Unit – 11 MB0049

Project Risk Management

Dr. Smita Choudhary
 Learning objectives:

• Introduction
• Planning for project
• Different types of risks involved in project
• Steps in risk management
• Risk management process
 Introduction
• In any project, it is difficult
to assess the amount of
risks involved.
• With careful planning, risks
in a project can be
minimized.
• A project when executed
faces many surprises and
uncertainties.
• Risk management is about
facing and handling these
uncertainties.
• A project must be analyzed
in all aspects to help
manager in taking proper
decisions.
Planning for project – coping with risk
• Risk is an inherent part of any
project. Irrespective of how much
you have planned, your project
(software product or process
improvement effort) is plagued with
uncertainties.
• Risk management involves identifying
potential problems (risks), analyzing
those risks, planning to manage
them, and reviewing them.
• Risk management works as an
insurance for projects, and can help
reduce project costs and efforts
when trouble strikes.
• Also help in preventing problems
even before they take bigger shape.
Different types of risk involved in a project

1.Project Risks (This is the risk pertaining to pure project

related parameters and activities.)
2.Market Risks (This is the risk which is external to
project but related to it.)
3.Industry Risks (This is an industry specific risk.)
4.Social and Political Risk (These are the risks pertaining
to society at large.)
 Steps for risk management

There are four generic steps to manage a risk:

1. Risk identification
2. Risk analysis
3. Risk management planning
4. Risk review
1. Risk Identification
• Risk identification occurs at each stage of the project life
cycle.
• To identify risk , we must first define risk
• When people begin performing risk identification they
often start listing known problems.
• The best and most common methodology for risk
identification is done using a brainstorming session.
• Concern the following points during a brainstorm session
 Selection of weak areas in a project, such as unknown technology
being used or to be used.
 Things those are critical or extremely important to the effort,
such as the timely delivery of a vendor’s database software,
creation of translators, or a user interface that meets the
customer’s needs.
 Things that have caused problem in the past, such as loss of key
staff, missed deadlines.
Important Risk Consideration

- Risk Analysis

- Risk Management Planning

- Review Risks
 2. Risk Analysis
• The first step in risk analysis is to make each risk item more specific.
• The next step is to set priorities and determine where to focus risk
mitigation efforts.
• During the analysis, discuss with the team members each risk item to
understand how devastating it would be if it did occur and how likely it
is to occur.
• It is a useful practice to analysis risk either by sensitivity analysis or
by probabilistic analysis.
Quantitative risk analysis

• Sensitive analysis

• Probabilistic analysis
3. Risk Management Planning
• After analyzing and prioritizing,
the focus comes on management of
the identified risks.
• Two things you can do manage risk.
 The first is to take action to
reduce (or partially reduce) the
likelihood of the risk occurring
 Second, you can take action to
reduce the impact if the risk
does occur. Sometimes this is an
action taken prior to the crisis,
at other times, it is a simple
backup plan.
 4. Review risks

• After you have implemented response actions, you must track and record their
effectiveness and any changes to the project risk profile.

• Need to review the risk periodically so that you can check how well mitigation is
progressing.
 Risk Management Process
These simple steps are to be followed:
• Determine scope of the risk session
• Select the team and moderator
• The moderator explains the risk process to new team members.
• Identify risks
• Brainstorm areas of risk.
• Identify things that have caused problems in the past.
• Remove invalid or irrelevant stuff.
 Steps to handle risks
• Identify risks
• Analyze the risk
• Plan to mitigate risks
• Review risks
• Control the risk