contingency reserves for cost or schedule should be modified in
alignment with the current risk assessment.
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9.2 Purpose and Objectives

❑ The first action of control risk is to check whether all of the approved unconditional
response actions have been included and defined in the current project
management plan and take any appropriate action if necessary, such as:
❑ invoking the change management process with respect to any missing
actions. This will then ensure that the agreed-upon actions are carried
out within the normal project execution framework.

Check That The

Response Actions If No
have been Included Invoke
change
In the Project Plan management
process

To ensure that the agreed-upon actions are carried out

within the normal project execution framework
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9.2 Purpose and Objectives

❑ The risk owners and risk action owners need to be briefed on any changes that
may affect their responsibilities.

❑ Effective communication needs to be maintained between them and the project

manager.
❑ So they accept accountability for controlling the potential outcomes of
specific risks.
❑ Apply their best efforts to track the associated trigger conditions
❑ Carry out the agreed-upon responses in a timely manner.

Effective
PM communication

Risk Owner

Risk action
Owner
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9.2 Purpose and Objectives

❑ The mechanism for measuring the effectiveness

of the response is provided by the Plan Risk
Responses process.

❑ The risk action owner should keep the risk

owner aware of the status of the response
actions.

❖ So that the risk owner can decide that

additional actions need to be planned
and implemented or not.

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9.2 Purpose and Objectives

❑ As the project progresses, additional information becomes available and the

project environment may change as some risks occur, whether foreseen or
unforeseen, and others become or cease to be relevant.

❑ The planning should be kept current, the project manager should ensure that
periodic risk reassessment including risk identification, analysis, and response
planning:

❖ Repeated at reasonable intervals.

❖ Repeated in response to project events, without generating excessive
administrative overhead:

▪ Occurrence of a major or unexpected risk.

▪ Need to analyze a complex change request.
▪ Phase end review.
▪ Project re-planning or major plan elaboration.
▪ Periodic review to ensure that the information remains current.

❑ If major organizational changes, risk management planning may need to be

revisited before reassessing the risks.
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9.2 Purpose and Objectives

❑ In addition to the regular status reviews,

Periodic Audits should be performed to:

❑ Examine and document the effectiveness of risk

responses in dealing with identified risks and their
root causes, as well as the effectiveness of the risk
management process.

❑ Determine strengths and weaknesses in handling

risks within the project.

❑ Identifying any barriers to effectiveness or keys to

success in risk management.

❑ Recognition of which could lead to improvements in

risk management of the current or future projects.

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9.2 Purpose and Objectives

At the end of the project.

an integrated analysis of the risk management process should be carried out with a
focus on long-term process improvements.

This analysis consolidates the findings of the periodic audits to identify lessons that
would be applicable in general to a large proportion of the organization’s projects in
the future, such as
▪ Appropriate levels of resources.
▪ Adequate time for the analysis.
▪ Use of tools.
▪ Level of detail, etc.
End Of The Project.

Integrated Analysis Consolidates

Identify
Of The Risk The Findings Of
lessons for
Management The Periodic
Future Projects
Process Audits

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9.2 Purpose and Objectives

At project closure:
❑ the project manager should ensure that a description has been given of the
closure of every risk in the risk register.
(a) Did not occur.
(b) Occurred and contingency plan invoked.
(c) Occurred and impact to the project scope (i.e., time, cost, and quality).

❑ The output of the audit of the risk management process should be consolidated
with specific information with respect to:
▪ The project’s experience of risks.
▪ Any generally applicable guidelines for the organization should be
highlighted and potential actions proposed for applying them.

❑ This can lead to an update to the corresponding OPA.

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9.3 Critical Success Factors

1- Integrate Risk Monitoring and Control with Project Monitoring and Control

❑ Early in the planning, the actions required to monitor and control project risk
should be included in the project management plan.

❑ Then adjusted in view of the risk response planning decisions, for example, the
actions associated with monitoring specific conditions or metrics.

❑ Once risk response planning has been carried out, the project schedule should
include all of the agreed-upon actions.

❑ So that they can be carried out as a normal part of project execution and tracked
accordingly.

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9.3 Critical Success Factors

2- Continuously Monitor Risk Trigger Conditions

❑ Risk response actions to be carried out as part of the project schedule

❑ Actions whose execution is dependent on a predefined trigger condition.

❑ Monitor the trigger condition is the responsibility of the risk action owner, in close
collaboration with the risk owner under the overall authority of the project manager.

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9.3 Critical Success Factors

3- Maintain Risk Awareness

❑ Risk management reports should be a regular item on every status meeting agenda
▪ Ensure that all team members remain aware of the importance of risk
management
▪ Ensure that it is fully integrated into all of the project management decisions.

❑ The project’s senior-level sponsor should require :

▪ Regular reports on the risks.
▪ planned responses.
to ensure that stakeholders are aware of the importance of keeping a focus on risk.

❑ Sponsor feedback also motivates the project team by demonstrating senior-level

interest in Project Risk Management.

Risk
Ma na g
ement

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9.3 Critical Success Factors

3- Maintain Risk Awareness (contd)

❑ Stakeholders’ perception of the effectiveness of risk

management is conditioned in part by:
▪ The way in which risks are handled as they occur.
▪ By the number or characteristics of such events.

❑ It is important if risk occurs:

▪ The information about the Risk.
▪ Progress and effectiveness of the responses.

Should be communicated at:

▪ Regular intervals .
▪ Honest manner adapted to the needs of each
stakeholder.

This should be supported by a well-executed

communications plan.

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9.4 Inputs, Tools & Techniques, and Outputs

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9.4 Inputs, Tools & Techniques, and Outputs

Control Risks Data Flow Diagram

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9.4.1 Inputs

1- Project Management Plan

The project management plan, which includes the risk management plan, provides
guidance for risk monitoring and controlling.

2- Risk Register

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9.4.1 Inputs

3- Work Performance Data

Work performance data related to various performance results possibly impacted
by risks includes, but is not limited to:
❖ Deliverable status.
❖ Schedule progress.
❖ Costs incurred.

4- Work Performance Reports

Work Performance
❑ Work performance reports take information from Reports

performance measurements and analyze it to

provide project work performance information
including:
▪ variance analysis.
▪ earned value data.
▪ forecasting data.
❑ These data points could be impactful in
controlling risks performance.

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9.4.2 Tools and Techniques

1- Risk Reassessment
❑ Control Risks often results in:
▪ Identification of new risks.
▪ Reassessment of current risks.
▪ Closing of risks that are outdated.
❑ Project risk reassessments should be regularly scheduled. The amount and detail
of repetition that are appropriate depends on how the project progresses relative
to its objectives.

❑ The objective of risk reassessment is to ensure that the full risk management
cycle is repeated as required to ensure effective control

Technique Strengths Weaknesses CSFs

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9.4.2 Tools and Techniques

1- Risk Reassessment Process

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9.4.2 Tools and Techniques

2- Risk Audits
❑ Risk audits examine and document the effectiveness
of risk responses in dealing with identified risks and
their root causes.

❑ Effectiveness of the risk management process.

❑ The project manager is responsible for ensuring that

risk audits are performed at an appropriate
frequency, as defined in the project’s risk
management plan.

❑ Risk audits may be included during routine project

review meetings, or the team may choose to hold
separate risk audit meetings.

❑ The format for the audit and its objectives should be

clearly defined before the audit is conducted.

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9.4.2 Tools and Techniques

2- Risk Audits
❑ Risk audits are carried out in order to evaluate:
▪ Are the risk management rules being carried out as specified ?
▪ Are the risk management rules adequate for controlling the project?

Technique Strengths Weaknesses CSFs

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9.4.2 Tools and Techniques

3- Trend Analysis
The evolution of the variance values over time should be analyzed in order to
evaluate how the risk profile is changing:
▪ Whether previous actions are having the expected effect .
▪ Whether additional actions are required.

To complete performance index can be used to assess changes with respect to time
and cost. TCPI = (BAC – EV)/(BAC – AC) Or TCPI= (BAC – EV)/(EAC – AC).

For the purposes of controlling risks, trends in the project’s execution should be
reviewed using performance information

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9.4.2 Tools and Techniques

3- Trend Analysis (Contd)

Technique Strengths Weaknesses CSFs

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9.4.2 Tools and Techniques

3- Variance analysis
1. Earned Value Analysis (CV, SV, CPI, SPI) can be used
▪ Set thresholds for action.
▪ Indicate when the risk process may be ineffective.
▪ Variance from plan as the basis of forecasts
▪ Forecast the cost at completion.

❑ Projections made using EVMS have been shown by

experience to be reliable early in the project.

❑ Earned value analysis and other methods of project

variance and trend analysis may be used for
▪ monitoring overall project performance.

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9.4.2 Tools and Techniques

3- Variance analysis (Contd.)

❑ Outcomes from these analyses may forecast potential deviation of the project at
completion from cost and schedule targets.

❑ Deviation from the baseline plan may indicate the potential impact of threats or
opportunities.

Technique Strengths Weaknesses CSFs

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9.4.2 Tools and Techniques

4- Technical Performance Measurement

❑ Compares technical accomplishments during
project execution to the schedule of technical
achievement.

❑ Requires :
▪ Definition of objective.
▪ Quantifiable measures of technical performance,
to compare actual results against targets.

❑ Such technical performance measures:

▪ Weight.
▪ Transaction times.
▪ Number of delivered defects.
▪ Storage capacity.

❑ Deviation, such as more or less functionality than

planned at a milestone, can help to forecast the
degree of success in achieving the project’s scope.

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9.4.2 Tools and Techniques

5- Reserve Analysis
❑ Throughout execution of the project, some risks may occur with positive or
negative impacts on budget or schedule contingency reserves.

Reserve analysis compares the amount of the contingency reserves remaining to the
amount of risk remaining at any time in the project to determine if the remaining
reserve is adequate or still provides the agreed level of confidence.

Need Additional
Amount Of Risk Contingency
Reserve From
Remaining Reserves Remaining
Management Reserve
NO
At any time in the project Is It
Adequate
YES

No Action
Reserve Analysis
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9.4.2 Tools and Techniques

5- Reserve Analysis
❑ Tracking the state of the reserve through project execution will provide summary
of the evolution of the status of the risks.

❑ This information can be useful when reporting up the organization to those

responsible for several projects

Technique Strengths Weaknesses CSFs

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9.4.2 Tools and Techniques

6- Status Meetings

❑ Project risk management should be an agenda

item at periodic status meetings.

❑ Risks can and should be on the agenda at all

project reviews.

❑ The amount of time required for that item will

vary, depending upon the:
▪ Risks that have been identified.
▪ Their priority.
▪ Difficulty of response.

❑ The more often risk management is practiced,

the easier it becomes.

❑ Frequent discussions about risk make it more

likely that people will identify risks and
opportunities.

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9.4.2 Tools and Techniques

6- Status Meetings (Contd)

Agenda items should cover the following:

❑ Top priority risks at present.

▪ Are there any changes?

❑ Risks or trigger conditions that have occurred .

▪ What is the status of the actions?

❑ Risks responded to in the last period.

▪ Effectiveness of actions taken.
▪ Are there any additional actions required?

❑ Risks closed in the last period.

▪ Impact on the plans.

❑ Lessons to be added to the Organizational Process

Assets .

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9.4.2 Tools and Techniques

6- Status Meetings (Contd)

Technique Strengths Weaknesses CSFs

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9.4.2 Tools and Techniques

7- Critical Chain Project Management (CCPM)

Technique Strengths Weaknesses CSFs

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9.4.2 Tools and Techniques

1- Managing Contingency Reserves

❑ Reserves may have been allocated separately to cover time-related and cost-
related risks.

❑ Techniques are required that allow the project manager to assess at any point in
the project whether these provide the required level of confidence in the success
of the project.

❑ Tools for managing time buffers should be closely integrated into the project’s
scheduling techniques.

❑ Tools for managing cost should be compatible with the financial practices.

❑ Tools are required to identify trends and forecast future outcomes to determine
whether the reserves will remain sufficient.

❑ Tools are also required for tracking progress and spending in a consolidated
manner.

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9.4.2 Tools and Techniques

2- Tracking Trigger Conditions

❑ Trigger conditions and the corresponding

metrics defined in Plan Risk Responses. Trigger Conditions

❑ Tools to Evaluate and track conditions against

the project baseline or specified thresholds, Their Metrics
based on actual status.
Plan Risk
❑ Tools to provide information on risks related to Responses
the deliverables, such as performance, time and
cost.

Baselines or
Actual Status Specific
Threshold

Evaluate And Track Conditions

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9.4.2 Tools and Techniques

3- Tracking Overall Risk

Tools are required in order to determine, as the project progresses, whether the
responses are having the expected effect on the project’s overall level of risk.

4-Tracking Compliance

❑ To monitor the quality of the execution of the responses and processes, a set of
quality metrics such as degree of variation from the baseline, should be
tracked and recorded.

❑ These metrics will normally have been defined in the risk management plan.

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9.4.3 Output

1- Work Performance Information

Work performance information, as a Control Risks output, provides a mechanism to
communicate and support project decision making.

2- Change Requests

❑ Implementing contingency plans or workarounds sometimes results in a change

request.

❑ Change requests are prepared and submitted to the Perform Integrated

Change Control process .

❑ Change requests can include recommended corrective and preventive actions as

well.

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9.4.3 Output

2- Change Requests
Recommended corrective actions.
❑ These are activities that realign the performance of the project work with the
project management plan.

❑ They include contingency plans and workarounds.

❑ The workarounds for risks that were not initially planned, dealing with:
▪ Emerging risks that were previously unidentified.
▪ Accepted passively.

Recommended preventive actions.

These are activities that ensure that future performance of the project work is
aligned with the project management plan.

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9.4.3 Output

3- Project Management Plan Updates

❑ If the approved change requests affect the risk management processes, the
corresponding component documents of the project management plan are
revised and reissued to reflect the approved changes.

❑ The elements of the project management plan that may be updated are the
same as those in the Plan Risk Responses process.

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9.4.3 Output

4 - Project Documents Updates

Risk register updates may include:

1- Outcomes of risk reassessments, risk audits, and periodic risk reviews.

These outcomes may include:

▪ Identification of new risks.
▪ Updates to probability, impact, priority, response plans and ownership.
▪ Update other elements of the risk register.
▪ Outcomes includes closing risks that are no longer applicable
and releasing their associated reserves.

2- Actual outcomes of the project’s risks and of the risk responses.

This information can help project managers to plan for risk throughout their
organizations, as well as on future projects.

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9.4.3 Output

4 - Project Documents Updates

Risk register updates

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9.4.3 Output

5 - Organizational Process Assets Updates

❑ The risk management processes produce information that may be used for future
projects, and should be captured in the organizational process assets.

❑ The organizational process assets that may be updated include:

▪ Templates for the risk management plan, including the probability and
impact matrix and risk register.
▪ Risk breakdown structure.
▪ Lessons learned from the project risk management activities.

❑ These documents should be updated:

▪ As needed
▪ At project closure.

❑ Final versions of the risk register and the risk management plan templates,
checklists, and risk breakdown structure are included.

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9.5 Documenting the Results

Documenting the Results of the Monitor and Control Risks Process

❑ The final control action of risk monitoring and controlling is to record actual data of
risk management from start to finish of the project for future use .

❑ The definition of The following specified in the risk management plan.

▪ what this information must include.
▪ Storage mechanism.

❑ The goal of record actual data is to ensure that the significant risk management
information is recorded to provide concrete data to the lessons learned process
for inclusion in:
▪ Lessons learned document.
▪ Report.
▪ Other communication vehicle.

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9.5 Documenting the Results

Typical information includes the following:

❑ For each identified risk or type of risk, whether it occurred, and, if so:
▪ When and how often.
▪ Impact.
▪ Effectiveness of detection and of response.
▪ Any unplanned, additional actions that were carried out.

❑ Effectiveness of avoidance or exploitation actions.

❑ Effectiveness of transfer and sharing actions.

❑ Unexpected or undocumented risks which occurred and data about them.

❑ Effectiveness of risk mitigation and enhancement actions.

❑ Occurrence of accepted threats or opportunities.

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9.5 Documenting the Results

Typical information includes the following:

❑ The Information should provide the level of effort expended.

❑ Costs and benefits to the project of risk management activities should be

provided.

❑ This information will need to be archived and indexed in a manner that will
facilitate retrieval for easy review:
▪ During the project.
▪ At closure.
▪ For future projects.
▪ When the need arises.

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MANAGEMENT
Course
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LESSON 10
Questions
Engr. ALAA SULTAN
Senior Project Manager
PMP, PMI-RMP, OCP, 6SIGMA
425
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Questions

Contingency Reserve & EMV questions

Q1- You are a project manager of a new project for your organization FDR Inc. You
and your team calculating the EMV for some risks. Reference to the risks in the
below table What is the Expected Monetary value (EMV)?

Risk Probability Impact ($)

A) - 74,100
B) - 170,460 R1 0.6 -80,000
C) 100,460 R2 0.5 + 66,000
D) - 67,150. R3 0.4 -120,000
R4 0.66 + 23,000
R5 0.73 -36,000

EMV = Sum (P x I) =
- 0.6 x80,000 + 0.5 x66.000 - 0.4 x 120,000 + 0.66 x 23,000 - 0.73 x 36,000 =
-74,100 $
Correct answer is A.

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Questions

Contingency Reserve questions

Q2- You are a project manager of a new project for your organization FDR Inc. You
and your team calculating the contingency reserve for the project. Reference to the
risks in the below table What is the contingency reserve of your project ?

Risk Probability Impact ($)

A) 120000
B) - 170,460 R1 0.6 -80,000
C) 170,460 R2 0.5 -66,000
D) - 120000. R3 0.4 -120,000
R4 0.66 -23,000
R5 0.73 -36,000

Contingency reserve of the project = CR = EMV = Sum (P x I) =

- (0.6 x80,000 + 0.5 x66.000 + 0.4 x 120,000 + 0.66 x 23,000 + 0.73 x 36,000) =
-170,460 .
So the contingency reserve of the project = CR =170,460.
Correct answer is C.

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Questions

Contingency Reserve questions

Q3- You are a project manager of a new project for your organization FDR Inc. You
and your team calculating the contingency reserve for the project. Reference to the
risks in the below table What is the remaining contingency reserve of your project
if R5 occurred?
Risk Probability Impact ($)

A) 144,180 R1 0.6 -80,000

B) 128,460 R2 0.5 -66,000
C) 170,460 R3 0.4 -120,000
D) 134,460 R4 0.66 -23,000
R5 0.73 -36,000

Old Contingency reserve of the project = CR = EMV = Sum (P x I) =

- (0.6 x80,000 + 0.5 x66.000 + 0.4 x 120,000 + 0.66 x 23,000 + 0.73 x 36,000) =
-170,460 . So the old contingency reserve of the project = CR =170,460.
If the R5 occurred, we have to subtract its impact from the old CR of the
project.
The remaining CR of the project = 170,460 - 36,000 = 134,460 $.
Correct answer is D.
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Questions

Contingency Reserve questions

Q4 - You are a project manager of a new project for your organization FDR Inc. You
and your team calculating the contingency reserve for the project. Reference to the
risks in the below table What is the new contingency reserve of your project if the
probability of R1 changed from 60% to 70%?
Risk Probability Impact ($)
R5 occurred?
A) 178,460 R1 0.6 -80,000
B) 128,460 R2 0.5 -66,000
C) 170,460 R3 0.4 -120,000
D) 185,460 R4 0.66 -23,000
R5 0.73 -36,000

The new Contingency reserve of the project = CR = EMV = Sum (P x I) =

- (0.7 x80,000 + 0.5 x66.000 + 0.4 x 120,000 + 0.66 x 23,000 + 0.73 x 36,000) =
-178,460 .
So the new contingency reserve of the project = CR =178,460.

Correct answer is A.

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Questions

Contingency Reserve questions

Q5 - You are a project manager of a new project for your organization FDR Inc. You
and your team calculating the contingency reserve for the project. Reference to the
risks in the below table What is the new contingency reserve of your project if R4
outdated (retired) ?
Risk Probability Impact ($)
R5 occurred?
A) 178,460 R1 0.6 -80,000
B) 155,280 R2 0.5 -66,000
C) 170,460 R3 0.4 -120,000
D) 147,460 R4 0.66 -23,000
R5 0.73 -36,000

Old Contingency reserve of the project = CR = EMV = Sum (P x I) =

- (0.6 x80,000 + 0.5 x66.000 + 0.4 x 120,000 + 0.66 x 23,000 + 0.73 x 36,000) =
-170,460 . So the old contingency reserve of the project = CR =170,460.
If the risk retired you have to subtract its contingency reserve from the old CR of
the project.
The new Contingency reserve of the project = 170,460 – (0.66 x 23,000) = 155,280.
Correct answer is B.
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Questions

Contingency Reserve questions

Q6 - You are a project manager of a new project for your organization FDR Inc. You
and your team calculating the contingency reserve for the project. Reference to the
risks in the below table What is the new contingency reserve of your project if R2
outdated (retired) ?
Risk Probability CR
R5 occurred?
R1 0.6 80,000
A) 333,330
B) 437,000 R2 0.5 70,000
C) 367,000 R3 0.35 220,000
D) 297,000 R4 0.55 28,000
R5 0.79 39,000

Old Contingency reserve of the project = CR = EMV = Sum (P x I)

= 80,000 + 70,000 + 220,000 + 28,000 + 39,000 = 437,000
If the risk retired you have to subtract its contingency reserve from the old CR of
the project.
The new Contingency reserve of the project = 437,000 – 70,000 = 367,000.
Correct answer is C.

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Questions

Contingency Reserve questions

Q7 - You are a project manager of a new project for your organization FDR Inc. You
and your team calculating the contingency reserve for the project. Reference to the
risks in the below table What is the new contingency reserve of your project if the
probability of R3 changed from 35% to 50%?
Risk Probability CR
R5 occurred?
R1 0.6 80,000
A) 700,330
B) 437,000 R2 0.5 70,000
C) 447,000 R3 0.35 220,000
D) 531,286 R4 0.55 28,000
R5 0.79 39,000

Old CR of R3 = 220,000 = 0.35 x I So I = 220,000/0.35 .

The new Contingency reserve of the project = CR = EMV = Sum (P x I).
= 80,000 + 70,000 + ((220,000 /0.35)x 0.5) + 28,000 + 39,000 = 531,286.

Correct answer is D.

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Questions

Contingency Reserve questions

Q8 - You are a project manager of a new project for your organization FDR Inc. You
and your team calculating the contingency reserve for the project. Reference to the
risks in the below table What is the new contingency reserve of your project if R1
occurred ?
Risk Probability CR
R5 occurred?
R1 0.6 80,000
A) 303,667
B) 357,000 R2 0.5 70,000
C) 447,000 R3 0.35 220,000
D) 531,286 R4 0.55 28,000
R5 0.79 39,000

CR of R1 = 80,000 = 0.60 x I So I = 80,000/0.60 = 133,333 .

Old Contingency reserve of the project = CR = EMV = Sum (P x I).
= 80,000 + 70,000 + 220,000 + 28,000 + 39,000 = 437,000.
If R1 occurred, we have to subtract its impact from the Old CR of the project.
The new CR = 437,000 – 133,333 = 303,667
Correct answer is A.

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