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Project Management Professional

(PMP) Exam Review


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Chapter 11
PROJECT RISK MANAGEMENT

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What is a Risk ?

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


effect on one or more project objectives.

Uncertainty Cause and Effect Project Objectives


A state of having limited A risk is triggered by one or more
1 Scope
knowledge where it is impossible causes and it may have one or
to exactly describe the existing more impacts. 2 Schedule
state, a future outcome, or more
than one possible outcome. The effect can be positive or 3 Cost
negative. 4 Quality
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.

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What is Project Risk Management ?

* Project Risk Management includes the processes of conducting risk management planning,
identification, analysis, response planning, and controlling risk on a project.

Increase positive events Decrease negative events


probability and Impact probability and Impact

Objective of Project Risk Management


* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.
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Risk, Uncertainty & Cost of changes

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, Figure 2-9, Page 40.

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Identified, analyzed and responses created.
(proactive)
Known risks
Assign contingency reserve if it cant be managed
proactively.

Cant be managed proactively.


Unknown risks
Requires Management reserve.

Issue an occurred negative risk

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Individual Overall
project risks project risk

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Risk attitude among organization and stakeholders

Risk appetite the degree of Risk tolerance the degree, amount Risk threshold measures along the level
uncertainty an entity is willing to take or volume of risk that an organization of uncertainty or the level of impact at
on in anticipation of a reward.* or individual will withstand.* which a stakeholder may have specific
interest.*

The organization is willing to accept The organization or stakeholder is willing to The organization or stakeholder will NOT
reasonable risk to the cost on this project. accept risk of up to 8% increase in the project accept a risk that may increase the project
cost. cost by more than 9%.

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute Inc., 2013, Page 311.
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To be successful, an organization should be dedicated to address risk
management proactively and consistently throughout the project.
KEY POINTS

Project risk could


Positive and negative risks are commonly
exist from initiation
known as opportunities and threats.
till closing.

Risk Aversion Risk Taker Risk Neutral

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute Inc., 2013, Page 311.
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Project Risk Management Processes
11.1 Plan Risk Management The process of defining
how to conduct risk management activities for a project.*
11.2 Identify RisksThe process of determining which
risks may affect the project and documenting their
characteristics.*
11.3 Perform Qualitative Risk AnalysisThe process of
prioritizing risks for further analysis or action by assessing
and combining their probability of occurrence and impact.
*
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.
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Project Risk Management Processes
11.4 Perform Quantitative Risk AnalysisThe process of
numerically analyzing the effect of identified risks on overall
project objectives.*
11.5 Plan Risk ResponsesThe process of developing options
and actions to enhance opportunities and to reduce threats to
project objectives.*
11.6 Control RisksThe process of implementing risk response
plans, tracking identified risks, monitoring residual risks,
identifying new risks, and evaluating risk process effectiveness
throughout the project.*
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.
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Project Risk Management
11.1 PLAN RISK MANAGEMENT

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Plan Risk Management

* The process of defining how to conduct risk


management activities for a project.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, Figure 11-2, Page 313.
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Inputs
1. Project Management Plan
2. Project Charter
3. Stakeholder Register
4. Enterprise Environmental Factors
5. Organizational Process Assets

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, Figure 11-2, Page 313.

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Plan Risk Management: Tools and Techniques
Analytical techniques
Various techniques used to evaluate, analyze, or forecast
potential outcomes based on possible variations of
project or environmental variables and their relationships
with other variables.*

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, Figure 11-2, Page 313.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.

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Plan Risk Management: Tools and Techniques
Expert Judgment
Judgment provided based upon expertise in an
application area, knowledge area, discipline, industry,
etc., as appropriate for the activity being performed.
Such expertise may be provided by any group or person
with specialized education, knowledge, skill, experience,
or training.*
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, Figure 11-2, Page 313.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.

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Plan Risk Management: Tools and Techniques
Meetings
Meetings should be a common way to develop risk management plan
with project team members. Meetings can include stakeholders who
have vested interested in the project and subject matter experts.
Several decision can be made this meeting including but not limited to
1. Plans to conduct risk management activities
2. Assign budget and schedule for risk management
3. Assign responsibility in risk management
4. Develop templates for risk categories

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, Figure 11-2, Page 313.
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute Inc., 2013, Page 316.
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Plan Risk Management: Outputs
Risk Management Plan
This will layout the risk management activities structure and
plan.
Methodology
Roles and responsibilities
Budgeting
Timing
Risk categories
Definitions of risk probability and impact
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, Figure 11-2, Page 313.
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute Inc., 2013, Page 316.
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Definitions of risk probability and impact
Defined Conditions for Impact Scales of a Risk on Major Project Objectives

Relative or numerical scales are shown


Project
Objectives
Very low / 0.1 Low / 0.2 Moderate /0.3 High /0.5 Very High /0.8

Insignificant cost 3% - 5% cost 5%-10% cost > 10% cost


Cost increase
< 3% cost increase
increase increase increase
Insignificant time
Time increase
< 10 days delay 10 to 20 days delay 20 to 30 days delay > 30 days delay

Scope reduction Project end item


Scope decrease Minor areas of Major areas of
Scope barely noticeable scope affected scope affected
unacceptable to is effectively
sponsor useless

Only very demanding Quality reduction Quality reduction Project end item
Quality degradation
Quality barely noticeable
applications requires sponsor unacceptable to is effectively
are affected approval sponsor useless

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, Table 11.1, Page 318.
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Plan Risk Management: Outputs
Risk Management Plan
Probability and impact matrix
Revised stakeholders tolerances
Reporting formats
Tracking

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, Figure 11-2, Page 313.
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute Inc., 2013, Page 318.
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Risk Threshold
Probability & Impact Matrix
Probability Threats Opportunities
0.9 0.09 0.18 0.27 0.45 0.72 0.72 0.45 0.27 0.18 0.09
0.8 0.08 0.16 0.24 0.40 0.64 0.64 0.4 0.24 0.16 0.08
0.7 0.07 0.14 0.21 0.35 0.56 0.56 0.35 0.21 0.14 0.07
0.6 0.06 0.12 0.18 0.30 0.48 0.48 0.30 0.18 0.12 0.06
0.5 0.05 0.10 0.15 0.25 0.40 0.40 0.25 0.15 0.10 0.05
0.4 0.04 0.08 0.12 0.20 0.32 0.32 0.20 0.12 0.08 0.04
0.3 0.03 0.06 0.09 0.15 0.24 0.24 0.15 0.09 0.06 0.03
0.2 0.02 0.04 0.06 0.10 0.16 0.16 0.10 0.06 0.04 0.02
0.1 0.01 0.02 0.03 0.05 0.08 0.08 0.05 0.03 0.02 0.01
Impact 0.1 0.2 0.3 0.5 0.8 0.8 0.5 0.3 0.2 0.1
Red High Risk, Yellow Medium Risk, Green Low Risk
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Project Risk Management
11.2 IDENTIFY RISKS

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Identify Risks
* Identify Risks is the process of determining
which risks may affect the project and
documenting their characteristics.

This process will help you identify and anticipate


uncertain events.

* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.

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Key Points
Frequency of Participation in
Iterative process
iteration each cycle

This process should involve the project New risks may


team evolve

Stakeholders outside the project team may provide additional


objective information.
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute Inc., 2013, Page 321.
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Identify Risk Process

Who can help you with identifying risks?


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, and Risk
Management Experts.

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-5, Page 319.
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Tools & Techniques
1. Documentation Reviews
2. Information Gathering Techniques
3. Checklist Analysis
4. Assumptions Analysis
5. Diagramming Techniques
6. SWOT Analysis
7. Expert Judgment
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-5, Page 319.

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1. Documentation reviews

The process of gathering a corpus of information and


Project reviewing it to determine accuracy and completeness.*
Documents

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-5, Page 319.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.

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2. Information Gathering Techniques
Brainstorming
Delphi technique
Interviewing
Root cause analysis

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-5, Page 319.

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Brainstorming

* A general data gathering and creativity


technique that can be used to identify risks,
ideas, or solutions to issues by using a group of
team members or subject matter experts.

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-5, Page 319.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.

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Delphi technique 1. An information gathering technique used as a
way to reach a consensus of experts on a
subject.
2. Experts on the subject participate in this
technique anonymously.
3. A facilitator uses a questionnaire to solicit ideas
about the important project points related to
the subject.
4. The responses are summarized and are then re-
circulated to the experts for further comment.
5. Consensus may be reached in a few rounds of
this process.
6. The Delphi technique helps reduce bias in the
data and keeps any one person from having
undue influence on the outcome.*
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-5, Page 319.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.

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Interviewing

* A formal or informal approach to elicit


information from stakeholders by talking to
them directly.

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-5, Page 319.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.

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Root Cause Analysis

An analytical technique used to determine


the basic underlying reason that causes a
risk. A root cause may underlie more than
one risk.*

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-5, Page 319.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.

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3. Checklist Analysis

Risk identification checklists are developed based


on historical information. The checklist should be
reviewed during project closure to incorporate
new lessons learned and improve it for use on
future projects.*

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-5, Page 319.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.

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4. Assumptions Analysis

* A technique that explores the accuracy of


assumptions and identifies risks to the project
from inaccuracy, inconsistency, or
incompleteness of assumptions.

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-5, Page 319.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.

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5. Diagramming Techniques
Cause and effect diagrams
* A decomposition technique that helps trace an undesirable
effect back to its root causes .

System or process flow charts


These show how various elements of a system interrelate and the
mechanism of causation.
Influence diagrams
* A graphical representation of situations showing causal
influences, time ordering of events, and other relationships among
variables and outcomes.
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-5, Page 319.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.
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6. SWOT Analysis

Analysis of strengths, weaknesses,


opportunities, and threats of an
organization, project, or option.*

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-5, Page 319.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.

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7. Expert Judgment

Judgment provided based upon expertise in an


application area, knowledge area, discipline,
industry, etc., as appropriate for the activity being
performed. Such expertise may be provided by any
group or person with specialized education,
knowledge, skill, experience, or training.*

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-5, Page 319.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.

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Identify Risks: Outputs
Risk Register
A document in which the results of risk analysis and risk
response planning are recorded.
List of identified risks.
List of potential responses.

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-5, Page 319.

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Project Risk Management
11.3 PERFORM QUALITATIVE RISK ANALYSIS

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Things to know
It enables project
Assesses the priority of Focus on high-priority
managers to reduce the
identified risks risks.
level of uncertainty

This process can lead into


Performed regularly throughout the project life cycle perform quantitative risk
analysis

It is usually a rapid and cost-effective means of establishing


priorities for plan risk responses
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute Inc., 2013, Page 329.
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Perform Qualitative Risk Analysis

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

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-8, Page 328.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.
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Perform Qualitative Risk Analysis: Inputs

1. Risk Management Plan


2. Scope Baseline
3. Risk Register
4. Enterprise Environmental Factors
5. Organizational Process Assets

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-8, Page 328.

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Perform Qualitative Risk Analysis: Tools and Techniques

1. Risk probability and impact assessment


2. Probability and impact matrix
3. Risk data quality assessment
4. Risk categorization
5. Risk urgency assessment
6. Expert judgment
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-8, Page 328.

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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.

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-8, Page 328.
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute Inc., 2013, Page 329.
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2. Probability and Impact Matrix
Probability & Impact Matrix
Probability Threats Opportunities
0.9 0.09 0.18 0.27 0.45 0.72 0.72 0.45 0.27 0.18 0.09
0.8 0.08 0.16 0.24 0.40 0.64 0.64 0.4 0.24 0.16 0.08 Evaluation of each risks
0.7 0.07 0.14 0.21 0.35 0.56 0.56 0.35 0.21 0.14 0.07 importance and priority for
0.6 0.06 0.12 0.18 0.30 0.48 0.48 0.30 0.18 0.12 0.06 attention is typically conducted
0.5 0.05 0.10 0.15 0.25 0.40 0.40 0.25 0.15 0.10 0.05 using a look-up table or a
0.4 0.04 0.08 0.12 0.20 0.32 0.32 0.20 0.12 0.08 0.04 probability and impact matrix.*
0.3 0.03 0.06 0.09 0.15 0.24 0.24 0.15 0.09 0.06 0.03
0.2 0.02 0.04 0.06 0.10 0.16 0.16 0.10 0.06 0.04 0.02
0.1 0.01 0.02 0.03 0.05 0.08 0.08 0.05 0.03 0.02 0.01
Impact 0.1 0.2 0.3 0.5 0.8 0.8 0.5 0.3 0.2 0.1

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, Figure 11.10, Page 331.

* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.
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3. Risk Data Quality Assessment

* Technique to evaluate the degree to


which the data about risks is useful for
risk management.

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-8, Page 328.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.
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4. Risk Categorization

* Organization by sources of risk (e.g.,


using the RBS), the area of the project
affected (e.g., using the WBS), or other
useful category (e.g., project phase) to
determine the areas of the project
most exposed to the effects of
uncertainty.

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-8, Page 328.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.
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5. Risk Urgency Assessment

* Review and determination of the


timing of actions that may need to
occur sooner than other risk items.

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-8, Page 328.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.
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6. Expert Judgment

Expert judgment is required to evaluate the


probability and impact of each risk.

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-8, Page 328.
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute Inc., 2013, Page 333.
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Perform Qualitative Risk Analysis: Outputs
1. Project Documents Updates
Project documents that may be updated include, but are
not limited to:
Risk register updates
Assumptions log updates

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-8, Page 328.
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute Inc., 2013, Page 333.
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Project Risk Management
11.4 PERFORM QUANTITATIVE RISK
ANALYSIS

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Perform Quantitative Risk Analysis

* The process of numerically analyzing the effect of identified


risks on overall project objectives.
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-11, Page 334.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.

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Perform Quantitative Risk Analysis: Inputs
1. Risk Management Plan
2. Cost Management Plan
3. Schedule Management Plan
4. Organizational Process Assets
5. Enterprise Environmental Factors
6. Risk Register
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-11, Page 334.

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Perform Quantitative Risk Analysis: Tools and Techniques

1. Data gathering and representation techniques


2. Quantitative risk analysis and modeling techniques
3. Expert judgment

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-11, Page 334.

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1. Data gathering and representation techniques

Interviewing. Interviewing techniques draw on


experience and historical data to quantify the probability
and impact of risks on project objectives. The
information needed depends upon the type of
probability distributions that will be used. For instance,
information would be gathered on the optimistic (low),
pessimistic (high), and most likely scenarios for some
commonly used distributions.
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-11, Page 334.

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute Inc., 2013, Page 336.
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Probability Distribution

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-14, Page 337.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.
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2. Quantitative Risk Analysis and Modeling Techniques

1. Sensitivity analysis
2. Expected monetary value analysis
3. Modeling and simulation

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-11, Page 334.

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Sensitivity analysis * A quantitative risk analysis
and modeling technique used to
help determine which risks have
the most potential impact on
the project.
It examines the extent to which
the uncertainty of each project
element affects the objective
being examined when all other
uncertain elements are held at
their baseline values.
The typical display of results is
in the form of a tornado
diagram.
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-15, Page 338.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.
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Expected monetary value analysis

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure 11-16, Page 339.

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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.*
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-17, Page 340.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.
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3. Expert Judgment
Judgment provided based upon
expertise in an application area,
knowledge area, discipline, industry,
etc., as appropriate for the activity
being performed. Such expertise may
be provided by any group or person
with specialized education,
knowledge, skill, experience, or
training.*
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-11, Page 334.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.
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Perform Quantitative Risk Analysis: Outputs
Project Documents Updates
Probabilistic analysis of the project.
Probability of achieving cost and time objectives.
Prioritized list of quantified risks.
Trends in quantitative risk analysis results.

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-11, Page 334.

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Project Risk Management
11.5 PLAN RISK RESPONSES

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Key Points
Follows of
Optimum risk
qualitative and or Realistic
response
quantitative analysis

Agreed upon by all


Cost-effective in meeting the challenge
parties involved

Identification and assignment of one person (an owner for risk


response) to take responsibility for each agreed-to and funded
risk response

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute Inc., 2013, Page 343.
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Plan Risk Responses

* The process of developing options and actions to enhance


opportunities and to reduce threats to project objectives.
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-18, Page 342.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.
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Plan Risk Responses: Inputs
1. Risk Management Plan
2. Risk Register

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-18, Page 342.

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Plan Risk Responses: Tools and Techniques
1. Strategies for negative risks or threats
2. Strategies for positive risks or opportunities
3. Contingent response strategies
4. Expert judgment

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-18, Page 342.

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1. Strategies for negative risks or threats
Risk avoidance is a risk response strategy whereby the project team acts
Avoid to eliminate the threat or protect the project from its impact.

Risk transference is a risk response strategy whereby the project team

Transfer shifts the impact of a threat to a third party, together with ownership of
the response.

Risk mitigation is a risk response strategy whereby the project team acts

Mitigate to reduce the probability of occurrence or impact of a risk.

Risk acceptance is a risk response strategy whereby the project team

Accept decides to acknowledge the risk and not take any action unless the risk
occurs.

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-18, Page 342.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.
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2. Strategies for Positive Risks or Opportunities
The exploit strategy may be selected for risks with positive impacts
Exploit where the organization wishes to ensure that the opportunity is realized.

Sharing a positive risk involves allocating some or all of the ownership of


Share the opportunity to a third party who is best able to capture the
opportunity for the benefit of the project.

The enhance strategy is used to increase the probability and/or the


Enhance positive impacts of an opportunity.

Accepting an opportunity is being willing to take advantage of the


Accept opportunity if it arises, but not actively pursuing it.

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-18, Page 342.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.
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3. Contingent Response Strategies
Responses provided which may be used in the event
that a specific trigger occurs.*

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-18, Page 342.

* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.
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4. Expert Judgment

Judgment provided based upon expertise in


an application area, knowledge area,
discipline, industry, etc., as appropriate for
the activity being performed. Such expertise
may be provided by any group or person with
specialized education, knowledge, skill,
experience, or training.*

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-18, Page 342.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.
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Plan Risk Responses: Outputs
1. Project Management Plan Updates
Schedule management plan
Cost management plan
Quality management plan
Procurement management plan
Human resource management plan
Scope baseline
Schedule baseline
Cost baseline
2. Project Documents Updates
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-18, Page 342.

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Terminologies
Trigger

Management Fallback
Reserves plans

Risk Owner

Contingency Residual
reserves risks

Secondary
risks

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Project Risk Management
11.6 CONTROL RISKS

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Control Risks

* Control Risks is the process of implementing risk response plans, tracking


identified risks, monitoring residual risks, identifying new risks, and evaluating
risk process effectiveness throughout the project.
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-20, Page 349.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.
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Things to know
Contingency reserves for cost or
Risk response owner reports
schedule should be adjusted
Project assumptions are still valid. periodically to the project
based on the current risk
manager
assessment.

Analysis shows an
Risk management policies and procedures are being followed assessed risk has changed
or can be retired.

Project work should be continuously monitored for new,


changing, and outdated risks.
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute Inc., 2013, Page 350.
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Control Risks: Inputs
1. Project Management Plan
2. Risk Register
3. Work Performance Data
4. Work Performance Reports

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-20, Page 349.

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Control Risks: Tools and Techniques
1. Risk reassessment
2. Risk audits
3. Variance and trend analysis
4. Technical performance measurement
5. Reserve analysis
6. Meetings
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-20, Page 349.

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1. Risk reassessment

* Risk reassessment is the


identification of new risks,
reassessment of current risks, and
the closing of risks that are
outdated.

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-20, Page 349.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.
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2. Risk Audit

* Examination and documentation of


the effectiveness of risk responses in
dealing with identified risks and their
root causes, as well as the effectiveness
of the risk management process.

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-20, Page 349.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.
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3. Variance and trend analysis
A technique for determining the
cause and degree of difference
between the baseline and
actual performance. (Variance
Analysis)

An analytical technique that uses


mathematical models to forecast
future outcomes based on
historical results. (Trend Analysis)
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-20, Page 349.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.
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4. Technical performance measurement

Technical performance
measurement compares technical
accomplishments during project
execution to the schedule of technical
achievement.

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-20, Page 349.
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute Inc., 2013, Page 350.
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5. Reserve analysis

* An analytical technique to
determine the essential features and
relationships of components in the
project management plan to establish
a reserve for the schedule duration,
budget, estimated cost, or funds for
a project.

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-20, Page 349.
* These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013.

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6. Meetings

Project risk management should be


an agenda item at periodic status
meetings. The amount of time
required for that item will vary,
depending upon the risks that have
been identified, their priority, and
difficulty of response.
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-20, Page 349.
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute Inc., 2013, Page 352.
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Control Risks: Outputs
1. Work performance information
2. Change requests
3. Project management plan updates
4. Project documents updates
5. Organizational process assets updates

Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) - Fifth Edition, Project Management Institute, Inc., 2013, figure11-20, Page 349.

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End of Chapter 11
PROJECT RISK MANAGEMENT

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