Risk management

Question 1

what is risk?

Answer 1

an uncertain event or set of circumstances that, should occur, will have an effect on the achievement of the project’s objectives

risk management should be a process integral to the project planning/management process

Question 2

what is the risk management process

Answer 2

1. initiate - ensure common understanding of project objectives, scope and success criteria
2. identify
3. assess - look at structure of risks and ownership, estimate probability and impact
4. plan responses
5. implement responses and control

IIAPI

Question 3

1. Initiate

Answer 3

• Look at scope, sucess criteria and project objectives
• risk management focusses on customer needs

Question 4

what is contained in the risk management plan?

Answer 4

• developed in Definition stage
• description of project risk management process
• criteria for tolerability of risk (what constitutes excessive risk?)
• roles and responsibilities
• risk register format

Question 5

2. identification

Answer 5

• development of risk register
• they should be specific and consider a range of factors
• identification can be done using mechanisms such as brainstorming, SWOT analysis, interviews, questionnaires, assumptions and constraint analysis

Question 6

give some examples of risk factors

Answer 6

human
commercial
political
economic
social
legal
environmental

Question 7

2. identification what is assumptions and constraints analysis?

Answer 7

mechanism used for risk identification

• identifies assumptions and constraints made whilst developing project plan.
• assumptions then analysed based on their sensitivity (importance to project objectives) and stability (how likely assumption will be false)
• then ranked and converted into risks

+ quick, specific
- subjective - relies on assumptions being identified

Question 8

2. identification: brainstorming

Answer 8

activity should be structured, for example around the WBS.

+ cost effective, wide ranging
+ involves those involved with project, assists communication and understanding
- depends on strong facilitation to keep group on track
- impractical ideas
- risks exaggerated

Question 9

2. identification; check lists

Answer 9

Draws on risks identified in previous projects yes/no/not applicable/unknown
+ uses past experience
+ quick process
- restricted to items on paper
- may be too generic and not up-to-date

Question 10

2. Identification; Delphi Technique

Answer 10

structured method of obtaining group consensus on risk. group of experts meet under guidance of a chairperson to provide assessment of risk.
their responses are then circulated to group

+ taps into expert opinion

• requires experts, time consuming, requires coordination

Question 11

3. risk assessment what does it aim to establish?

Answer 11

structure of risks identified

ownership of the risks, between client and contractor

estimation of the probability evaluation raks and prioritises risk

Question 12

3. risk assessment; evaluation

Answer 12

Categorisation of identified risk according to severity

Priorities risk for treatment

The scores developed for each risk in the P-I matrix can now be used as the basis for ranking and prioritising risks for treatment.

Question 13

what is the P-I matrix?

Answer 13

probability-impact matrix is a tool for estimating level of risk uses assigned numbers to categorise risks and provide overall measure of their severity

process;
1. define ranking scales and criteria for each scale point

2. assign scores for each scale point
3. derive the P-I scores for each risk

4, risks then evaluated and ranked according to P-I scores

Question 14

Explain P-I process

Answer 14

1. define ranking scales and criteria agreed high/medium/low or five-point scale criteria are project specific

2. assign scores for each scale point linear score used for probability and logarithmic scale used for impact
3. derive P-I scores for each risk -

PxI for each impact.

creates a positioning matrix into which each risk can be placed

Question 15

What is risk evaluation (part of P-I process)?

Answer 15

This process priorities risks for treatment scores from P-I matrix used

High/medium/low categorisation

is there concentration of risk in one area?

how is risk distributed in project?

Question 16

5. Plan responses

Answer 16

• identify strategies and options for treating risk
• evaluate options on cost/benefit basis
• prepare action plans
• nominate risk owner

Question 17

5. plan responses;
   Risk treatment strategies; what do they depend on and what should they be?

Answer 17

strategy depends on

• acceptability of risk and cost/benefit of options

strategies should be SMART - specific measurable appropriate realistic time-bound

Question 18

5. plan responses; risk treatment strategies

Answer 18

accept - do nothing

avoid/eliminate - change or abandon goals to remove risk reduce probability

mitigate causes - to reduce impact

if risk has occurred - contingency, budget, float

Question 19

2. identification; cause/effect analysis

Answer 19

understand defective components (root causes of risk)
use fishbone diagram

Question 20

Risk monitoring, control and review

Answer 20

Tools for reporting;

risk register

P-I matrix showing risks top ten rank list of risks

Question 21

what is risk register?

Answer 21

• output of risk management process
• living document
• list of identified risks
• P-I assessment
• Timescale and cost of treatment
• Current ranking of risk

Question 22

Which of the following best describes a project risk?

A. An unforeseen event or set of circumstances which, if it occurs, will have an effect on the achievement of the project’s objectives.

B. A current problem that will result in the project going over budget

C. A future event that if it occurs will impact on one or more project objectives

D. A current problem that needs resolving because failure to do so will delay the project.

Answer 22

C. A future event that if it occurs will impact on one or more of the project objectives