Risk Management

For Project Management

What is Risk?

Risk (noun): possibility of loss or injury

(Merriam-Webster Dictionary)

Risk in Project Management

A risk is something that may happen
and if it does, will have an impact on the
project objectives.
May
Impact
Objectives

possibility
loss
time, cost, performance,
quality, scope, client
satisfaction.

Words in Risk Management

Possibility probability, likelihood
Loss impact
Weakness vulnerability
Threat
Control countermeasure
Residual Risk the amount of risk that is left
over when appropriate controls are properly
applied to lessen or remove weakness

Risk Management Plan

Risk Identification
Risk Quantification
Risk Response
Risk Monitoring and
Control

Risk Identification
Or Risk Assessment
Threats to the project
Weaknesses of the project environment
The possibility that threat will make use of
weakness
The impact of the exposure (threat to
weakness)
Available controls

Risk Identification and SWOT

Factors affecting an
organization (in this
case, project) can usually
be classified as:
Internal factors
Strengths (S)
Weaknesses (W)

External factors
Opportunities (O)
Threats (T)

Risk Identification Tools and

Techniques
Document Reviews
Information Gathering
Brainstorming
Lessons Learned Database
Other methods, some common techniques include:
questionnaires and surveys, interviewing, checklists,
and examination of the Work Breakdown Structure
for the project with appropriate specialty groups,
asking what-if questions

Risk Identification Output

Identification # for each risk identified
Date and phase of project development when risk was
identified
Name of risk (does the risk pose a threat or present an
opportunity?)
Detailed description of risk event
Risk trigger
Risk type
Potential responses to identified risk
Comments about risk identification

Risk Identification Sheet Example

Risk Quantification
Set Impact Level of the Project
Impact Level to Cost
Impact Level to Schedule

Set Probability Level of the Project (could be

organization standard)
Set Risk Matrix (should be organizational
standard)

Impact Level Example

Project Value 10M
Project Schedule 3 Months

Level

Value

Time

Very High

> 5M

> 1Mo

High

2M-5M

2W-1Mo

Medium

0.5M-2M

3d-2W

Low

0.1M-0.5M

1d-3d

Very Low

<0.1M

< 1d

Probability Level Example

Level

Probability

Very High

>90%

High

70%-90%

Medium

30%-70%

Low

5%-10%

Very Low

<5%

Risk Matrix Example

VH

Probability
H
M
L
VL
VL

Impact

VH

Risk Response

Avoid: Do Something to Remove

Transfer: Make Someone Else Responsible

Reduce: Take Action to Lessen the Impact or

Possibility
Accept

Risk Response: Rule

Cost of Risk Response (Avoid, Transfer or
Reduce) must be less than the cost of impact.
Probability

Reduce

Avoid

Accept

Transfer
Severity

Risk Monitoring and Control

Risk Audit
Risk Reviews
Risk Status Meetings and Reports